Business confidence cools as costs climb and demand outlook weakens, survey finds

Rising labour and energy expenses dominate concerns, while optimism around future demand and profitability remains muted

Business confidence across the Isle of Man has cooled over the past year, as firms face persistent cost pressures and weaker demand outlook, according to Statistics Isle of Man’s 2025 Business Environment and Conditions Survey.

The report surveyed a random sample of 2,300 employers and received 375 responses. While the sample broadly reflects local business size distribution, it slightly under-represents the smallest firms.

A narrow majority of 59.3 percent said their overall business situation had remained unchanged over the previous six months. Those that reported a shift were relatively evenly split between improvement and deterioration.

However, the survey recorded a statistically significant drop in the share of businesses expecting conditions to improve over the coming six months compared with 2024.

Looking at demand specifically, 58.8 percent of respondents said the customer appetite for goods or services had stayed the same, while 20.6 percent reported a fall, and 18.7 percent a rise.

Expectations for increased demand in the next six months declined sharply year-over-year, sliding from nearly 32 percent in 2024 to 20 percent in 2025.

Cost pressures remain the dominant theme. In total, 45.2 percent of firms increased prices in the past six months, though this was below the proportion seen in 2023.

Labour costs were the most cited driver of price increases (44.2 percent), followed by energy prices (30.6 percent) and raw material expenses (24.7 percent). More than a third of respondents also identified broader inflation and energy costs as central concerns.

Turnover metrics paint a mixed but largely flat picture: around half of businesses saw no change in revenue across the most recent six-month window, while the rest split roughly evenly between gains and dips.

Roughly two-thirds reported rising operating and staffing expenses over the past six months, and a similar share expect staffing costs to continue their upward trend into early 2026.

Profitability has shown limited momentum. Only 15.3 percent of firms reported improved profitability in 2025 - a figure that has remained largely static since 2023. Meanwhile, 84.7 percent reported that profits had either stayed the same or fallen during the last six-month period, although 2025 saw a statistically significant improvement in the share of firms reporting stable profits compared with 2024.

Recruitment friction remains high, with one in four businesses saying they were currently experiencing a labour shortage - above comparable UK survey results.

Half of all businesses (51.1 percent) also cited difficulties recruiting, particularly in skilled technical toles, followed by professional and managerial positions, and semi-skilled or unskilled vacancies.

The most commonly cited recruitment obstacles were a lack of suitably qualified applications, a low number of applicants overall, and insufficiently attractive pay packages.

Capital investment activity was more subdued, although 28 percent reported increased capital expenditure over the prior six months, uncertainty around demand and business prospects was the most cited limiting factor for future investment.

Despite extensive cost challenges, 51.3 percent of companies reported no current insolvency risk, with 36.8 percent rating their insolvency exposure as low. This reflects a statistically significant improvement in "no risk" answers since 2023.

Sentiment around the Island as a business destination has also shifted. While seven in 10 firms claim they would recommend the Isle of Man for doing business to some extent, strong enthusiasm has diminished among small businesses (those with up to 50 staff) since 2017, when more than 90 percent said they would recommend the Island "fully".

Planners and connectivity costs draw outsized discontent, as nearly 66 percent of respondents expressed moderate or strong dissatisfaction with the planning system, while almost 60 percent were unhappy with the cost of transport links to and from the Island.

Set against these challenges, businesses expressed broad satisfaction with the cost and quality of hotels and utilities.

The survey further highlights skills concerns among workforce entrants: life and communication skills were noted most frequently, though roughly one in five businesses also raised concerns around numeracy and literacy.

Around 60 percent expressed moderate or strong disagreement with the suggestion that the Island’s education system is responsive to labour market needs.

The Isle of Man Steam Packet Company has been contacted for comment.