QUARTERLY REPORT

ON THE ECONOMY

TO THE

COUNCIL OF MINISTERS

1 October 2014 – 31 December 2014

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Contents

General Economy ............................................................................................................... 3

Manufacturing .................................................................................................................... 4

Financial Services ............................................................................................................... 5

e-Business ......................................................................................................................... 6

Shipping ............................................................................................................................ 8

Aircraft Register ................................................................................................................. 9

Construction ...................................................................................................................... 9

Energy ............................................................................................................................ 10

Visitor Economy ............................................................................................................... 11

Film and Creative Industries .............................................................................................. 12

Agriculture ....................................................................................................................... 13

Fisheries .......................................................................................................................... 15

Retailing .......................................................................................................................... 16

Appendix 1 – Economic Indicators ..................................................................................... 19

Appendix 2 – Revenue Account ......................................................................................... 28

Appendix 3 – Capital Spending .......................................................................................... 29

Appendix 4 - Government Cash and Investments ............................................................... 31

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General Economy

The main change in the global economy in the last quarter of 2014 has been the dramatic fall in oil prices, with global oil prices more than halving to below $50 a barrel. This should have had a positive overall impact on the economy, but continued concerns about the Eurozone, and levels of business investment led the International Monetary Fund (IMF) to further reduced global growth prospects for 2015 to 3.5% (from 3.8%) in its late January report. The US economy continues to be the best performing globally, with growth of 3.6% expected this year. The strength of the US economy has fed through to the dollar, which has strengthened from over 1.60 to the pound to around 1.50. As Oil is priced in dollars, this has offset some of the reduced raw material cost. The main risk to the US economy is now the energy sector, much of which cannot compete at current oil prices.

The Eurozone is now in deflation. Prices fell by 0.6% in January 2015. The European Central Bank finally responded in late January with its version of Quantative Easing (QE). The IMF lowered growth projections to 1.2% in 2015. One impact of the Eurozone QE programme has been a fall in the value of the Euro. This will make it harder for UK exporters. The Eurozone is also facing considerably political uncertainty caused by result of the snap election in Greece, which is further depressing the value of the Euro. The United Kingdom continues to grow. The IMF project growth unchanged at 3.2% in 2014 and 2.7% in 2015. The Head of the IMF noted in January 2015 that the UK was leading the way back to growth. UK public sector borrowing remains stubbornly high however, and only the reduced level of interest on these debts is providing good news as the UK Chancellor prepares for his March budget.

Isle of Man Outlook

The main uncertainty at present surrounds the degree to which the Isle of Man economy will benefit from the sharp reduction in global oil prices. Real incomes are expected to rise as a result of low inflation, and this should primarily benefit the domestic economy. Whilst the direct benefits of lower petrol prices are clear, the impacts on food costs, travel costs and energy costs are less transparent, and may take some time to feed through, if they do at all. Clearly the more competition there is the faster any benefit from reduced fuel costs is likely to be passed on to consumers. The reduction in oil prices has therefore increased the growth and employment forecasts as well as reducing inflation. There are therefore real reasons for optimism that 2015 will result in improvements in the key economic measures. Local unemployment continues to fall after considering seasonal factors and would normally be expected to fall to between 700 and 800 (around 1.5% of the economically active population) by the summer. One of the potential limiting factors to this feel good factor continues to be the increase in taxes and charges introduced by Government. Both the aggregated amount and the distributional impact of charges will have a major influence on their subsequent economic impact. The slow decline in house prices has not helped overall confidence levels, although this appears to have stabilised in the final quarter of 2014.

Transport costs are a major part of any island’s economy. As such, the lower oil price should also narrow the cost base between doing business here and elsewhere, and as a result make the Island relatively more attractive for inward investment. The lower oil price is predicted to last throughout 2015, maybe longer. The main risks are that this, plus the problems in the Eurozone, trigger a further round of financial turbulence on the markets, and this cannot be ruled out. As it stands however the Island appears well placed to benefit from increasing

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growth in the United Kingdom, increasing local living standards and lower transportation costs, and as such growth forecasts are likely now to be nearer the higher end of the 3%-4% range.

Manufacturing Overview of 2014

The Isle of Man’s manufacturing and engineering sector overall has experienced a stable 2014, with retention of levels of employment in both manufacturing and engineering. The manufacturing and engineering sectors are composed of a relatively small number of firms, some of which have experienced a year of very high demand for their services and products and have found sourcing skilled labour challenging, while others have failed to receive renewed contracts from their traditional clients. As a result, while overall employment is stable, conditions are quite complex. The aerospace engineering sector evidences this, in that firms which provide products and services to the civil aircraft industry have successfully expanded order book growth, in some instances to the extent that capacity has been exceeded and contracts declined. On the other hand, firms which sell to military contractors have found demand has shrunk due to political decisions elsewhere as developed states contract defence spending. As a result, successes in some areas of engineering have been offset by contraction in others.

In general manufacturing fortunes have varied amongst local businesses. Those involved in the manufacture or supply of parts for consumer products have faced a continued recessionary mind set in the major developed economies and sluggish growth with the development of new markets. On balance local firms have fared reasonably well and maintained market position despite the difficult market conditions. One local firm has had to contend with its traditional client base reducing orders due to reductions in UK public sector spending.

Industry surveys during the year have highlighted that the expenses of shipping products and the cost of labour are felt to have risen above inflation across the year. Returns have also indicated that large amounts of investment (considered to be more than £250,000 per business) have taken place at multiple firms during the year, illustrating confidence locally. Skilled labour shortages have been raised repeatedly during the year, though the establishment of the Advanced Manufacturing Training Centre has been warmly welcomed by industry.

The Department of Economic Development’s (DED) Grant Assistance Scheme continues to be appreciated and well utilised by industry, and forms an integral part of the Isle of Man’s appeal to foreign direct investment. In this regard there is a considerable pipeline of leads which are being worked on and it is hoped that some of these will be converted in the next 12 months resulting in new jobs and factory builds or tenancy of some of the speculative but high quality industrial schemes being built around the Island.

The fiscal year 2014/15 has seen the Grant Assistance Scheme offer over £4m in support to local businesses in return for over £12m in private sector investment offered in the near future. In the fiscal year to date, a total public-private investment of £7.5m has already occurred.

