On June 23, following its much publicised national referendum, the United Kingdom took the historic decision to leave the European Union. In the immediate aftermath of the verdict, the UK Prime Minister David Cameron, who had strongly advocated remaining in the EU, resigned saying that fresh leadership was now needed to steer Britain’s future.
Whilst the Isle of Man is a UK Crown dependency, the Island is not, and never has been, a member of the EU. So from that perspective, nothing has changed with the referendum vote. Nevertheless, in the months and years ahead, as the full repercussions of Brexit become apparent, there will be a knock on effect for the Isle of Man and further afield. This is inevitable, given our special connection to the UK and the sheer size of the British economy on the world stage.
There is now likely to be a period of transition, inertia even, with Mr Cameron stating that he would like to see a new leader installed by the beginning of October to lead the exit negotiations.
Probably by the end of 2016, the UK will invoke Article 50, the official mechanism of secession from the EU, which is the starting gun for a two year window for the “divorcing parties” to finalise terms.
What the full impact will be for the Isle of Man remains an area of conjecture. But there is no reason why the Island, with its 1000 year history of unbroken self government, cannot continue to thrive as one of the world’s leading international financial centres.
We set our own laws and taxes and have robust governance and regulation. The economy has grown every year for at least the last three decades. The Island has broad appeal for both companies and individuals as a great place to do business, a jurisdiction that protects and nurtures family and personal wealth. This fine tradition can undoubtedly continue, irrespective of the UK’s changing relationship with its European neighbours.
Indeed, over the short term – for clarification, let’s say the next two years – there is likely to be consistent demand for the Island’s outstanding range of corporate services.
As an example, ahead of any change to UK immigration policy, certainly for non-UK citizens there is set to be continued demand in UK property. London remains one of the world’s prime property hotspots and the UK is determined that the City retains its status as a financial powerhouse. The UK has stated its intention to broaden its trading relations with countries globally beyond the boundaries of the EU, so there seems little reason why foreign buyers should be discouraged.
This plays to the Isle of Man’s strengths. It is well known that the Island is a highly advantageous jurisdiction for overseas investors looking to structure their UK property assets tax efficiently. At Sterling, this is a sector in which we are extremely active and we remain ideally placed to provide a comprehensive range of real estate services.
Nevertheless, we cannot deny that Brexit could have a significant impact for us all. The Island’s Chief Minister, Allan Bell, has concluded that the UK’s decision to leave the European Union could have a serious and long-lasting effect on the economy and politics of both Britain and Europe.
As an example, there are likely to be a whole raft of negotiations to replace the Isle of Man’s current Protocol 3 relationship with the EU, which allows free trade in manufactured goods and agricultural products.
Furthermore, the Isle of Man has already announced that it will set up a central database of beneficial ownership information which it will share with law enforcement agencies in the UK. Mr Bell has insisted the database should, under no circumstances, be open to the general public.
Just prior to the Referendum, however, the prominent UK Labour MP, Margaret Hodge, tabled a motion calling for the UK Government to extend the requirement to publish a register of people with significant control of companies incorporated in the Crown dependencies and overseas territories.
We firmly endorse the view that this amendment is unacceptable. Private should remain private. Confidential, often sensitive family information should have no place in the public domain. Rest assured, but we shall be closely monitoring developments and advising clients accordingly.
It must be recognised that Brexit is the start of a journey into the unknown for both the UK and the Isle of Man. The potential implications are far reaching and could impact on the structure of the UK itself, as well as the future of Europe. There is even talk of a second referendum which might trigger a whole new UK renegotiation with the EU. Or, the EU could disband altogether, leading to a completely fresh set of trading agreements between nations.
Despite this uncertainty, we see no reason why the Isle of Man won’t continue to play an important role in the provision of trust and corporate services.
The Island’s international reputation and relationships are stronger than ever. We don’t act in isolation and have built up a network of excellent multi-jurisdictional connections across the globe. It will be incumbent upon the Isle of Man to draw on the strength of these relationships and work hard to maintain them in the months and years ahead.
As Mr Bell has said, much will depend on what new economic arrangement the UK can negotiate with the EU, and how the Isle of Man, as a Crown Dependency, can fit into that framework.
Above all, policy makers at both national and international level must prioritise fiscal stability, good governance and effective regulation.
The UK EU Referendum result has no real precedent. We are all in unchartered territory. It is important through this period of upheaval that we maintain the courage of our convictions. As we have done at Sterling for the past 20 years, our objective has always been to serve our clientele in the best way we know how. Whatever challenges emerge on the international horizon, that’s something which will never change.