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DED focuses on job creation and income generation in 2013 19 February 2013

Summary

  • Real terms economic growth of 3% in 2012/13 and 4% forecast for 2013/14. Both significantly above average for world’s developed economies of 1.4%
  • Net job creation of 165 in key export sectors forecast for 2013/14, enabling 500 to 550 new jobs in total to help grow the economy and reduce unemployment
  • The Department has a wide range of initiatives to support key sectors, e.g. new apprenticeship scheme for engineering
  • Additional support for long-term unemployed, with aim to halve numbers to fewer than 100 over the next two years
  • New Control of Employment Bill this year to ensure work permit system supports economic growth while protecting vulnerable sectors and individuals
  • Department’s net revenue budget reduced by £1m (7.7%) compared to previous year, to be achieved by planned increases in income from the ship and aircraft registries and TT. Implementing savings worth over £0.75m annually and utilising some to expand business development efforts

JOHN Shimmin MHK, the Minister for Economic Development, confirmed he is confident that his Department can drive further economic growth, job creation and thus Government income generation and for the Isle of Man following the Treasury Minister’s Budget speech today.

In terms of the budget for 2013/14, the Department estimates it will generate additional income of £1m from growth in the Ship and Aircraft Registries and the TT. As a result, the Department is able to reduce its net revenue budget by £1m (-7.7%) compared to 2012/13 without having to cut efforts to grow the economy. In addition, the Department is implementing savings worth over £0.75m annually.

As a result, the Department will be significantly expanding its business development efforts to grow the economy within its budget.

The Minister stated:

‘It is vital that all Departments find ways to improve both effectiveness and efficiency and so maximise the value for money they provide. While the net cost to the taxpayer of my Department is reducing by £1m next year, due to additional income and a range of savings I am confident we can provide additional support to key sectors. As a result, I am confident my Department has the resources we need to grow the economy while also helping to balance Government’s budget.’

The Department’s priority is helping to grow the Island’s economy. The Minister commented:

‘Our economy enjoyed another successful year in 2012 with growth of 3%, which was significantly above the average of 1.4% across the world’s developed economies*. We estimate that the Department helped create over 130 new jobs last year in the export-generating sectors such as financial services, manufacturing, e-gaming and aviation services. We are committed to building on these achievements over the coming year. Indeed, we are forecasting growth of 4% in 2013/14 in what remains a tough global economy.’ (* Source: Organisation for Economic Cooperation and Development (OECD), which is also forecasting growth of 1.4% average across the world’s developed economies in 2013.)

The Department is forecasting that for 2013/14 the Isle of Man will enjoy net job creation of some 165 jobs within key export-generating sectors, even after allowing for possible job losses in some parts of financial services. This should enable the economy to create 500 to 550 new jobs in total, which will help to both grow the economy and reduce unemployment.

The Minister added:

‘We are working hard with the private sector to ensure that 2013/14 is an even more successful year for our Island. We have clear programmes of support in Financial Services, Established Sectors such as our Visitor Economy and Manufacturing as well as Emerging Sectors such as Aviation and Space that will all continue to grow and diversify our economy, making the Isle of Man more resilient.’

The policy of economic diversification of this and previous Governments has resulted in the Island enjoying 30 years of unbroken growth averaging 6% per year – double the average in the developed world. The policy has also reduced the Island’s dependency upon any one sector and geographic market.

The Minister outlined his Department’s plans for Financial Services for the forthcoming year:

‘We recognise that Financial Services remains vital to the Island as they account for over a third of our National Income. My Department will continue to support the Island’s businesses to pursue new markets such as Asia and the Middle East through our Country Strategy. At the same time, we will work with Treasury, the regulators and the private sector to address the wide range of international reforms that are crucial to the future of global Financial Services. This balanced approach will help to maintain and grow the internationally-respected industry we have developed over the last 30 years.’

There is currently an unprecedented level of global regulatory change in Financial Services which will present challenges for many finance centres. International exchange agreements such as US and UK FATCA will impact fiduciaries and banks over the next several years. The implications for the Island of the Vickers proposals to separate UK retail and investment banking will become much clearer this year.

The insurance sector faces changes driven by the European Union Solvency II measures. Similarly, the fund management sector will be affected by the Alternative Investment Fund Management Directive. In addition to our work on these reforms, the Department will launch new financial support packages combined with marketing campaigns targeted at key decision makers in order to help protect the thousands of existing jobs on the Island in these sectors as well as vigorously pursue new investment to create new jobs.

As part of this initiative, the Department is changing its policy on financial assistance such that support will now be available for financial institutions seeking to bring a significant number of jobs to the Island.