Outlook for 2015 Outlook for 2015 reflects the trend of divergence between those that provide services and products to defence contractors which are reporting negative expectation of the year to come and some shrinkage of employment, whereas other aerospace and engineering firms are confident and planning investment and recruitment. However, concerns raised by industry include the stagnant Eurozone growth, which has seriously hampered order book growth at one particular firm. Other firms are again citing difficulty in acquiring labour and new floor space as limits to potential growth. The continued disparity between Isle

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of Man energy prices and UK energy prices has also been mentioned as a growth inhibitor. Finally, development of the new waste facility has been raised as an important provision of Government support. Employment forecasts for engineering are to remain neutral, as considerable shrinkage in one firm is expected to be offset by hiring’s at several others. It is also expected that some of these skills will be taken up by new inward investment companies looking to either grow existing companies or create new ones. Above all this there are also advanced plans by some of the larger engineering companies to expand their floor space and workforce for the longer term so confidence on the whole is strong.

Financial Services Overview of 2014 Isle of Man financial services have experienced a year of growth within some sectors and expected shrinkage in others which has produced an overall mixed year of economic growth for the sector. Employment within financial services has remained steady overall, as losses in banking have been compensated for by growth within insurance, CSPs and professional services. Bank deposits fell slightly during the year, dropping from £41.9bn on 31 December 2013 to £40.86bn by 30 June 2014, before rising back to £41.08bn at 30 September. This marks the first growth in deposits since March 2013. The deposit profile of local banks has seen shrinkage of corporate, trust and fiduciary deposits by £760m, offset by a growth in group depositors by £820m during the 2014 year up to September. Retail deposits shrunk by £160m. Lending by local banks has stabilised and grown slightly by September 2014, following a gradual decline of lending since early 2013. The local banking sector has experienced a challenging year as the Island’s traditional banking business model of attracting retail deposits has experienced prolonged pressure due to historically low interest rates and extensive regulatory reform targeting UK parent banks. The number of banking licenses active on the Isle of Man has fallen, as have overall employment numbers, as was predicted from the DED’s ‘Vision 2020’ analysis. The total value of Isle of Man funds has grown slightly during 2014, from $21.6bn at December 2013 to $21.9bn at September 2014. The number of schemes decreased during the period from 366 to 338. The largest increase in NAV has been within specialist funds, which have grown in volume by 73% or $491m during 2014 up to September. Decreases of NAV have occurred in other scheme types, apart from qualifying funds, which have seen a 71% growth. Overall, the total NAV of funds has grown gradually since June 2013 when total NAV reached a low of $20.8bn. Employment within the funds sector has remained relatively static. Again, this is consistent with Vision 2020 and the focus on new and emerging managers and schemes is starting to pay dividends. The insurance sector has experienced a year of good growth, with the approval of four new captive licenses during the year. The Isle of Man’s pension sector has performed well, with growth in both the number of domestic and international retirement schemes in existence including a growth of International schemes by 23%. Overall, employment is expected to have grown slightly within the sector over the previous 12 months. The fiduciary sector has experienced a year of great regulatory pressure and enhanced compliance costs due to the requirement for reporting on client information for FATCA purposes. However, the sector has performed better than expected considering the circumstances, and indicators have been mixed to positive. The overall number of corporate and trust service licenses have declined during the year, with few new licenses being granted. Fiduciary related deposits have also fallen in the local banking sector due to de-risking within multinational clearing banks. However, new company incorporation has remained stable, with a continued shift from 1931 to 2006 companies and strong growth in the number of foundations established. 2014 has seen a number of mergers and acquisitions taking place amongst the sector, as the industry consolidates. The number of jobs in the sector is also expected to have increased slightly, though the need to respond to increased compliance may be the reason for some of

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the job creation. This stands in contrast to expectations of employment shrinkage in the sector during 2014. The Island’s professional services sector has also grown in terms of job numbers, with many new small start-ups offering accounting and legal services. How much this reflects a more fractured labour market necessitating self-employment and ad-hoc work rather than permanent job creation is not currently known, and the extent of professional services growth will not be clear until into 2015. 2014 saw the establishment of a digital currency sector on the Isle of Man, which is still being defined in a regulatory context globally. DED has worked extensively with stakeholders to encourage a secure and compliant environment within which the sector can operate. Outlook for 2015 The regulatory pressures which have impacted banking, insurance and the fiduciary sectors during 2014 are not yet resolved, and DED will continue to work with the financial services sectors to support as effective a transition as possible. While the Isle of Man is not directly impacted by Solvency II, insurance firms that wish to have a Solvency II compliant business model for international reasons or because they base administration locally will be required to expand compliance and capital solvency levels. The fiduciary sector will be required to begin reporting client information to over 50 other jurisdictions towards the latter part of this decade, which will require a parallel reporting system to that already in existence for FATCA reporting. The fiduciary sector will be required to assess current business models and enhanced compliance costs, and a transformation in how the sector operates and provides services if it is to remain viable is expected to begin in the near future. It should be noted that while expected shrinkage in 2014 within the fiduciary sector has not occurred, the sector is still considered to be at high risk, and the sector cannot be considered to have returned to a state of normalcy. The Isle of Man’s banking sector appears to have stabilised following a period of great uncertainty, in particular due to changes to UK and EU legislation. The new Payment Services Bill 2015 will receive its first reading in the House of Keys in January, and should provide the appropriate legal context for Isle of Man access to the Single Euro Payments Area and associated cost savings for IOM banks. However, the traditional retail-deposit based business model which has driven the Island’s banking sector for the past generation may be supplanted in the medium term by another business model which will allow the Isle of Man to compete more effectively in other forms of international banking. DED has been working with stakeholders with the intention of allowing new financial services sectors to establish themselves on the Isle of Man, as part of a diversification of the financial services sector and as a response to changing global circumstances and innovation. This process began in 2014 with the emergence of the digital currency sector, and is expected to continue in 2015 with other forms of emerging financial services.

e-Business

Overview of 2014 The 2012/13 National Income statistics published in 2014 showed the sector had grown to be 19% of the Isle of Man economy in 2013 up from 13% the previous year. As a consequence, e-business is the second largest economic grouping after financial services. Like financial services, e-business is highly diverse and includes e-gaming and Information and Communication Technology (ICT) businesses. E-business continued to grow in 2014, creating additional jobs both through the growth of existing businesses and attracting new businesses. In addition, 2014 was notable for the emergence of the Crypto Currency sector on the Isle of Man. The Island has established itself as an industry leader due to its first mover advantage and its past history of

