QUARTERLY REPORT

ON THE ECONOMY

TO THE

COUNCIL OF MINISTERS

1 April 2015 – 30 June 2015

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

Manufacturing .................................................................................................................................... 3

Financial Services ............................................................................................................................... 4

e-Business ......................................................................................................................................... 5

Shipping ............................................................................................................................................ 6

Aircraft Register ................................................................................................................................. 7

Construction ...................................................................................................................................... 7

Energy ............................................................................................................................................... 8

Visitor Economy ................................................................................................................................. 8

Film and Creative Industries ................................................................................................................ 9

Agriculture ......................................................................................................................................... 9

Fisheries .......................................................................................................................................... 11

Retailing .......................................................................................................................................... 12

Appendix 1 – Economic Indicators ..................................................................................................... 14

Appendix 2 – Revenue Account ......................................................................................................... 23

Appendix 3 – Capital Spending .......................................................................................................... 24

Appendix 4 - Government Cash and Investments ............................................................................... 26

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General Economy Global Overview Growth in the world economy is now at its lowest level since the financial crash, according to the IMF in its July update. It reduced its global forecast from 3.5% to 3.3%. This is blamed mainly on slower growth in North America, but has resulted in continuing low oil prices, low inflation, and depressed stock markets. The FTSE is down around 8% since April at the time of writing, and hit a seven year low in August. Countries are continuing to print money or devalue to gain competitive advantage, with China and the EU the current focus of attention. Even in the United Kingdom, the gains in employment have come to an end, with two months of rising unemployment, and growing business caution reflecting uncertainty over global exchange rates. The path to global recovery is beginning to feel like a long haul, with the quantitative easing boost having worn off, or diminished in many countries by competitive devaluations. Many countries are realising that real economic growth, productivity and increased exports are the key to success. The IMF also reduced its projections of UK growth to 2.4% (from 2.7%) in 2015 and 2.2% from 2.3% for 2016. The OECD also downgraded its growth forecasts in June, to 3.1% (from 3.6%) for 2015. That said growth is still occurring, and the recovery continuing, albeit at a slower pace than most would like. Isle of Man Outlook Unemployment has fallen further and faster than expected in the last quarter, to a figure just below 800. Employment numbers have also grown by a little over 300, but this is in keeping with normal seasonal patterns. Underlying employment levels are estimated to be unchanged on Q1. This can be seen as an improvement from the previous reducing level of employment, but is still around 1,000 below the 2011 peak level. Provisional estimates of National Income for 2013-14 show that in aggregate personal incomes rose in real terms for the first time in 4 years during 2013-14. This marks an important turning point for the local economy, and supports the fact that the recovery in the domestic economy appears well underway, with jobs in construction in particular growing in the last 12 months. At some point a “tight” labour market will start feeding through to increased levels of pay. Pay increases are already running above inflation, due to the low oil price, and most forecasters expect pay pressures to increase, and whilst this is good for Government in terms of taxation, it will raise challenges for it as an employer. Manufacturing Overview

The quarter ending June 2015 has seen a very slight increase in employment within engineering and manufacturing which has largely offset the losses in the previous quarter. A significant challenge to part of the engineering sector can be defined as difficult trading conditions due to conditions within the UK defence industry, as shrinkage to the UK defence budget have had a direct impact on the industry. However, performance continues to vary substantially across the engineering sector, with one aeronautical firm reporting excellent prospects, order book expansion, net recruitment and near shoring from China to the Isle of Man of production in the coming quarter.

Overall reported issues are that firms that sell goods into the Eurozone are reporting pressure on their profit margin due to the weakness of the Euro in relation to the strength of the pound, smaller high-tech

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firms are finding the cost of IT services (in particular data on/off island) uncompetitive with the UK. Energy and labour have been reported as the two quickest growing input costs in the previous quarter.

Overall, the engineering and manufacturing sector has experienced another mixed quarter, with broad trends being hard to identify, other than some of the expected growth predicted from the Vision 2020 analysis has not yet occurred due to the need for expansion of manufacturing sites, unexpected change in UK defence policy and the rising cost of energy in comparison to competing jurisdictions is occurring.

Outlook

Outlook continues to be mixed for the sectors in the coming quarter. Inhibitors to growth reported include a lack of immediately available skills, a strong pound and the depressed UK Government spending. Some expected hiring has been indicated.