The Minister also highlighted positive developments in several of the Island’s Established Sectors:

‘The Manufacturing sector is forecasting the creation of over 100 new jobs this year, continuing the trend of recent years. Our aerospace cluster continues to be an integral part of the UK supply chain and we are assisting 2 further aerospace firms set up in the Island. We are also supporting the establishment of 5 other new manufacturing companies on the Island. 2 of these are in engineering and 3 are in general manufacturing. To support this success we have recognised that there needs to be a supply of skilled local labour to meet the requirements of industry. We are developing a new apprenticeship scheme for engineering in conjunction with the Department of Education and Children, the Chamber of Commerce and the manufacturing industry. This will effectively treble apprentice numbers to 36 each year, providing skilled new jobs for the Island’s young people and providing locally-trained Manx engineers for the future. The Tourism and Hospitality sectors form the basis of the visitor economy and remain important to the Isle of Man, especially in terms of jobs and influence on the overall quality of life we enjoy here. Despite challenging economic conditions in our main market, the UK, our visitor numbers held up well last year, bucking the trend experienced by some other destinations in Britain. It is important that we continue to work with the industry this year to further drive up quality and exploit new niche markets and events so that we may build upon this. The Ship and Aircraft Registries continue to drive the success of the maritime and aviation services sectors and both have maintained their reputation for delivering a world class service. During 2012, a survey of global aviation lawyers rated the Isle of Man as the best register for corporate jets in the world. The Aircraft Registry’s expertise and excellent service have helped the local private sector to create 80 jobs at an average salary of £40,000 to support the management of these aircraft in just four years. The Ship Registry continues to work hard to attract new shipping business to the Island and is enjoying success following its targeted Far East marketing efforts. For example, they recently registered the ‘Berge Neblina’, one of the largest vessels afloat and owned by a Far East operator. In spite of the challenging environment for the Retail sector in the Isle of Man it accounts for around 6% of our National Income and remains one of the main employment sectors. In recognition of this, the Department will continue to support a number of measures to help local retailers. We are leading the development of a strategy which will help shape the future of retailing in the Isle of Man. Retailers are also being offered direct support through initiatives we are funding such as access to a specialist retail consultant and dedicated customer service training for retail staff.’

The Minister also highlighted plans for growth in the Emerging Sectors:

‘The success of the e-Gaming sector means that it now accounts for 8% of our National Income and well over 700 jobs. 9 new gaming licences were granted in 2012/13 and 2 companies have commenced trading. We are forecasting strong further growth in the year ahead including over 80 new jobs. The e-Business and Information and Communication Technology (ICT) sectors have been boosted by the success of e-Gaming due to the important support role they play and these sectors both offer excellent potential for further growth in their own right. 4 new businesses have set up creating 15 new jobs. This figure is forecast to rise to up to 22 jobs after 12 months.’

One of the Department’s other challenges is to continue to try and reduce the number of unemployed, particularly the long-term unemployed, i.e. for more than a year. Total unemployment remains very low on the Island (2.4% compared to the average of over 5% for other developed countries). However the number of long-term unemployed has risen from 90 people in 2008 to nearly 200 now, with a third being under the age of 25.

The Minister commented:

‘Long-term unemployment has an immense social as well as economic cost that our community cannot afford. It is vital that Government helps people to be as self-sufficient as possible, rather than create a culture of benefits dependency and associated low-esteem. My Department is currently leading a major new initiative with the Department of Social Care to ensure that everyone currently registered unemployed for over a year is given additional support targeted to their specific needs. We aim to halve the number of long-term unemployed to fewer than 100 over the next 2 years. This support will include additional job skills training, vocational training, work placements and other positive steps to aid individuals into paid employment. There will also be closer scrutiny of claimants to ensure they take advantage of these additional opportunities and, where they fail to do so, their benefits will be reviewed and reduced where appropriate. This major initiative has already commenced and is involving other Government Departments, local authorities and the third sector, as well as private employers. We will look to build on the successful support we provided to the unemployed in 2012. For example, our work placement programme provided placements for 150 young people not in employment, education or training (NEETs). As a result, 50% gained employment following participation in the programme and we are starting to see the number of long-term unemployed fall. ‘We will be seeking to introduce other initiatives to assist the long term unemployed (including young people) and persons with a disability into employment. For example, the introduction of a Community and Social Enterprise Fund, a ‘Payment by Results’ scheme for professional agencies and a programme of work placements with both public and private sector organisations.’

The Minister commented on support for the wider economy:

‘The Department aims to create the right environment for business and is committed to ensuring that the Island is seen as an enterprise zone to attract new businesses requiring the services of its ‘real economy’ sectors. The types of support we provide are continually being reviewed and changed as necessary. The recent major review of the Department’s Financial Assistance Scheme will ensure it remains attractive to potential investors and we will be announcing further important improvements to the Scheme shortly.’ On Work Permits the Minister commented: We will be bringing forward a new Control of Employment Bill this year with the objective of ensuring the current Work Permit system is supportive of economic growth while at the same time protecting vulnerable sectors and individuals. Greater scrutiny will continue to be applied in certain sectors, such as construction, to ensure employment opportunities for Isle of Man Workers.’

The Minister concluded:

‘The Island’s economy, aided by my Department, enjoyed some key successes during 2012 and helped consolidate our position as a world class International Business Centre. Following this Budget, I believe that we approach the year ahead in a strong position to deliver the priorities I have outlined and achieve further economic growth.’

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