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creating e-gaming success combined with a neutral tax /high technology proposition. Anecdotal reports indicate that at December 2014 over 20 firms in the Crypto Currency sector had been established in the Island, comprising exchanges, mining, hardware, software, compliance and consultancy. E-gaming is believed to have been one of fastest growing parts of the economy in 2014. As well as existing businesses continuing to grow, the Island successfully attracted new licensed operators as well as several related services businesses which have re-located. The Isle of Man saw the loss of some of the less well established and funded licence holders during the year in part due to UK tax changes which are putting pressure on margins in a maturing market. At the end of 2014 the total number of licence holders was unchanged at 56. The UK introduced the Place of Consumption Tax legislation in December 2014. The Gambling Supervision Commission and DED were heavily involved in discussions to minimise the effects on licensees. Isle of Man licensees are considered by the UK as coming from a trusted source and will be granted Interim Licence ‘grandfather rights’ until such time as the UK Gambling Commission has reviewed its applications. In cooperation with the Gambling Supervision Commission and Customs and Excise and through negotiations with the UK authorities, DED has secured benefits to Isle of Man license holders who have a UK player base. These benefits include removing the need for a Fiscal Representative in the UK to guaranty duty payments to Her Majesty’s Revenue and Customs, allowing the Gambling Supervision Commission to provide dispute resolution services for UK resident players and providing double duty relief in specific circumstances to licence holders. Arguably the biggest issue for e-business in 2014 was the shortage of skilled ICT workers. During 2013 DED announced a ‘fast-track’ work permit process for ICT and engineering jobs to alleviate the situation and this has continued to work well in 2014.The confirmation of the Manx Educational Foundation’s purchase of the Nunnery in order to establish a private ICT and business education and training centre offers potential to aid e-business sector growth The site will house the staff and facilities to provide university education, professional certification and accredited degrees to over 200 new students each year. DED and the Department of Education and Children also commenced work with the private sector to devise new education and training initiatives ranging from primary school level to industry vocational qualifications for workers. Outlook for 2015 E-business continues to offer good growth prospects for the Isle of Man in 2015 in terms of GDP, jobs and spending in the local economy. ‘Vision 2020’ identified that e-business offers the Island the greatest growth potential of any sector in terms of jobs and taxes over the next decade. Specific plans are in place to boost ICT skills and raise awareness of career opportunities. In the short-term, the e-business pipeline remains positive with a steady flow of enquiries coming from the digital industry with business sectors such as Crypto Currency, computer video games, high speed financial trading platforms and financial technologies (FinTech), cyber security, content download networks and online dating. Specifically within e-gaming the pipeline profile has changed and the Isle of Man is experiencing a reduction in start-up companies with no unique selling propositions as these are finding it very hard to attract investment. However, an increase in those companies with new intellectual property and with good financial backing is apparent. From an employment perspective DED is expecting good potential growth from the largest operators and software companies in the sector who continue to see the Island as an excellent home for them, their staff and families. As has been the case in the past it should be expected that a small number of start-ups from previous years will not renew their licences in 2015 if their businesses have not reached the break-even point. To achieve the above mentioned growth potential, DED will continue to work closely with the local industry, the e-Gaming Strategic Advisory Board, the Manx e-Gaming Association, Manx ICT Association and the Manx Digital Currency Association to adapt existing strategy. Two key areas of focus will be skills development and international marketing. The efforts to boost skills that commenced in 2013 will

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continue in 2015. In terms of marketing, DED will continue to access marketing budgets (£350,000 was committed in 2013 over 2 years) to promote e-business, both helping local businesses to grow as well as attracting new investors. The Crypto Currency sector is expected to grow in 2015 once the proposed Proceeds of Crime Act amendment receives Royal Assent and the Designated Businesses Act comes into force. This growth depends upon these legislation changes not being delayed any further.

Shipping Overview of 2014 The table below shows the register performance over 2014 in terms of numbers on the register. Although the growth in tonnage slowed and dipped below 16 million gross registered tonnes with some larger vessels being sold on, the register is still adding new ships with a healthy normal throughput of sale and purchase activity by owners. This year has shown 100 additions and 110 deletions from the register.

31/12/2013 31/12/2014 Net Change

Merchant Ships 443 432 -11

Commercial Yachts 102 86 -16

Sub-total - surveyed fleet 545 518 -27

Pleasure yachts 326 339 +13

Fishing vessels 71 74 +3

Small Ships 122 123 +1

Fleet Total 1064 1054 -10

Total Gross Registered Tonnes 16.43 m 15.77 m -0.66 m

This quarter the registry has seen a steady level of activity in terms of ship registry transactions (re-mortgaging, de-registrations, registrations, name changes, and registry transfers) which reflects a continuing level of business through the local shipping sector. Figures for this quarter and year 2014 (in brackets) are shown below:

2 (19) New ownership companies have been set up in the Isle of Man 5 (42) Vessels have contracted Representative Persons on the Isle of Man 71 (187) Mortgages have been arranged through Isle of Man advocates 1127 (4804) Separate transactions have been recorded with the registrars Outlook for 2015 The outlook remains very positive. Shipping is seeing something of a recovery from the recent financial crisis as freight rates continue to climb, although the dry bulk sector is still struggling. The Isle of Man is becoming an established and recognised register for international clients looking for quality and service. Many of the register’s existing owners have placed orders for new vessels to be built and will register them once they are completed over the next 2-3 years. The number of these new buildings is currently at a record level with a total of 98 orders placed for Isle of Man registry. The superyacht sector is more positive as there has been a change in requirements for Charter Licences from the Balearic Islands. Non-EU flagged yachts can now obtain charter licences and the Isle of Man yachts will no longer be disadvantaged. The Monaco Yacht Show 2014 was very promising for the Isle of Man delegation and we can expect more yachts to register (or return to the register) in the future.

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Aircraft Register Overview of 2014 In 2014 the Isle of Man Aircraft Register became the world’s 6th largest business jet register, overtaking both the UK and Austria. The Aircraft Registry registered 97 additional aircraft during 2014 and demand for future registrations shows little sign of abating, notwithstanding increased competition from other jurisdictions. The Aircraft Registry is well established, has a strong reputation for high regulatory standards combined with excellent customer service and this, combined with the excellent Isle of Man business proposition, explains why the figures detailed below remain so positive.

Aircraft Register Total 31/12/13 31/12/2014 Gross Change

Executive jets 452 528 76

Airliners between commercial lease 88 97 9

Helicopter/turbo prop/small plane 119 131 12

Aircraft Fleet 659 756 97

Aircraft Register Net 31/12/13 31/12/2014 Net Change

Executive jets 321 348 27

Airliners between commercial lease 21 16 -5

Helicopter/turbo prop/small plane 84 84 0

Aircraft Fleet 426 448 22

Outlook for 2015 The outlook for the Aircraft Registry and the associated private sector remains positive. Strong potential for new aircraft registrations exists and anecdotal evidence suggests that the Isle of Man is increasingly being seen as ‘the registry of choice’ for private business jets. International global demand for business jets is likely to remain strong for the foreseeable future and the Isle of Man is very well placed to benefit from a buoyant market.

