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Alan Smith

Alan Smith Alan Smith

30 Voices on 2030: What does the future hold?

The global crash of 2021/22 (the biggest recession of all time) hit the Isle of Man hard and led to a number of measures forced upon the Island, which created a paradigm shift in the nature of business here and the models necessary to sustain growth.

The nucleus of the crash could be seen in 2019 in the turmoil existing in Europe and the exit of the UK from the EU and the trade wars, notably started between USA and China, which soon spread to Europe and a vast number of emergent economies. Globalisation still exists today but on a country by country basis with little scope for "passporting".

Following the UK exit from Europe in 2020 the UK went into recession which significantly reduced the tax take and led to further austerity measures. Improved technologies and logistical support led to the almost total demise of the traditional high street and the resultant fall in domestic VAT. Europe's failure to implement effective point of sale VAT contributed to the near collapse of a number of the economies (notably Spain, Portugal, Greece, Italy, Belgium and France) and its only now in 2030 that the much reduced EU has finally decided upon a mechanism to bifurcate the Euro into a Southern Euro (Southern European Central Bank headquartered in Milan) and a Northern Euro (Northern European Central bank headquartered in Frankfurt). Sterling has strengthened considerably during the last 6 years following the very close links to the US and the Dollar, forged post Brexit.

All major economies around the world are surprisingly much more domestic in outlook than in 2020, in that they manufacture or produce around 80% to 90% of their own domestic consumables. This again was triggered by China (now the world’s largest economy by far) and the trade wars with the USA. Make USA great again was at the expense of the rest of the world!

All of the above is a backdrop to the Isle of Man's position in 2030. Due to pressure from UK, Moneyval and OECD etc, the Island introduced full public beneficial ownership registers which caused almost 50% of trust and corporate business to relocate overnight. The rest of it went when the Island introduced, first, inheritance tax, then capital gains tax and then higher rates of income tax on individuals. When the Island abolished the zero/ten tax policy in 2024 the vast majority of corporate business, including the lucrative e-gaming market, moved to other jurisdictions outside the EU. The population, which was already falling in 2020 now stands at 65,000 and is falling. The housing market is stagnant. There are only three traditional banks on the Island but most people use apps and technology companies in the UK for payments, foreign exchange etc, preferring not to pay the charges banks now levy on current accounts. Interest rates have stayed in the 0.5% to 1% bracket since 2019.

As the "cross border" business declined so the agricultural, fishing and tourist industries took on more importance. The conservation measures for fishing worked well and the Island's "organic" status has led to high margin exports. The new marinas have led to an explosion of high net worth tourism in the sailing community.

Those companies with servicing capabilities here and front end businesses in other countries have done reasonably well. Targeting the domestic market was a mistake but as there has been no natural distribution channels for Island businesses for many years, the successful CEO needs to go out country by country and target highly specific markets to be successful. There is no "industry" left but small pockets of highly flexible service providers servicing business which they front in other jurisdictions. Back office work has become successful again. The availability of a low cost, moderately educated workforce is reminiscent of the 1970's but there is a debate that back office work, without owning the intellectual capital of the business, leaves the Island as a low level "cheap" location, to dump processing work which can easily be moved. The key will be to find the middle ground. 

The roadworks on the prom are nearly finished - now promised for 2032.