The Isle of Man: how a tax haven reinvented itself as a startup paradise

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The Isle of Man: reputation, transparency, suspicion

However, it went beyond simply moving away from banking to actually changing its nature. Around the time of the banking crash someone on the island realised that the game might be up for old-world secrecy and no-questions-asked banking. In 2016, tax havens look like a doomed business model and it’s hard to find many people on the Isle who will publically express much enthusiasm for this way of making a living.

Since 2013, there has new legislation to improve transparency, fight money laundering and embrace international standards such as the imminent EU General Data Protection Regulation (GDPR). Although the island isn’t part of the EU, the latter was necessary to shore up the burgeoning data hosting sector based in expanding datacentres built by national carrier Manx Telecom, an impressive layer of infrastructure critical to the wider tech story.

Today, e-business has turned into the firm foundation of a success story, with the sector comprising around 170 companies that together generate 25 percent of the island’s GDP. Encouraged, the island has more recently turned to newer sectors such as blockchain and cryptocurrencies, becoming the first Government in world to experiment with the technology by listing local companies in online ledgers. It is a good idea, uses a platform developed by local firm Credits, and is a start in raising wider business trust in the blockchain concept.

It also underlines how close government is to business on this island: businesses need a helping hand and legislation or professional help is on hand to make it happen at a speed and in ways unimaginable in the UK.

“We want to do it but need to make sure is we keep crime out and protect the consumer,” explains Donegan on the Isle of Man’s realisation that trust and a sound regulatory framework were going to be key to firms operating in the blockchain space.

Islexpo and University College Isle of Man

The island recently hosted its first Islexpo, a two-day event organisers designed to act as a focus for insiders and invited mainlanders to meet to discuss the sectors government sees as important to its future such as offshore energy, aerospace, and of course ICT and tech.

Headlined by Olympic cycling star-to-businessman Chris Hoy, Islexpo looked and sounded the part right down to sessions where local entrepreneurs were given time to pitch their businesses to attendees.  The tightknit local business community turned up in force but there were enough new faces from the UK and elsewhere to make this more than another exercise in boosterism.

Another intriguing development is the setting up of an ‘ICT university’, a franchise arrangement with the University of Chester that will turn a large Georgian former nunnery on 43 acres on the outskirts of Douglas into the island’s first university offering a BSc Honours in computing science to local and eventually UK and foreign students.

“Everyone on the Isle of Man is struggling for ICT recruits,” admits David Butterworth, executive director at the Manx Educational Foundation. “If it was going to be a success it has to be niche and the obvious niche was ICT.”

The initiative recruited 16 local firms that might benefit from having more people with these skills to contribute £5,000 each per annum to get the idea off the ground.

The first small ICT intake will be this September. But why one asks would students come here rather than, at present, head for established universities on the mainland?

“We will place students into two days of work experience per week, the idea being at the end of the three-year degree they have a validated degree and one, two, or three years work experience.”

Computing degrees compete to offer industry internships but none offer this level of paid engagement with real employers and are willing to structure the teaching to make it possible, Butterworth points out. Longer term, the University wants to expand the site into a tech park for ICT businesses in which it will invest and take equity stakes.

“Why do tech clusters work? It’s the availability of bright young people,” says Butterworth.

The Isle of Man: will it work?

There’s nothing unusual about the Isle of Man’s strategy – high-value, high-growth startups are an aspiration for civic and national bodies across the developed world – but the longer you spend on the island the more its subtle advantages start to stand out.

The question is, then, what makes the Isle of Man more compelling than anywhere else. After all, there are plenty of startup hotspots in London, Cambridge, Edinburgh and doubtless Dublin to not to mention the competition from other English-speaking islands such as Gibraltar and the Channel Islands that aspire to do many of the same things.

Geography plays its part – the island is a lot nearer to London and its customer base than some of those places. It can also now boast of its track record in attracting tech firms and that will get it some attention.

But after visiting the island, something else jumps out about the place that has nothing to do with money, clever people, tech hype or the fact it is probably a pleasant place to live. It’s pretty simple.

“Because of the small community things can happen quickly,” explains the Isle of Man Government’s Donegan. “Because politicians here have a good appreciation of business and it’s all about job creation, they can see the case.”

The island needed updated regulation to boost its credentials as a post-tax haven economy and encourage bitcoin and blockchain startups and that duly arrived. The island had a skills shortage and has found a way to set up a university of sorts. It needed an event to give entrepreneurs somewhere to meet and the first event, Islexpo, just happened.

Everything that happens on the Isle of Man happens for a reason and the Government is de-layered and small enough for it to dovetail with business. Doubtless if a new tech sector emerged the handful of people on the Isle of Man with the power to make decisions would have a meeting arranged to discuss the potential very quickly.

This doesn’t feel like a country or even a regional government. In truth it’s more like the way an incubator or accelerator works. If you ask to speak to someone on the island about Government policy, the call or email will often be answered in a matter of hours of even minutes. Many small organisations struggle to be as available as this. It is impressive even if it probably depends on the enthusiasm of people such as Donegan.

Responsiveness are helpful to outsiders such as journalists but the fact it exists at all tells you a lot about an organisation. Where barriers or time or access go up for whatever reason in organisations it betrays a deeper problem of remoteness and decision making. It speaks of hierarchy, bureaucracy and, sometimes, tired inefficiency. These organisations eventually lag. The Isle of Man is the exact opposite. It feels busier than it should.

Driven by desire and economic necessity, the Isle of Man has grasped something that larger governments and economic zones often struggle with: there is simply no more time to waste.

This story, "The Isle of Man: how a tax haven reinvented itself as a startup paradise" was originally published by

Copyright © 2016 IDG Communications, Inc.

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