Construction Overview of 2014 Construction activity has remained depressed during the past year in respect of large projects but activity levels for smaller builders generally appear to be better. A number of new housing developments have progressed at Port Erin, Colby, Peel and Ramsey. A section of the construction industry relies heavily on Government contracts to deliver work and is dependent upon Government’s maintenance of its capital programme. Quarry outputs remain low corresponding with construction activity. The Island’s Construction Sector, including quarrying, is a significant contributor to National Income (3.9% of total 2012/13) and a significant employer (3,390– ITD data). The number of registered unemployed construction related workers has declined over the past 12 month period, from 165 at November 2013 to 158 at November 2014 according to unemployment statistics. This may not represent a growth in construction employment, as some of the decline in unemployment may be due to movement of labour into other non-construction sectors. Outlook for 2015 There is optimism that the forthcoming year will see an upturn in demand for construction services. New office developments are planned in Douglas and the IOM Business Park, and substantial new housing developments are underway or have recently received planning approval and are expected to

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commence shortly. Planned public sector new developments include a new school at Westmoreland Road. Such developments offer construction employment opportunities and may optimistically be viewed as indications of business and general confidence in the economy. The recently constituted Virtual Development Team has an objective of enabling and expediting public and private development of sites and it is expected that the initiative will result in the early development of significant new construction projects. There is also though cause for caution. In the event of an upturn (or even a maintenance of the level of construction activity experienced over the past few years), there is concern that local construction businesses will not have the resources to address demand or the ability to sustain very thin margins, and off-Island companies may be required to deliver projects. This position may be exacerbated because clients are conditioned to a tough market and understandably remain keen to “get more for less”. The loss of some of the economic benefit of a construction project as a consequence of profit etc. leaving the Island is not desirable, and puts the sustainability of the local sector at risk. There is also concern that an increasingly buoyant UK construction market driven particularly by new home building as a result of the Help to Buy Scheme and rising investment in energy and transport projects will impact upon the Manx construction sector because of pressure to raise labour costs and increased possibility that necessary labour will be attracted to work off-Island or not be available to import. Similarly construction material prices and their availability may adversely affect the local market and make projects more difficult and expensive.

Energy Overview of 2014 The employment figures for the cleantech and energy sector has remained steady throughout 2014. Businesses in other sectors such as manufacturing and construction continue to diversify into the cleantech sector including a local engineering firm providing mooring solutions for floating wind turbines in Japan and a construction firm fabricating and building a private sector funded ‘passive house’ on the Island (ultra low-energy highly insulated building that does not need a heating system). High energy prices on the Island will continue to encourage energy efficiency and further advancements in technology will make energy efficiency more affordable such as light-emitting diode (LED) lighting, passive houses and solar panels. DED continues to offer energy efficiency training and Green Business Loans.

2014 Total

Energy champions trained in the private sector 9 75

Number (& value) of Green Business loans issued 4

(£51,411)

20

(£184,116)

Estimated annual savings from Green Business loans issued £12,422 £73,824

Following a selection process the preferred partners for offshore wind and tidal energy projects were announced in 2014. DONG Energy is the global leader in offshore wind power and is exploring the development of an offshore farm which will generate annual revenue to Government of greater than £5 million and create 50+ new jobs. Manx Tidal Energy and Tocardo Tidal Energy are exploring potential tidal developments which would create further economic benefit for the Island.

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Outlook for 2015 The current low oil price will reduce transport, manufacturing and processing costs resulting in short term economic growth. Should the low oil price continue it will impact long term investment in energy projects especially hydrocarbon exploration and production. In 2014, Expressions of Interest were sought from companies interested in undertaking a 3D seismic study in the Isle of Man Territorial Sea. The 3D seismic survey, at no cost to the Isle of Man Government, will be undertaken in advance of a future hydrocarbon licencing round and will assist in providing further information on the scale and location of hydrocarbon resources. Companies will be invited to tender in 2015 for the 3D seismic study which will assist in a future licensing round. DED is exploring the concept of developing an interconnector hub on the Island to facilitate the transfer of renewable energy from multi projects in the Irish Sea and neighbouring jurisdictions to the UK grid.

Visitor Economy Overview of 2014 The tourism sector achieved an increase in leisure visitors in 2014 over the previous year in terms of visitor numbers and economic contribution. By the end of the 3rd quarter 2014 the Island had attracted some 119,092 visitors compared to 103,713 representing a 12.9% increase compared for the same period in 2013, according to official provisional figures. The increase in the number of visitors was generally reflected in the performance of Island’s private sector organisations. The main accommodation providers reported a 5% growth in both occupancy levels and revenues, while the Steam Packet Company saw an 7% increase in coach bookings. The Visitor Economy Strategic Group, which was established in 2013 and is a public/private partnership, met quarterly during the year and is focused on developing the new Tourism and Visitor Economy Strategy which will begin in 2016. This Group is also working together to bridge the gap with regards to the skills shortages within the sector. 2014 saw a continuation of the growth in attendance figures achieved over recent years for the major motorsport events. Neither the TT or Festival of Motorcycling (FoM) were subject to official surveys to estimate visitor numbers in 2014 but data from the carriers reflects increases of over 5% at both festivals. DED was pleased by TT figures as the event has seen considerable growth in the last 4 years and appears to be confounding fears of the growth plateauing, although pressure on both accommodation and carrier places continues to increase. The Motorsport Team believes that the reported increases in carrier traffic in 2014 are conservative and that real growth is likely to be higher. The FoM continues to capture the imagination of the motorcycle media and visitors and 2014 saw DED building on the success of the inaugural event in 2013. In terms of the wider objective of increasing awareness of the Island to potential visitors and business partners there has been pleasing growth in media exposure for both the TT and Classic TT. The TT achieved a 5.7% growth in the global audience with 26 million viewers, including a 10% increase in the UK. This generated an estimated total media value of £13.5 million. Viewing of YouTube TT clips doubled with nearly 10.5 million minutes watched in 2014 with 47,000 subscribers. There was an 11% increase in the consumption of the live TT timing service which continues to reinforce DED’s effort to exploit online opportunities. The Classic TT continues to be the focus of media attention at the Festival of Motorcycling. The ITV4 Classic TT programmes achieved an audience of 500,000 which represents good progress but the bulk of the media audience continues to be in the printed sector. Journalists reported on the event for major