A resolution of the Greek crisis in Europe is expected to eventually lead to a stronger Euro and improved profit margins for those firms exporting to the Eurozone. It should be noted that the UK referendum on EU membership is being raised as a risk to some Isle of Man firms which are concerned with losing access to the single market. Financial Services Overview

The financial services sector has experienced a slight growth in jobs within the sector during the second quarter of 2015 with employment growth taking place mainly in the fiduciary sector. Overall the net job total within financial services has improved and stabilised. The first quarter 2015 Banking Bulletin from the Financial Supervision Commission (FSC) indicates that the trend in increasing group deposits has halted, with deposit growth coming from retail deposits (£374m) and a net overall bank deposit growth of £711m (1.6%).

The banking sector has seen deposit growth for two successive quarters, the first such sustained deposit growth for several years. Residential mortgage lending has returned to growth for the first time since late 2010. Likewise total lending (excluding inter-bank) grew by 1.8% since the previous quarter. No new licenses were issued in the first quarter 2015. The 'Payment Systems Bill' which will enable the Isle of Man's banks to join the Euro payment system was given Royal Assent in April 2015, and the Payment Systems Act has been communicated to Brussels alongside supporting documents. Additional secondary legislation will be put before Tynwald in July 2015.

The first quarter 2015 Funds Bulletin has shown a growth in funds under management by $2.27bn or 12.1% from fourth quarter 2014, with a net growth of 7 new schemes. Overseas schemes and inward outsourcing are the largest contribution to net growth representing $1.62bn additional growth combined though conversely employment within the sector has fallen by approximately 13%. The Isle of Man’s insurance sector has seen continued growth, including within pension schemes, which have seen a growth in the net number of schemes by 0.9% (6 additional domestic schemes and 2 additional international schemes). Early indications suggest that assets under management in this sub-sector have also risen substantially, though this will only be confirmed with the publication of the Insurance and Pension Authority’s 2015 Annual Report. Overall, however, employment has shown a slowing in growth within the insurance and pensions sector after reasonable job growth over the last year. The fiduciary sector has shown strong growth in terms of job numbers and risen by approximately 8% over the quarter. The FSC reported a slight upward change in net fiduciary licences. Class 4 and 5 licences combined stood at 285 at July 1 2015, 3 less from March 2015. Net company incorporation grew in the quarter finishing March 2015, a return to net growth (including 1931 Act companies) following a period of net reduction in company numbers.

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Outlook The financial services sector continues to be experiencing a period of pressure on existing business models and the consequential need to deliver new services and expand geographic markets. Although it is hoped that 2014/15 has seen the largest impact on the banking sector (in terms of closures, reorganisations and job losses), the Isle of Man is still exposed to changes with the larger banks based on decisions taken off the Island. Good progress towards a new business model for local banks is expected which DED believe will generate interest for new banks to the Island. A closed consultation on an alternative banking regulatory regime has been concluded, and findings will be analysed in the coming months. Similar progress is expected in the areas of alternative investment methods through crowdfunding, with a consultation response summary expected in the coming quarter. The UK’s Distributed Profit Taxation measure has come into effect and the impact of the new tax to local industry will begin to become clear during the rest of 2015/16. Combined with the added compliance costs of Common Reporting Standards (CRS) the measure is expected to place strain on the fiduciary sector in the medium term.

e-Business Overview Momentum of increased activity has continued into this quarter and leads established at Asian gaming conferences are progressing in a positive fashion (this includes both entrepreneurial start-ups, as well as established tier-1 business to business providers and business to consumer operator sites). Site visits by prospective companies looking to establish here has also increased over the last quarter (none in Q1, three in Q2). As predicted previously, there were some licences that were not renewed. This brings a current total of 49 companies licensed, 3 pending and a further 4 in preparation. Availability of skilled resources is still proving an inhibitor to growth within the e-Gaming sector, with over 30 software development roles remaining unfilled.

