PEOPLE who know the Isle of Man consider it should now be termed an International Business Centre rather than a Finance Centre, writes chairman of the Manx Business Connection John Webster.
"It has not yet been widely recognised, but the Isle of Man is now a country in transition, depending increasingly on broad business activities rather than just finance.
"Latest data confirms a significant shift in the composition of Manx national income, the banking sector falling by more than a quarter in a year.
"It has been the Island's policy to encourage e-gaming in order to develop the infrastructure, skills and culture attractive to general online business.
"This strategy is now bearing fruit and is demonstrated by the many new companies that have recently been established on the Island.
"Typically, they fall into a number of categories; they are started by serial entrepreneurs who have re-located to the Isle of Man because of quality of life or personal security reasons; there are enterprises attracted by the Isle of Man Government's aim to grow such sectors as clean technology, pharmaceutical and trading by targeting specific countries; the other growth area comprises the many e-business companies that have been developed on the back of the success of e-gaming, with an increasing number taking advantage of cloud computing and the most appropriate location of their servers.
"Isle of Man Government's latest National Income data shows that in real terms, that is discounting inflation, overall the economy grew by 2.1 per cent in the year ending April 2010, the 27th year of annual growth.
"Yet, illustrating the increasing diversity, the contribution of banking fell over the year by 26 per cent while that of e-gaming rose by 41 per cent and ICT 15 per cent.
"In absolute terms, insurance produces 13 per cent of annual national income compared with only 11 per cent for banking, while the e-gaming sector generates 9 per cent of the total.
"During this period of general growth in the Manx economy, evidence to support the decline of the finance sector is shown by statistics published by the Financial Supervision Commission.
"Their data shows that bank deposits in September 2011 were down to £49 billion, from a peak of £57 billion in 2008.
"Funds under management on the Island also peaked in 2008 at $58 billion and are now down to $30 billion.
"Companies and partnerships fell from 41,000 in 2008 to 34,000 today and trusts declined from 23,000 to 19,000.
"It is remarkable that, despite this significant decline in the finance sector, the Manx economy has remained robust, with, by the international norms of today, exceptionally low employment and real economic growth.
"Beneficial consequences from this shift in the structure of the economy include the fact that there are over 200 companies involved in the production of tangible services and products, many of which have their headquarters on the Island rather than just subsidiaries or branches.
"Also, the increased diversity, welcome in itself, has produced niche activities in which the Isle of Man is developing a real international reputation that provides a good platform for developing more such business and attracting those entrepreneurs who are the seedbed of innovation and economic activity.
"Despite the difficult trading conditions in the sector, it is somewhat disappointing that the Island has not capitalised on its finance industry.
"Nevertheless, overall it is welcome news that the restructuring of the Manx economy is producing diversified business, particularly e-business, that is more appropriate for the changing attitudes to offshore centres.
"In addition, the Island's new economic direction is better suited to the areas of growth that can be anticipated as power shifts East and as technology increases in importance."