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motorcycling publications in the UK, Germany, France, Australia, New Zealand and Ireland. Freelance articles also appeared in publications worldwide with additional growth in the number of online articles reporting the event. 4-wheel motorsport continues to be a relatively minor contributor to motorsport visitor numbers but signs of resurgence are evident. In 2014 Rally Isle of Man continued to re-establish its place in the rallying calendar. Growth will centre on increases in the number of competing teams and Rally IOM has managed to achieve small growth in this area. The Manx Auto Sport rallies also show signs of growth in the number of competitors as rallying emerges from a period of contraction. Both events are estimated to have grown by around 5% and currently continue to justify DED financial investment. Outlook for 2015 Visit Britain is estimating a 2.5% increase in overseas visits in 2015 and 4.5% in value. Isle of Man Tourism KPI’s are for a 5% increase in both spend and visitor numbers by 2015. It is envisaged that growth will be supported by a greater level public/private sector working via the Visitor Economy Strategic Group, including collaborative marketing campaigns. This will include a national Daily Telegraph campaign in partnership with the Isle of Man Steam Packet Company with further plans for similar campaigns to promote and support the air routes that serve the Island. The continued pressure on TT accommodation and carrier places continues to cause concern in terms of restricting further growth. However, the Steam Packet Company has increased capacity through the long-term charter of a freight vessel which allows the passenger ferries to concentrate capacity on visitor traffic and the increase in capacity that will be offered on the fast craft route. Air carriers are also showing a willingness to capitalise on the demand by offering more flights over the TT period. DED’s official travel partner, Regency Travel, is also working to increase accommodation capacity by increasing camping places and promoting Homestay. DED anticipates that these efforts will allow some further growth in 2015 but efforts in both areas must be ongoing. The performance of the FoM encourages the Motorsport Team to believe that it has potential to achieve its target of 20,000 visitors by 2016. This would at least double the attendance at the previous Manx Grand Prix Festival with a similar increase in the economic contribution made by the event.

Film and Creative Industries Overview of 2014

Local feature film expenditure in the 2013/14 financial year was estimated as £960,000 across two film productions, along with 3,680 bed nights and 110 short term jobs. The two feature films which shot on location on the Island during 2014 were an adaptation of BBC spy drama series Spooks in April for two weeks and also Take Down in July 2014 for three weeks. Take Down was the first co-production between the Isle of Man and Wales after the Welsh Government announced they had engaged Pinewood Pictures to also manage their £30m investment fund. It is likely that co-productions with Wales will continue. Pinewood Pictures recently signed a UK distribution deal with Twentieth Century Fox to release their current slate of projects. In 2014 there were significant UK policy changes which affect the Island positively. The European Commission approved the UK extension of tax credit incentives to include high budget TV production and videogames production and in due course it is anticipated that the Island will receive such activity via Media Development Fund investment through Pinewood. Secondly, Pinewood Group (in which Treasury is a shareholder) has secured permission to expand the infrastructure on their main UK site. A local media firm commenced a six month trial contract with DED in July 2014 to market the Island to media/creative businesses. The firm has since introduced several potential businesses to the Island,

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including the owner of a digital broadcast channel, a broadcast technology consultancy company and a producer of a reality TV series. They have also produced leaflets and a marketing website along with using social media to find leads and opportunities. DED will make a decision in January whether to continue the arrangement, at which stage a tender process will be required. DED worked with the Mannin Shorts scheme to mentor and match-fund two projects. The crews were made up of a mix of professionals and trainees and were previewed at the 2014 Isle of Man Film Festival in September. A local firm completed the purchase of Island Studios on the 15 October 2014. Their application for change of use is from “Film Studios, Media and Auxiliary facilities” to “Film Studios, Media, Technology, Community and Auxiliary facilities”. The application is currently with Planning. Outlook for 2015 There are no film projects expected in Q1; but five potential film projects are lining up for Summer and Autumn 2015. Previous Isle of Man films Robot Overlords is to be released in an exclusive deal with the Vue cinema chain in the UK on February 13th 2015. Spooks: The Greater Good to be released on 8th of May 2015. A confidential videogames project (details to be confirmed) is expected to go into production Q1 2015 and may apply to the Media Development Fund.

Agriculture

Weather The mild autumn weather gave an extended grass growing season enabling stock to be housed later, reducing feed costs. Cereal crops were sown in good conditions and are now generally well established. These favourable conditions have continued the earlier reported trend in production with milk sales off farm ahead of last year and cattle and lambs finishing earlier.

Isle of Man Meats

As previously reported Isle of Man Meats are maintaining their position as ‘destination of choice’ for beef producers. The total number of cattle utilised on and off Island for the year is some 16% greater than last year with cattle presented to Isle of Man Meats 9% ahead of last year.

The Department now has provisional figures for Beef calf registrations for the full year these figures reinforce the comments made in the Q3 report that Beef calf registrations have stabilised and appear to be ahead of last year. This reflects the increase in replacement breeding stock being seen on farms, which have now increased 88% since the low point in 2008 and indicates a significant re-investment in beef production. As was reported last quarter the destination of choice story is stronger for sheep and lamb, some 89% of sheep ewes and lambs sold by producers this year have gone to Isle of Man Meats. It should be noted that lamb production on the Isle of Man is very seasonal with virtually half of the lambs being processed in September, October and November; this can be very challenging to Isle of Man Meats from both an operational and marketing point of view

Milk Isle of Man Creameries made a policy decision in July 2013 to pay a stable milk price of 31p per standard litre to provide stability to their suppliers and thus ensure stability within the industry. This price has come under increasing pressure from the prevailing downward price pressure in world markets

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for milk products and a reduction to 28p/l has been announced as from 1 January. The ability to retain a higher milk price than the UK is, in part, due to the Milk Price Order, which ensures a stable retail price for milk in the Isle of Man, in contrast to the UK where milk is used as a ‘loss-leader’ by retailers and has fallen significantly in price. The effect of the policy is clearly demonstrated in the graph below which shows the average IoM producer price ahead of all local jurisdictions after September, especially when allowing for the normal seasonal variations.

This is truly a ‘good news’ story and is probably a factor in the setting up of a new dairy unit on the Island by a milk producer who is relocating his dairy business here from Cheshire.