UK e-Gaming Regulation, and the resulting double-duty relief implemented by Isle of Man in Q4 2014, had the potential to negatively affect receipts. However, the growth of local licensees seen in the first half of ’15 will decrease (and possibly eliminate) the impact of its implementation. Other developments include the International Centre for Technology working closely with the Department of Education and Children as well as the Department of Economic Development (DED) to ensure a programme of quality tertiary education is put in place at the Nunnery, the purchase of which was completed in January of this year. DED has been working closely with Manx ICT Association on a number of commercial opportunities most notably the Livewire Group looking to establish operations in the Isle of Man and Ghost Systems looking to provide a comprehensive strategic data infrastructure solution. The Proceeds of Crime Act amendment to include digital currencies has come into operation. In addition, the Designated Businesses Bill passed through Tynwald and has now received Royal Assent. These legislative initiatives have positioned the Island at the forefront of controls in the sector and have attracted a number of visits from potential employers to the Island. The availability of UK clearing banking facilities is still holding back the growth of the sector but changes to the UK “faster payments” system and the planned expansion of the actual number of clearing banks should change this position which could also involve an Isle of Man financial institution Extensive work has also been carried out with Innovate Finance, a UK initiative with the private sector that could see an incubator and accelerator for ICT start-ups be established here. DED has reviewed the recent Financial Action Task Force report in respect of digital currencies and is in broad agreement with the report’s findings having recently introduced its own regulations to address

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money laundering activities (Proceeds of Crime Act, schedule 4) and Know Your Customer (Designated Businesses Bill).

Outlook

It is forecast that e-Business classed activities will generate a further 100 jobs over the next year. It is anticipated that a number of the smaller gaming licence holders will not renew during this year but that there will be little or no loss of gaming duty or jobs in this regard. DED is awaiting several decisions on new company incorporation and job creation from both e-Gaming and ICT companies that have visited the Island in recent months and will host return visits of some of the digital currency companies looking to establish here. Innovate Finance, an independent, non-profit membership based industry organisation that aims to advance the UK’s position as a leader in financial technology innovation both domestically and abroad has rescheduled the proposed Island visit to September to discuss the potential of cooperation with DED. Shipping Overview The table below shows the register performance over the first two quarters of 2015 in terms of numbers on the register. The table shows a reduction in numbers and tonnage as de-registrations continue as owners continue to send older vessels for scrap in the dry bulk sector. The figures below reflect a ‘slow’ quarter for commercial ships and superyachts but not a long term trend. This is due to a number of vessels (in excess of 90) being scheduled for delivery in the next two years as owners replenish their fleets and new owners are introduced. Pleasure vessel activity (on and off the register) is strong with an overall increase of 19 vessels on the register.

31/03/2015 30/06/2015

Net Change

Merchant Ships 429 420 -9

Commercial Yachts 84 80 -4

Sub-total - surveyed fleet 513 500 -13

Pleasure Yachts 347 366 +19

Fishing Vessels 72 70 -2

Small Ships 125 126 +1

Fleet Total 1057 1062 +5

Total Gross Registered Tonnes 16.08m 15.74m -0.34m

This quarter the registry has seen a decent level of activity in terms of ship registry transactions (re-mortgaging, de-registrations, registrations, name changes, and registry transfers). It is this activity which creates economic benefit in the local economy. Figures for this quarter are shown below:

Q1/2015-6

New ownership companies 11

Vessels that have contracted Representative Persons on the Island 17

Mortgages arranged through IOM advocates 33

Separate transactions recorded with the registrars 1093

Outlook

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The outlook remains very positive. 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 to 3 years. The Ship Registry has a healthy ‘pipeline’ of new ships and superyachts under construction and should see a return to incremental growth over the next two quarters.

Aircraft Register Overview

The year 2014 saw the Isle of Man Aircraft Registry become the world’s 6th largest business jet register, overtaking both the United Kingdom and Austria. The Registry registered an additional 16 aircraft during the second quarter of 2015 and demand for future registrations remains positive, notwithstanding increased competition from other jurisdictions. The Registry is regarded as being well established, having a strong reputation for high regulatory standards which is facilitated by excellent customer service and a sound Isle of Man business proposition.

Aircraft Register Total 01/04/2015 30/06/2015 Gross Change

Executive jets 548 557 9

Airliners between commercial lease 101 106 5

Helicopter/turbo prop/small plane 135 137 2

Aircraft Fleet 784 800 16

Aircraft Register Net 01/04/15 31/06/2015 Net Change

Executive jets 361 354 -7

Airliners between commercial lease 17 20 3

Helicopter/turbo prop/small plane 84 85 1

Aircraft Fleet 462 459 -3

Outlook

The outlook for Aircraft Registry and the associated private sector remains positive. Anecdotal evidence indicates that international business aviation industry is ‘cautiously optimistic’ for the future and that the Isle of Man is very well placed to benefit from any upturn in market activity. Challenges for the industry on an international scale are present and apply to all jurisdictions and in general are caused by global financial uncertainty. Additionally the international availability of funds and suitable finance options are frequently cited as major constraints on current and future business jet purchases.

