Skandia House in Onchan on Douglas Bay tells the history of the Manx economy in a single building.
From hotel, to financial services office block, to headquarters for PokerStars, the leading online poker website, the building’s uses have mirrored the rise and fall of Manx industries.
Online gaming is the fastest growing sector of the Manx economy. The digital economy, dominated by the industry, grew 10 per cent in 2013 and added 100 jobs.
There were 56 licensed egaming companies based there, with five more in the process of applying. These companies are attracted by good telecommunications, low taxes – betting duty is between 0.1 per cent and 1.5 per cent of gross profit – and the island’s presence on the UK and OECD white lists of countries that share tax-related information.
It means Manx businesses can advertise in the UK, though many target Asia.
Leading companies include Microgaming and Playtech, which provide software for the industry, PokerStars, Celton Manx, and 188 Bet. Their presence has supported £1bn of private and public investment in telecoms infrastructure, says Chris Corlett of the Department of Economic Development.
There are seven data centres on the island and Manx Telecom, the dominant local carrier, is to spend £10m to roll out 4G mobile internet services this year.
The island is on the route of BT and Vodafone’s subsea cables running from northwest England to Ireland. The Manx Electricity Authority also sells surplus capacity on its fibre optic cable to the UK mainland.
Paul Telford, general counsel at PokerStars, says the infrastructure was central to the decision to set up on the island. The website deals some 50m hands in 500,000 tournaments every day – or about six starting every second. It also has to take stakes and settle accounts with the 65m registered players.
“All that activity goes through our servers on the island,” says Mr Telford The island is the hub of the business, with the directors living there and board meetings held there too.
The business expanded in 2012, when it bought Full Tilt, a rival, as part of a $731m settlement with the US, which had accused the two of violating its laws against online betting. With customer accounts frozen, PokerStars, which had to keep funds in ringfenced accounts under Manx law, reimbursed its clients but Full Tilt could not. Under the deal, PokerStars reimbursed Full Tilt customers.
Now there are moves by some US states to legalise online betting and PokerStars is seeking a licence in New Jersey. However, it is harder to operate in small markets because there are fewer players.
The industry also faces a move by rich countries to tax gambling at source, rather than by jurisdiction, with punters paying according to where they live.
The UK’s Place of Consumption Tax takes effect in December. The Isle of Man government believes the introduction of this is unlikely to have a significant impact, as much of the business managed from the island is outside the UK.
Only 6 per cent of UK demand for egaming is supplied by Manx licensees, against about 60 per cent supplied through Gibraltar.
However, new UK rules could also stop Manx businesses advertising there, including via football shirt sponsorship. An estimated £60m-£90m annually is spent on the Premier League alone to reach Asian audiences.
As egaming matures, the island is hoping to expand into areas such as computer games, high-speed trading, cyber security and online dating.
Peter Greenhill, chief executive of the government’s egaming department, says it is examining setting up an exchange for bitcoins and other virtual currencies. “The halcyon days of it driving rapid growth for the island may be over, so far as existing licensees are concerned,” according to the Manx eGaming Association survey for 2014.
Chris Gledhill, founder of PDMS, a big data business, says the sector is growing. PDMS runs the UK Police National Legal Database, which keeps officers up to date on the law. It also created Employed.im for careers advice and job searches for young people.
PDMS has just opened an office in Scotland, but about a fifth of its £5m turnover comes from outside the British Isles. “We see ourselves unashamedly as a world-class software business with a global market,” says Mr Gledhill.
If the industry is to expand beyond egaming, it needs trained staff. Mr Gledhill, as chairman of the island’s ICT association, has thrown his weight behind plans to establish a training college.
The Manx Educational Foundation, a private philanthropic organisation funded by local companies and businesspeople, has bought a building and intends to open the college.
Global names such as HP have shown interest and Mr Gledhill says UK universities have been approached, as the college hopes to teach to undergraduate level. The government has committed an extra £350,000 over the next two years to promote ebusiness. Tony Parker runs Riva, a home-grown business that provides back office software for the asset management industry. He co-founded the business in 2002 and in 2007 it was acquired by Franklin Templeton, the US asset manager. It is deployed in 14 countries with $290bn of assets on its platform. “We’ve grown beyond our wildest dreams and there is a lot more potential”.
Riva, which has just moved to bigger offices, employs 20 on the island and 60 worldwide. Mr Parker says it has not had to recruit from abroad.
“I was surprised by the depth of skills.” The business has a development centre in India, but the cutting edge software is written on the island.
“The government is very accessible and red tape is limited here,” he says.
Read the original article at the Financial Times