Policy The consultation launched by the Department into proposed changes to the Countryside Care Scheme (CCS) in the light of recommendations by the Environment and Infrastructure Policy Review Committee and subsequent Tynwald amendments has now closed. A total of fifty three responses have been received from individuals and stakeholder groups, the large number of responses reflects both the wide interest in the scheme and the impact some of the proposed changes could have on the agricultural industry. It is hoped that the Department will be able to formally present any amendments which result from the consultation on CCS to Tynwald in March. Food Business Development Strategy

‘Food Matters’ a Food Business Development Strategy for the Isle of Man was approved by Tynwald in November 2014. The strategy seeks to grow the food and drink sector to a value of £125 million by 2025. The strategy also supports other key Government policy objectives, including Agenda for Change: ‘Growing the economy’ and Vision 2020: ‘Distinctive local food and drink’. The Department is currently working on the delivery phase of the strategy, including the appointment of a Food Business Development manager and in conjunction with DED, suitable support mechanisms for food and drink producers.

Outlook The marketing and operational initiatives launched by the new Chief Executive of Isle of Man Meats are begin to reflect on the financial position of the business. Some local retailers have recognised the improvements that have been instigated and are purchasing larger quantities. Whilst too early to read too much into these improvements they are a step in the right direction.

24

26

28

30

32

34

36

D J14 F M A M J J A S O N D

p/L

Average producer milk price compared to UK and NI

IoM Previous UK IoM NI

15

Isle of Man Creamery are continuing to develop their export markets for quality cheeses both in the UK and further afield which again is a good thing as the market for Manx liquid milk now accounts for just over 30% off milk delivered to the creamery.

Fisheries Queen scallops 2014 economic value (first sale at quayside) = £ 1,393,854 from 2,666 tonnes or 52p/kg, this value is doubled through processing on Island, before subsequent export, though represents just 56% of the 2013 volume. After a much restricted season following concerns over the decline in stocks within the territorial sea, the Isle of Man queen scallop season closed on 2 October 2014. A restricted Total Allowable Catch (TAC) of 1,000 tonnes was set for the fishery within the territorial sea and landings amounted to 975.3 tonnes, leaving a small amount as bycatch for the king scallop fishery, which started on 1 November. The balance of the product (well over half of the total) was achieved from fishing outside our territorial waters. A proportion of the TAC was allocated to the Manx Fish Producers Organisation (MFPO) to enable poor weather fishing within the Fisheries Management Zone of Ramsey Bay. The restrictions in supply did allow for better local prices for the trawl product and the end of year value for the queen scallop trawl fishery. The tie-up scheme introduced to compensate local vessels for the imposed reduction in fishing activity over the month of July paid out £50,770 in total. Outlook Following a recommendation from the Queen Scallop Management Board to consider further management measures to reduce effort within the fishery, a consultation was launched by DEFA in December, seeking views on a proposal to cap fishing effort by means of restrictive licencing. The consultation closes on 9 February 2015. Management of the fishery for the 2015 season will be agreed with the Queenie Management Board following the outcome from the consultation and upon receipt of the annual stock assessment report. On an international level, DEFA is facilitating a group comprising all of the UK Fisheries Administrations considering options for improved management of queen scallop stocks across the Irish Sea. King scallops 2014 economic value (first sale, at Quayside) = £4,078,694 from 2,298 tonnes, or £1.77/kg. This value would be doubled through processing on Island, before subsequent export. The king scallop season started on 1 November 2014, with fishing restricted to the east coast of the Island, due to high levels of domoic acid being reported in the product; this causes Amnesic Shellfish Poisoning and therefore the fishery on the west coast of the Island was closed to commercial fishing on public health grounds. By the end of December the area to the south of Chicken Rock had been re-opened for fishing, however areas to the north and west remained closed until mid-January 2015. After a difficult season for queen scallops, there has been much effort focussed on the king scallop fishery from both local and visiting vessels, with reports of high quality product and good prices. Following survey work, the MFPO arranged a limited fishery for king scallop within the Fisheries Management Zone of Ramsey Bay for the second year. A total catch of 28,766kg was set (757 bags) and 17 vessels fished the area over a period of three weeks. A report from the MFPO is expected.

16

Outlook The king scallop season continues through to the end of May 2015. Landings in 2014 show an increase of 22% on that of the previous season. With significant increasing fishing effort for king scallops in recent years there is an increasing risk of over-exploitation of the stock. A formal stock assessment is expected from Bangor University in 2015, which will assist in informing future management options for the fishery. Whelk 2014 economic value (first sale) = £ 507,916 from 589 tonnes The pot fishery for whelk around the island is a relatively recent development and has involved a small number of vessels. Increasing interest in the whelk fishery continues, with landings up 30% on the 2013 figure and it is now the 4th most valuable fishery for the Island. Outlook This highlights the need for greater consideration of management of this species since whelk are a potentially vulnerable to overfishing. This is a potentially vulnerable species with increasing fishing effort being directed towards it and there is a need for more consideration of the management of whelk stocks in Manx waters. Scientific advisors from Bangor University have begun collecting data which will assist in developing more informed management strategies. Crab 2014 economic value (first sale) = £602,188 from 526 tonnes. Landings of crab increased by 15% on 2013 figures.

Retailing Overview of 2014 Continuing the trend of recent years, trading conditions remained difficult throughout the 2014, but performance does appear to be slightly better than 2013. DED completes an annual survey of a limited number of retailers and the results pertaining to sales performance are shown below.

The number of shop closures reduced significantly during the year and further evidences the upturn, albeit minor and slow, in retail trading conditions. It should be noted that vacancy rates on the Island are better than the UK average and significantly better than those of the North West. The graph below

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Current Year Christmas New Year Next YearAverages

Period

Sales Peformance

2011

2012

2013

2014

Excellent

Average

Poor

17

shows the monthly empty units statistics on the main shopping street in Douglas from the Peter Luis building to Sam Webb’s public house:

Christmas trading was reported by Stephen Bradley MBE, Chairman of the Retail Chamber of Commerce, as “tough”. DED’s own survey shows results as being slightly better than 2013 as the sector struggled against difficult external factors including Strand Street footfall being significantly reduced by approximately 20-30% from 2013 (See graph below), car parking charges and confusion over free parking in Douglas, margins and sales hit by Black Friday, regeneration work leaving Strand Street devoid of Christmas lights and the shift to ‘click and collect’ online shopping.