Registry growth continues to be positive and has registered 801 aircraft since starting and 460 aircraft remain active on the Register.

Construction Overview

The construction sector remains depressed because of levels of demand and certain contractors continue to place a high level of reliance upon Government as a client.

There are some positive signs of demand for new built dwellings with substantial new developments at Port Erin, Colby, Peel and Ramsey and a number of sizable commercial developments such as a new Microgaming HQ under development.

Two professional consultancies have ceased trading or announced that they will shortly cease to trade. The reason for these decisions is not known, but it is not indicative of buoyancy in that area of the Sector. Quarry outputs remain at depressed levels.

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The sector is a significant contributor to the economy1 and a significant employer2. Unemployed construction workers form the largest single category of the unemployed. In June 2015 112 people were registered as looking for construction work out of a total registered unemployed of 768. However, the trend is now improving and the numbers of vacancies in the sector increasing, as of the end of June this stood at 27 posts.

Outlook

The immediate future does not offer any certainty of an improvement but there are optimistic signs. The Central Douglas Master Plan has elicited a good number of responses and the Douglas Promenade re-development is likely to proceed and will constitute a large capital scheme.

Energy Overview

The energy sector overall has seen a small reduction in employment from traditional hydrocarbon suppliers over the last quarter, while clean-technology has seen a small rise.

Outlook

Government is focusing on the significant opportunities that exist to develop offshore energy projects in the Isle of Man territorial seas for potential export to the United Kingdom. Companies were selected as preferred developers for offshore wind and tidal projects in November 2014. The Isle of Man Government is in discussion with the offshore wind farm developer, DONG Energy, and hopes to finalise and sign the Agreement for Lease towards the end of 2015. Discussions are also ongoing with the tidal developers and the Isle of Man Government hopes to issue Prospecting Licences over the remaining course of 2015 so that initial surveys may commence.

DED is observing a diversification of local businesses into new opportunities in the clean tech sector. Examples include a local engineering firm which would be manufacturing anchors for floating offshore wind turbines and a construction company building “Passive” houses (well insulated houses that do not require a heating system). Visitor Economy Overview Provisional figures the quarter show a further 11% increase in leisure visitors but the overall visitor numbers are down 10%, this is largely due to the reduction of business visitors (-14%) and visiting friends and relatives categories (-14%). Anecdotal evidence is showing that the new Bristol and Stansted routes have positive load factors and this has been supported by DED with a digital marketing campaign to market the air routes. This follows the joint marketing campaign with the Isle of Man Steam Packet Company and the Telegraph. DED has have worked with the official TT Travel Partner to increase the number of bed spaces available for the racing fortnight. It is estimated that the number of bed spaces offered by homestay reached over 3,000 which is the highest since the centenary year of 2007. Twelve new accommodation businesses were registered during this quarter.

The TT was delivered successfully and a survey of the event was commissioned from a leading research company. The results of the survey are currently being collated by the contractor and the data will be available in late July and reported next report. Reports from carriers, accommodation providers and other commercial partners indicate that growth in the economic benefit derived from the TT should be expected in the region of 5%.

13.9% of Manx Sourced Income 2012/13

23,352 – 2011 Census

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Outlook The outlook for the next quarter remains positive with the industry and the Island’s accommodation providers reporting healthy demand for travel and accommodation over the main summer period, which includes the Classic TT and ancillary events. Early indicators relating to the Classic TT also indicate healthy growth but this will only be evidenced in the next report when survey data is available.

