Recent Isle of Man Developments and Outlook.
PRO-ACTIVE policy initiatives and the expertise and can-do attitude of the Isle of Man’s financial services sector have enhanced its international reputation. Maintaining its focus on the quality of its business offering should assist it in differentiating itself from its competitors in challenging economic conditions.
In recent months, the Isle of Man has consolidated its reputation as a leading international business centre, as evidenced by (amongst other indicators) its dominance in the fields of corporate structuring and capital markets work. The figures speak for themselves: by the last quarter of 2007, the Isle of Man had firmly established itself as the leading jurisdiction of origin for international companies admitted to trading on the London Stock Exchange Alternative Investment Market (AIM) on the basis of both the number of companies incorporated and their combined market capitalisation. Isle of Man-incorporated companies have also been involved in notable listings on the London Stock Exchange Official List (Official List) and other major exchanges, a recent example of which is the announcement earlier this month that Hardy Oil and Gas Plc intends to seek admission to the Official List.
Such success is due to a number of factors including a favourable tax strategy, a robust but responsive regulatory approach and an increasing awareness of the Isle of Man’s capabilities and the quality of its offering amongst the international business community. More specific developments, such as the New Manx Vehicle (NMV), have also contributed to the Isle of Man’s strength in corporate structuring. Introduced by the Companies Act 2006, the NMV’s modern and flexible format has been well-received and it has been utilised as the issuing vehicle for admissions to both the Official List and AIM.
The Isle of Man’s funds sector has also benefited from strategic initiatives. New legislation brought into effect on 1 November 2007 is already credited with boosting the Isle of Man’s funds sector by attracting two new fund operators, Bridge Asset Management and Pelham Capital Management. Aimed at encouraging alternative funds and global operators to establish themselves here, the Isle of Man funds regime now offers new and enhanced categories of funds. These include the Specialist Fund which is designed to appeal to institutional investors and high net worth individuals, permits increased flexibility on strategy and asset allocation, has a minimum subscription of US$100,000 and does not require any regulatory pre-approval to set up. Partly as a result of such initiatives, the Government predicts that funds under management will double in the next three years.
The recent launch of the London Stock Exchange Specialist Fund Market (SFM) is expected to create additional opportunities for accessing the markets via Isle of Man funds, potentially driving further growth in this sector. The SFM is open to both UK and non-UK domiciled funds, giving sponsors and managers the option of locating investment entities in tax neutral, facilitative and well-regulated jurisdictions such as the Isle of Man.
In creating its international brand, the Isle of Man has set out to differentiate itself from other offshore financial centres (and their negative associations) by focusing on the quality end of the investment spectrum and committing to the principles of transparency and exchange of information, all of which place it on a distinctly different footing to the less discerning or uncooperative “tax haven”. Moreover, in contrast to the threat which offshore financial centres are usually regarded as posing to the international community, the Isle of Man has succeeded in demonstrating its worth as a global trading partner and facilitator adding value to the business of onshore jurisdictions.
The approach adopted by the Isle of Man is consistent with the role that international bodies such as the Organisation for Economic Co-operation and Development (OECD) foresee for offshore financial centres, namely to become “service centres” in contrast to “concealment centres”. Taking into account its principal resources (chiefly labour) and its constitutional and geographical situation, the positioning of the Isle of Man as a service ‘spoke’ connecting the major financial hubs would appear to be a mutually beneficial strategy. This symbiotic relationship was highlighted by the Lord Mayor of London, Alderman David Lewis, during a recent visit when he acknowledged the contribution played by the Isle of Man in attracting international business to AIM and described it as a “core asset of the City”.
With increasing international approval and a keen awareness of its own strengths and interests, the Isle of Man has begun to engage directly with other governments and international bodies, rather than through the UK, which has historically handled all matters affecting the Isle of Man at an international level. Most recently, the Isle of Man’s assertion of its independence to negotiate international agreements was demonstrated by the landmark taxation and economic co-operation agreements entered into by the Isle of Man with Sweden, Norway, Iceland, Greenland, the Faroes, Denmark and Finland (the Nordics). As the first offshore financial centre to conclude such a comprehensive package of agreements with the Nordics, this may be regarded as a clear endorsement of the Isle of Man’s established status as a reputable jurisdiction with which to do business. It is also likely, given their ground-breaking nature, that the Isle of Man-Nordic agreements will have a major influence on the mode of global engagement between OECD and non-OECD countries going forwards.
Given the current economic climate where the repercussions of the credit crunch continue to cause profound uncertainty in the financial markets and loss of investor confidence, it is anticipated that there will be knock-on changes in investment trends. In a recent report co-produced by KPMG International, it was predicted that, going forwards, there will be a greater drive towards quality products with particular emphasis on capital protection and transparency in investment structures. The combination of the Isle of Man’s expertise in capital structuring, well-regulated financial sector and political and economic stability (as reflected in its ‘AAA’ sovereign rating) may well increase its attractions for a diverse range of investors, including individuals and institutions and, potentially, sovereign funds for which new opportunities have opened up in light of liquidity shortages in the global economy.
The increasingly international nature of the Isle of Man’s commerce means, of course, that it is not immune to the effects of global financial forces and may, accordingly, expect to be affected at least to some degree. However, provided it continues to focus on the quality of its products and adapt its strategic approach in light of changing conditions, it will be in the best position possible to ride-out the effects of any economic downturn. |