Progress has been made during 2014 on several major projects and initiatives, seen as absolutely vital to the sector, and it is hoped that the benefits of these will continue to assist the sector during 2015. These include the retail sector strategy, with agreement close to finalising a suite of training and careers options required by the sector; Douglas regeneration which is on schedule and improving the streetscape; the Castletown consultancy team and the Central Douglas Masterplan. The final public and stakeholder consultations have been completed with the draft masterplan and development prospectus both being agreed by the political steering group. The Masterplan is to be laid before Tynwald in

0

5

10

15

20

25

Douglas - No of Empty Units

18

February and this will conclude that stage of the project. Expressions of Interest for the Lord Street and Parade Street site is now being circulated, this has a closing date of 13th March. Outlook for 2015 Continued difficult trading conditions directly related to low consumer confidence. However, with real wage growth forecast in 2015 and DED forecasting continued economic growth of 3%, this may eventually lead to increased consumer spending. It should be noted that any improvement in economic conditions on the Island do not result in immediate benefits for the retail sector, as retail benefit lags behind the economies upturn.

19

Appendix 1 – Economic Indicators

Labour Market

Unemployment

Job Vacancies

600

700

800

900

1000

1100

1200

1300

No of Persons

Unemployed

Dec 2014 - 882 persons registered as unemployed - 2% of economically active population - UP by 23 persons from Sept 2014 - DOWN by 277 on December 2013

0

1000

2000

3000

4000

5000

6000

7000

8000

2011 2012 2013 2014

Vacancies Notified

During the Year

Part-Time

Full-Time

2014

-4,758 Full-Time Vacancies notfied during the year; up 1% on 2013

-2,154 Part-Time Vacancies notified during the year; up 2% on 2014

20

Employment

Work Permits and NI Number to Foreign Nationals

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000

35,000

36,000

37,000

38,000

39,000

40,000

41,000

42,000

43,000

44,000

45,000

46,000

47,000

48,000

49,000

50,000Persons Employed

Jobs Undertaken

Self Employed

Dec 14

-38,313 persons employed

-47,211 jobs undertaken -7,780 persons self-employed

-100

100

300

500

700

900

1100

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

No of Permits

New Permits

Renewals

NI numbers to Foreign Nationals

21

Number of Jobs by Sector – Annual Trends

Sector 2013 Q4 2014 Q4 12 month change

Agriculture, Forestry & Fishing 635 627 -8

Manufacturing: Engineering 1,009 999 -10

Manufacturing: Food & Drink 1,957 1,917 -40

Manufacturing: General 555 572 17

Mining & Quarrying 315 319 4

Construction 2,381 2,421 40

Utilities 541 541 0

Transport and Communications 1,866 1,830 -36

Wholesale Distribution 462 479 17

Retail Distribution 4,387 4,478 91

Banking 2,452 2,332 -120

Insurance 1,600 1,497 -103

Other Finance and Business Services 3,582 3,928 346

Information and Communication Technology 936 972 36

Legal and Accountancy Services 1,088 1,114 26

Corporate Service Providers 1,448 1,475 27

Education 4,164 4,459 295

Medical & Health Services 6,132 6,359 227

Other Professional Services 1,268 1,289 21

Tourist Accommodation 844 875 31

Catering and Entertainment 1,723 1,658 -65

E-gaming 250 262 12

Miscellaneous Services 2,762 2,941 179

Public Administration 4,084 3,866 -218

TOTAL 46,441 47,210 769

22

General Indicators Inflation

Scheduled Passenger Departures – Q4 (1 October to 31 December Annually)

Notes: 2014 figures are provisional Excludes Day Trip Passengers

0%

1%

2%

3%

4%

5%

6%

7%

8%

RPI CPI

Dec 2014 - RPI 2.2% - CPI 0.2%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2011 2012 2013 2014

Visitors in Paid Accommodation Visiting Friends and Relatives

Business Persons Isle of Man Residents

Q4 2014

- 88,286 Isle of Man Residents - 9,234 Visitors in Paid Accommodation

- 17,469 Visiting Friends & Relatives - 11,676 Business Visitors

23

Electricity Consumption

Average Property Price – (12 month rolling average)

140

150

160

170

180

190

200

210

220

230

240

2011 2012 2013 2014

GWH

Domestic

Non-domestic

2014

- lowest annual domestic electricity consumption for 4 years (158

GwH) - annual non-domestic consumption up 4% on 2013 (215 GwH)

120

140

160

180

200

220

240

260

280

300

£'000

HouseFlat

Dec 14

- average house price £265,239

- average flat price £150,559

NB: 2014 prices are provisional

24

Planning and Building Control Applications

0

100

200

300

400

500

600

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Planning applications approved

Building Control applications received

25

Financial and Related Services Financial Services Act 2008 – No of Selected Licenceholders

Deposit Base

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200

Deposit TakingInvestment BusinessServices to Collective Investment SchemesCorporate ServicesTrust Services

Dec 2014

- 25 Deposit Takers

- 53 Investment Business - 56 Services to Collective Investment Schemes

- 168 Corporate Services - 120 Trust Services

10

15

20

25

30

35

40

45

50

55

60

65£ billions

Sterling Non Sterling Total

Sep 14 (latest figures)

- £33 billion sterling

- £20 billion non-sterling

26

Insurance – No of Companies

Funds under Management – All Schemes

0

20

40

60

80

100

120

140

160

180

Life Captive

Total

Dec 14 - 15 Life Companies

- 92 Captive Insurers -136 Total no of authorised insurers

15

17

19

21

23

25

27

29

31$ billion

27

Company Registration - New Companies Formed

Total Companies on Register

0

50

100

150

200

250

300

350

400

450

500

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

1931 Act2006 ActConversions to 2006 Act Companies

0

5,000

10,000

15,000

20,000

25,000

30,000

35,0002006 Act

1931 Act

Total

28

Appendix 2 – Revenue Account Revenue Account Report for the Nine Months to 31 December 2014

SUMMARY

1. Compared with the same period last year income at £378.8 million is £7.0 million (+2%) higher, whilst Departments' net payments at £398.3 million are £5.8 million (+2%) higher.

2. Customs’ net cash receipts of £239.8 million for the 9 months to 31 December 2014 have been adjusted to the proportion of annual estimate for the year and are £5.9 million (+3%) up on last year’s position. It is currently anticipated that the Customs Estimate for the year will be attained.

3. Income Tax receipts at £132.5 million are £2.0 million (+2%) higher than the same period for last year. It is currently anticipated that the Income Tax Estimate for the year will be attained.

4. ‘Other Treasury Income’ includes £8.3 million from interest on investments, including income from Reserve Fund investments, which is remitted quarterly in arrears. It is currently anticipated that the ‘Other Treasury Income’ Estimate for the year will be attained.