Film and Creative Industries Overview The Minister for Economic Development is scheduled to attend the British Irish Council’s Ministerial summit in Jersey in October 2015, which is to discuss the outcome of the two year workstream on Creative Industries. The Isle of Man Creative Industries workgroup (Manx National Heritage, Culture Vannin, Manx Arts Development, Isle of Man College, DED) has arranged for an economic measurement of the Island’s Creative Industries sector to be prepared in advance of the summit. Outlook Pinewood Pictures manage a rolling slate of projects in consideration for investment for the Media Development Fund. Mindhorn has been confirmed as the next film production to receive investment funds. Tentative filming dates for the Isle of Man are 26 July – 13 August 2015. The film is a comedy and set on location in the Isle of Man. The film is to be financed and produced by prestige partners including BBC Films, British Film Institute, Scott Free Productions and Studio Canal. The project has the potential to generate a TV spin off which would be a welcome longer-term development for the Island’s film industry. Also recently confirmed was MDF investment into a videogames developer company who are to establish an office in early September 2015 on the Isle of Man. The company is producing a slate of four games for various markets and platforms, concurrently. The company have offered to work with the Government throughout the development, production, testing and launch of their products to maximise publicity - for both the company, and also the Island as an attractive and burgeoning jurisdiction for the videogames sector. The Government’s trial economic initiative to attract broadcast industry players continues and a number of promising leads are being worked through. The Government is in discussion with the committee of Celtic Broadcasters including BBC Alba, RTE and S4C with a view to hosting the Celtic Media Festival in 2017. Agriculture Cattle exports A number of producers are continuing to export cattle. The majority of this trade is derived from dealers buying store cattle from producers who either are short of cash and need to sell or lack confidence in the meat market and are prepared to sell cattle early for a given price. Others are exporting to exploit the perceived better prices paid for cattle in England. The exportation of cattle from the Island is not an issue as far as meeting local demand for local produce is concerned and the trend for above average numbers of exports early in the year seems to be abating, but it is starting to have an impact on the throughput at Isle of Man Meats (IoMM).

IoM Meats

IOMM is continuing with their marketing initiatives both on and off Island. They have also started releasing a weekly newsletter to their suppliers. One of the purposes of this document is to publicise the

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prices it is paying for the stock it is buying. This is designed to address the perception within their suppliers that they can get better returns by selling off-Island. They have also recently employed a dedicated UK sales person and their new website will be launched in late July. The management disciplines which have been put in place are starting to bring benefits and the margins they are making across all species are improved. The total gross margins are better than last year

o Cattle 13% against 8% o Sheep 16% against 14% o Pigs 26% against 21%

Beef

IoMM is now in a position where they can make a margin processing cattle therefore to try to encourage more throughput they have recently increased the amount they pay for most classes of beef cattle from 92 to 95% of their UK guide price. This better price delivers better returns to their suppliers whilst reducing their own fixed costs per beast processed. However the early season exports and the reduced numbers this leaves is starting to have an impact on the throughput at IoMM.

Sheep

The fact that IoMM is faced with a glut of lambs in the autumn has been mentioned in previous reports. This seasonal glut of animals has up to now been sold into France and Italy as carcasses with somewhat variable success. The current weakness of the € against the £ has made the prospect of continuing with this route to market look economically unsustainable. Therefore IoMM has recently employed a dedicated salesman to find markets for lamb in the UK; although it is too early to see any upturn in sales, UK markets have been found for all exported lamb.

IoMM has also successfully applied to DED for support towards upgrading its Vac pack capability. This new machine will give an extended shelf life to boned out products enabling them to gain access to higher value markets.

Both of the above are timely positive changes which are made the more important by the fact that the number of lambs presented to the factory is running some 50% ahead of last year.

Milk

There is still instability in the milk price across Europe with a recent report from the EU’s Milk Market Observatory stating that the average EU farm gate milk price in May was 6% below the average of the past five years and the downward trend is set to continue in the EU and indeed the rest of the world until late 2015. The policy of the Creamery is to maintain the maximum possible milk price to encourage confidence within the industry, the price they are paying compared to neighbouring jurisdictions is illustrated below.

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The Creamery recently commissioned its new cartoning facility (grant aided by DED) this has given much needed resilience to its packaging capability but perhaps more importantly enabled it to expand its sales into the lucrative lunch/snack grab and go market.

Policy

The Department of Environment Food and Agriculture (DEFA) consulted stakeholders over the definition of an ‘active farmer’ as applied to the Agricultural Development Scheme. A definition was agreed and subsequently laid before Tynwald in May. DEFA is currently working with IoMM, the MNFU and other stakeholders to address perceived shortcomings in the Meatplant Fees Order 2001. It is hoped that the potential for efficiency gains which can be made by DEFA and IoMM which will be of benefit to both Manx farmers and Manx taxpayers will be recognised and that the Meat Hygiene, Inspection and Grading (Fees) Order 2015 will be adopted by Tynwald in its July sitting.

