The Isle of Man economy is currently in its twenty first consecutive year of growth. The period since the mid-90’s witnessed a particularly impressive economic performance with real growth averaging almost 10% p.a. between 1997 and 2002. Although the rate of growth has slowed over the last few years it is estimated that the economy is still expanding at something around 5% p.a. in real terms.

The key sectors in generating this performance have been financial services (this sector has grown by around two-thirds in the last six years) and professional services (growth of 50%). Banking generates typically around one quarter of the Island’s gross domestic product, with the rest of the finance industry adding another 15 to 20%.

One consequence of the economy’s performance has been an ongoing strengthening of public finances. Over the last six years alone Treasury’s receipts have increased from £300 million to over £475 million.

An important element of the Island’s fiscal strength is the long established and self imposed legislative requirement that Government must budget for a surplus in respect of its annual revenue spending. Whilst meeting this requirement Government has continued to invest in developing and updating the Island’s infrastructure, for economic as well as social benefit.

The Island’s unemployment rate has been below 1½% (of an economically active population of 40,000) for over six years. But labour market conditions for employers are considerably eased through the freedom to recruit and transfer personnel from off-Island. Although the Island operates a work permit system, it does so liberally, as evidenced in the information that shows around 13,000 permits being granted annually and refusals running at below 100 a year. The ability to bring in labour from outside is a key factor in constraining wage pressures.

Although increases in mortgage rates and energy prices conspired to push retail price inflation on the Island to over 6% in late 2004, expectations are for the rate to head back towards 4% over the course of 2005, a level that had previously not been exceeded for over eleven years.