5. At this, the third quarter stage of the year, taking normal seasonal patterns into account and assuming year-on-year accruals are unchanged, there are no indications yet that any Department will definitely overspend their revenue Vote. However, the Department of Health and Social Care and the Department of Infrastructure are experiencing significant financial pressures and will find it challenging to remain within their Votes for the year.

6. A transfer from Reserves of £11.0 million was included within the Budget presented to Tynwald in February 2014 (Page 19 of the Budget (GD No. 2014/0001)).

7. The actual balance brought forward at the 1 April 2014 of £41.3 million was £9.7 million higher than the "Probable" shown in the Budget in February 2014, as a result of income being £2.8 million higher and expenditure being £6.9 million lower than “Probable”.

Estimate inc.

Actual Actual to % of Estimate Supp. Votes Actual to % of

2013-14 31 Dec 13 Actual 2014-15 31 Dec 14 31 Dec 14 Estimate

£'000 £'000 £'000 £'000 £'000

Income

Customs and Excise 312,000 234,000 75% 319,700 319,700 239,775 75%

Income Tax 196,116 130,497 67% 201,000 201,000 132,454 66%

Other Treasury Income 13,264 7,329 55% 11,910 11,910 6,614 56%

Total Income 521,380 371,826 71% 532,610 532,610 378,843 71%

Expenditure

Net Voted Services 538,230 392,473 73% 543,603 543,603 398,307 73%

Surplus (Deficit) (16,850) (20,647) (10,993) (10,993) (19,464)

Add:

Transfers from/(to) Reserves 23,600 35,000 148% 11,000 11,000 (500) (5%)

Add:

Balance b/f 1st April 34,531 34,531 100% 31,571 31,571 41,281 131%

Balance c/f 41,281 48,884 31,578 31,578 21,317

29

Appendix 3 – Capital Spending

Report to Council of Ministers - 1 July 2014 to 31 December30 September 2014 1. Introduction Government Departments’ capital spending, excluding borrowing authorities and land purchases, for the third quarter of the year to 31st December 2014 was £26.10 million against a year to date estimate of £39.56 million (66%). This spending represents 47% of the full year estimate. Spending over the same period last year was £27.42 million (59% of full year estimate (£46.5m)). The third quarter saw a particularly busy period for approvals with a combined total of £10.52 million of capital projects being approved relating to Government capital spending alone.

FINANCIAL POSITION

1 April to 31 December Forecast for Year

2014-15 Revised* Forecast Forecast

Actual Actual as % of Estimate Under- as % of

2013-14 2014-15 2013-14 2014-15 2014-15 Spend Estimate

£'000 £'000 £'000 £'000 £'000

Government Total 27,416 26,104 95 61,441 49,153 12,288 80.0%

Statutory Boards' Spending 42,789 8,704 20 22,943 16,060 6,883 70.0%

* Revised Estimate 2014-15 refers to original 2014-15 Budget plus supplementary votes approved by Tynwald

Treasury

Forecast

2

4

6

8

10

12

14

16

18

20

June Sept Dec March

£ m

illio

ns

Quarterly Capital Spendingexcludes Statutory Boards' and Local Authority Borrowing

2011-12

2012-13

2013-14

2014-15

30

2. Capital Spending Summary 1 April to 31 December 2014

(includes Statutory Boards' spending, excludes Statutory Boards' borrowing)

Original

2014-15

£

Revised

2014-15

£

Actual

spend

£

spend against

original est

%

spend against

revised est

%

spend against

YTD est

%

Economic Development 1,795,148 1,795,148 151,806 8.5 8.5 11.1

Education & Children 9,200,112 9,200,112 5,980,725 65.0 65.0 94.6

Environment, Food & Agriculture 3,524,340 3,524,340 1,925,391 54.6 54.6 76.2

Health & Social Care 16,396,401 17,196,401 7,022,084 42.8 40.8 64.9

Home Affairs 6,645,750 8,621,750 2,626,115 39.5 30.5 47.5

Infrastructure 15,440,730 18,797,730 8,106,502 52.5 43.1 66.7

Treasury 1,450,000 1,450,000 10,215 0.7 0.7 3.4

Manx Museum & National Trust 855,631 855,631 281,614 32.9 32.9 51.0

Government Total 55,308,112 61,441,112 26,104,452 47.2% 42.5% 66.0%

Treasury (Contingency Fund) 0 0 0

55,308,112 61,441,112 26,104,452

Statutory Boards' Spending

Manx Utilities Authority 16,325,823 16,325,823 6,785,088 41.6 41.6 55.8

71,633,935 77,766,935 32,889,540

Water Schemes 3,050,000 3,050,000 1,585,233 52.0 52.0 103.9

Post Office 3,567,000 3,567,000 333,298 9.3 9.3 63.4

78,250,935 84,383,935 34,808,071

Spending analysed by type of scheme Actual

for the period 1 April to 31 December 2014-15 spend spend by

compared to same period last year as % of Statutory

2013-14 2014-15 2013-14 spend Boards 2014-15

£ £ % £ £

Construction 11,693,606 16,602,567 142.0 0 16,602,567

Engineering 5,989,846 2,696,043 45.0 8,370,321 11,066,364

Plant / Equipment 6,373,825 3,357,911 52.7 333,298 3,691,209

Land Acquisition 0 0 0.0 0 0

Loan Schemes 3,191,478 248,571 7.8 0 248,571

Other 166,855 3,199,360 1,917.4 0 3,199,360

27,415,610 26,104,452 95.2 8,703,619 34,808,071

31

Appendix 4 - Government Cash and Investments 1. Value of Externally Managed Investments

Schedule showing the value of the externally managed investments held in the following funds:

As at 31st December 2014 Book cost Market value £ millions £ millions

National Insurance Investment Account 693.0 770.4 Reserve Fund 303.9 346.0 Hospital Estates Development Fund 44.3 45.5 Manx Currency Account 32.7 33.7 Public Service Employees Pension

Reserve 218.9 243.1

1,292.9 1,438.7

Note: Each of the funds has its own investment strategy according to its investment needs. Treasury's

investment strategy for those reserve funds which have a significant exposure to equities is to

maximise the total return on the funds over the long term. The short term fluctuations of market values are therefore considered of less importance than the long term return on investments held.

2. Bank Deposits and Call Accounts Held at Local Banks by Treasury

Fixed term deposits and call accounts directly held by Treasury as at 31st December 2014 totalled:

Cash at Bank 31-Dec-14

Sterling £182.0m

Euro Nil