Laxey Glen Mill

They are continuing to progress their investigations into the feasibility of processing rye and have got an agreement with one of their milling wheat growers to grow a small trial tonnage for harvest next season. This will hopefully allow them to address the growing niche market for this product from the islands rapidly growing artisan bakery industry. They are also in negotiations with Tesco regarding supplying them flour for sale in a selection of their UK stores

Fisheries Queen scallops 2014 economic value (first sale) = £ 1,393,854 from 2,666 tonnes 2014 economic value for Quarter to 30 June = £146,408 from 364 tonnes 2015 economic value for Quarter to 30 June = £119,798 from 221 tonnes The seasonal closure remains in effect within the territorial sea although some landings are being received from vessels fishing outside of the territorial sea. The queen scallop stock assessment, undertaken by Bangor University indicated a further decline in the fishery which means that a restricted fishery will take place for a second year. Outlook The number of licences issued with regard to the queen scallop fishery has reduced significantly and it is hoped that this will further assist in the recovery of the stock in the future. On an international level, DEFA continues its involvement with a group comprising all of the UK FAs considering options for improved management of queen scallop stocks across the Irish Sea.

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22

24

26

28

30

32

34

36

M A M J J A S O N D J15 F M A M

p/L

IoM average producer milk price compared to neighbours

IoM Previous UK IoM NI GB

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King scallops 2014 economic value (first sale) = £4,078,694 from 2,298 tonnes 2014 economic value for Quarter to 30 June = £1,196,956 from 727 tonnes 2015 economic value for Quarter to 30 June = £869,942 from 494 tonnes

The king scallop season ended on 31 May 2015. During the season fishing was restricted to certain geographic areas, due to high levels of domoic acid being reported in the product which causes Amnesic Shellfish Poisoning (ASP). Following a restricted fishery for queen scallops in 2014, there was much effort focussed on the king scallop fishery. Although landings in quarter to 30 June 2015 show a decrease of 32% on the same quarter in 2014 (figure may change as late data becomes available), the figures for landings and economic value from the first six months of calendar year 2015 combined are comparable with 2014. Outlook 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 2014 economic value for Quarter to 30th June = £206,242 from 242 tonnes 2015 economic value for Quarter to 30th June = £219,163 from 235 tonnes The pot fishery for whelk around the Island is a relatively recent development and has involved a small number of vessels. It is now the 4th most valuable fishery for the Island and while an overall cap exists on the total number of pots that may be fished within three nautical miles of the Island, interest in this fishery continues to grow, with demand for licenses exceeding availability. Outlook

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 continue to analyse data which will assist in developing more informed management strategies. The whelk fishery, among others, may be impacted by the development proposed by DONG Energy in the Eastern territorial sea and the company will be liaising closely with the industry with regard to this matter. Retailing Overview

Car parking remains the number one priority for the sector, especially as trading conditions are continuing to be challenging.

The number of empty retail units on the main shopping street in Douglas from the Peter Luis building to Sam Webb’s public house continues to be high and is shown below: -

13

Empty Retail Units in Douglas

Outlook

There are potentially 3 new UK retailers moving into premises on the main Douglas high street in the coming months. DDP are progressing plans for the return of the continental food and craft fair and it is envisaged that this will be held in Douglas from 15 - 23 August.

The closing date for responses to the Lord Street and Parade Street invitations to tender has been extended from 3 July - 31 August 2015.

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7

9

11

13

15

17

19

21

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Appendix 1 – Economic Indicators Labour Market Unemployment

Job Vacancies

0

200

400

600

800

1000

1200

1400

1600

No of Vacancies

Notified During

Quarter

Fulll Time

Part Time

600

700

800

900

1000

1100

1200

1300

No of Persons

Unemployed

June 2015

- 768 persons registered as unemployed

- 1.7 % of economically active population

15

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

50,000

Self Employed Persons Employed

and Jobs

Persons Employed Jobs Undertaken

Self Employed

June 15

-38,471 persons employed

-47,444 jobs undertaken -7,811 persons self employed

-100

0

100

200

300

400

500

600

700

800

900

Permits/NI Numbers New Permits

Renewals

NI numbers to Foreign Nationals

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Number of Jobs by Sector – Annual Trends

