The economy of the Isle of Man is continuing to hold up well in the face of challenging global conditions, according to Treasury Minister Allan Bell, citing the government's report on the island’s economy for Q2 2009.
The report, covering the second quarter of 2009 up to the end of June, comments:
“Taking account of the seismic deterioration in the external economic environment over the last year, the Isle of Man economy is performing stoically and at this stage there is confidence that 2009/10 will be another year of growth.”
The report goes on to add however that conditions continue to be difficult, warning that:
“There can of course be no guarantee of this given the island’s relatively narrow economic base and the intense pressure on multinational financial institutions to return to profitability, pressure which is likely to accelerate the trend already existent in recent years for cross-jurisdiction consolidation and rationalisation.”
With regards the Isle of Man's financial services industry, the report acknowledges that the last year has been difficult for fund managers globally, and that the local funds industry had not gone unscathed from the significant redemptions seen across the industry, and change of sentiment amongst investors, erring towards lower-risk investment.
“Morale in the local funds industry has been affected by the recently announced departure of HSBC Securities and the announcement of a new Draft EU Directive on Funds. The Draft Directive proposes to ban all non-EU regulated funds from being promoted or distributed in the EU. The Fund Managers Association is engaged in a consultation process on this as to appropriate actions it and the government may take. Assets under management on the island continue to decline due to market forces and the FSC reported the latest figures to end of March at USD33bn, down from a high water mark of USD60bn in June 2008,” the report informed.
Statistics available in terms of company formation in the Isle of Man over the year to March 31, 2009, indicates a downward trend in new incorporations, but the figures for the end of June 2009 quarter show some increased activity - not dissimilar to the story in the other Crown Dependencies.
The island’s banking sector continued to perform well in the last quarter. The report notes that deposits were essentially unchanged over the period, which it noted, in current economic conditions, was something of an achievement. “The global economy has entered one of its worst periods in living memory and the double impact of a banking crisis followed by a global recession which in turn may cause more damage to the banking industry remains a cause for concern. Even with interest rates held at an historic low we are seeing that the cost of credit is still rising. As the recession continues, conditions for businesses will become more difficult as time plays its role. The Isle of Man has nevertheless fared very well so far.”
Business levels on the life insurance side continue to be below previous years. Investor confidence in global markets as a whole continues to play a major part although there is some positive industry sentiment in the IOM following G20 “white listing” and other recent positive news coverage. Business from overseas is still holding up for those life companies with a sales presence there, and other IOM life offices are looking to expand their business to these regions.
Pension business has been affected by the forthcoming closure of HSBC’s pension unit. "It is hoped that those schemes which are in existence on the island will be able to be administered by other IOM-based pension administrators," the report says. Currently the island has 649 domestic pension schemes and 666 international schemes.
Whilst the report notes varying levels of turbulence in various areas, Treasury Minister Allan Bell has noted that there are positive developments in a range of sectors including e-gaming, shipping, tourism, aircraft registration, and manufacturing. Construction, however, continues to report low demand and is heavily reliant on Government capital projects, while the retail sector is still experiencing difficult trading conditions.
Bell concluded:
“The strength and diversity of the island’s economy, built up over a quarter of a century of growth, has provided some protection from the global storm. But there is no doubt that the Isle of Man has felt the consequences of international turbulence, and will continue to do so.”
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