Sector 2014 Q2 2015 Q2 12 month change

Agriculture, Forestry & Fishing 632 631 -1

Manufacturing: Engineering 1017 952 -65

Manufacturing: Food & Drink 1977 2055 78

Manufacturing: General 571 573 2

Mining & Quarrying 352 311 -41

Construction 2367 2441 74

Utilities 570 541 -29

Transport and Communications 1906 1885 -21

Wholesale Distribution 476 460 -16

Retail 4302 4306 4

Banking 2445 2289 -156

Insurance 1440 1492 52

Other Finance and Business Services 3907 4048 141

Information and Communication Technology 939 948 9

Legal and Accountancy Services 1079 1088 9

Corporate Service Providers 1452 1532 80

Education 4098 4544 446

Medical & Health Services 6143 6405 262

Other Professional Services 1278 1350 72

Tourist Accommodation 945 846 -99

Catering and Entertainment 1693 1611 -82

E-gaming 254 272 18

Miscellaneous Services 3034 2869 -165

Public Administration 3996 3993 -3

TOTAL 46873 47442 569

Note; The table above refers to employment links and whilst this can be translated as meaning a job, this job many be full or part time, permanent or casual. In addition one person can have many separate employment links to the same employer e.g. teachers, nurses etc. It is also possible for employers (hotels, bars etc.) to keep employment links ‘open’ for casual staff as it is administratively convenient for them to do so.

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General Indicators Inflation

Scheduled Passenger Departures – Q2 (1 April to 30 June Annually)

Notes: 2015 figures are provisional Excludes Day Trip Passengers

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Annual Rate of

Inflation

RPI

CPI

0

20,000

40,000

60,000

80,000

100,000

120,000

2012 2013 2014 2015

Visitors in Paid Accommodation Visiting Friends and Relatives

Business Persons Isle of Man Residents

18

Electricity Consumption

Average Property Price – (12 month rolling average)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000Thousand Units

DomesticNon-Domestic

120

140

160

180

200

220

240

260

280

300

Average Property

Price £'000

HouseFlat

June 15

- average house price £269,916

- average flat price £148,088

NB: 2015 prices are provisional

19

Planning and Building Control Applications

0

100

200

300

400

500

600

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

Planning applications approved

Building Control applications

received

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Financial and Related Services Financial Services Act 2008 – No of Selected Licence holders

Deposit Base

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200

Deposit Taking

Investment Business

Services to Collective Investment Schemes

Corporate Services

June 2015 - 23 Deposit Takers - 51 Investment Business - 55 Services to Collective Investment Schemes - 166 Corporate Services - 119 Trust Services

10

15

20

25

30

35

40

45

50

55

60

65

£ billions

Sterling Non Sterling Total

Mar 15 (latest figures)

- £34 billion sterling

- £20 billion non-sterling

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Insurance – No of Companies

Funds under Management – All Schemes

0

20

40

60

80

100

120

140

160

180

LifeCaptiveTotal

June 15 - 15 Life Companies - 91 Captive Insurers - 137 Insurance Companies inTotal

15

17

19

21

23

25

27

29

31$ billion

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Company Registration - New Companies Formed

Total Companies on Register

0

50

100

150

200

250

300

350

400

450

500

1931 Act2006 ActConversions to 2006 Act Companies

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006 Act1931 ActTotal

23

Appendix 2 – Revenue Account

Estimate

inc.

Actual Actual to % of

Estimate Supp. Votes Actual to % of

2014-15 30 Jun 14 Actual

2015-16 30 Jun 15 30 Jun 15

Estimate

£'000 £'000

£'000 £'000 £'000

Income

Customs and Excise 319,700 79,925 25%

324,800 324,800 81,105 25%

Income Tax 203,045 34,300 17%

210,800 210,800 33,491 16%

Other Treasury Income 11,601 825 7%

11,645 11,645 325 3%

Total Income 534,346 115,050 22%

547,245 547,245 114,921 21%

Expenditure

Net Voted Services 540,611 132,015 24%

545,243 545,243 134,482 25%

Surplus (Deficit) (6,265) (16,965) 271%

2,002 2,002 (19,561)

Add:

Transfers from/(to)

Reserves 10,500 (500) (5%)

(2,000) (2,000) - -

Add:

Balance b/f 1st April 41,281 41,281 100%

33,610 33,610 45,516 135%

Balance c/f 45,516 23,816

33,612 33,612 25,955

24

Appendix 3 – Capital Spending 1. Introduction Government Departments’ capital spending, excluding borrowing authorities and land purchases, for the first quarter of the year to 1st April 2015 was £7.5m against a year to date estimate of £9.7m (77%). This spending represents 13.5% of the full year estimate. Spending over the same period last year was £6.8m (12% of full year estimate (£56.3m)). Spending is therefore 10% higher than the same period last year, with construction related expenditure also higher by 28% (£930K). Approvals with a combined total of £8.6m for capital projects were made by Tynwald in the first quarter of the year.

FINANCIAL POSITION

2015-16 Revised* Forecast Forecast

Actual Actual as % of Estimate Under- as % of

2014-15 2015-16 2014-15 2015-16 2015-16 Spend Estimate

£'000 £'000 % £'000 £'000 £'000 %

Government Departments' Expenditure 6,834 7,506 110 55,733 43,024 12,709 77.2%

Statutory Boards' Expenditure 2,871 2,902 101 26,774 21,419 5,355 80.0%

* Revised Estimate 2015-16 refers to original 2015-16 Budget plus any supplementary votes approved by Tynwald

Treasury

Forecast

1 April to 30 June Forecast for Year

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

2012-13

2013-14

2014-15

2015-16

25

2. Capital Spending Summary 1 April to 30 June 2015

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

Government Departments

Original

2015-16

£

Revised

2015-16

£

Actual

spend

£

spend against

original est

%

spend against

revised est

%

spend against

YTD est

%

Economic Development 2,288,148 2,288,148 36,285 1.6 1.6 7.1

Education & Children 8,514,666 8,514,666 1,365,154 16.0 16.0 77.5

Environment, Food & Agriculture 1,506,000 1,506,000 548,651 36.4 36.4 104.0

Health & Social Care 13,285,000 13,285,000 1,206,890 9.1 9.1 47.4

Home Affairs 5,229,112 5,229,112 450,649 8.6 8.6 53.3

Infrastructure 18,140,395 18,140,395 2,055,000 11.3 11.3 103.4

Housing Reserve 3,039,500 3,039,500 1,725,194 56.8 56.8 210.4

Treasury 1,000,000 1,000,000 -

General Registry 2,050,000 2,050,000 - -

Manx Museum & National Trust 680,000 680,000 118,106 17.4 17.4 69.5

55,732,821 55,732,821 7,505,929 13.5% 13.5% 77.2%

Government Funded Statutory

Boards' Spending

Manx Utilities Authority 22,296,790 22,296,790 1,928,074

78,029,611 78,029,611 9,434,003

Self Funded Statutory Boards'

Spending

Water Schemes 3,000,000 3,000,000 902,020

Post Office 1,477,000 1,477,000 72,381

82,506,611 82,506,611 10,408,404

Spending analysed by type of scheme for the period 1 April to 30 June compared to same period last year

Actual Spend Actual Spend 2015-16 Gov Actual Spend Combined totals

by Government by Government Depts' Spend by Statutory for Gov Depts

Departments Departments as % of Boards & Stat Boards

2014-15 2015-16 2014-15 spend 2015-16 2015-16

£ £ % £ £

Construction 3,275,266 4,205,497 128.4 4,205,497

Engineering 1,409,848 1,225,282 86.9 2,830,094 4,055,376

Plant / Equipment 1,764,758 699,714 39.6 72,381 772,095

Land Acquisition

Loan Schemes 58,765 58,765

Other 383,632 1,316,671 343.2 1,316,671

6,833,504 7,505,929 109.8 2,902,475 10,408,404

26

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 30 June 2015 Book cost Market value £ millions £ millions

National Insurance Investment Account 695.2 757.7 Reserve Fund 302.2 333.9 Hospital Estates Development Fund 42.6 43.3 Manx Currency Account 32.9 33.6 Public Service Employees Pension

Reserve 204.2 222.3 Manx Utilities Bond Repayment

Fund 32.9 34.6

1,310.0 1,425.3

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 March 2015 totalled:

Cash at Bank 30-June-15

Sterling £213.00

Euro Nil