Isle of Man economy contracts for second year

Figures show two consecutive years of real-terms GDP decline, raising questions over economic slump

New national income figures show the Isle of Man’s economy has contracted in real terms in successive years, marking a prolonged economic downturn as the Island's domestic output enters its second year of contraction, despite continued dominance by financial and professional services.

The latest National Income Report shows that while Gross Domestic Product (GDP) remains very large relative to the Island’s population, real GDP – adjusted for inflation – has declined year-on-year.

GDP measures the total value of goods and services produced on the Island. In cash terms, output remains high, reflecting the presence of internationally focussed and high value businesses.

However, once rising prices are taken into account, the report indicates that overall economic output has fallen in real terms over consecutive years.

Real GDP fell by five percent in 2022-23, followed by a further decline of 2.5 percent in 2023-24.

While a 'technical recession' is traditionally measured across two consecutive quarters, the Isle of Man's annual reporting cycle reveals a deeper economic slump. With real GDP falling for two straight years - a combined 7.5 percent drop since 2022 - the data signals a sustained contraction that exceeds the duration of a standard short-term recession.

While GDP measures the total value of goods and services produced on the Island, the report highlights that output remains highly concentrated on a small number of sectors, particularly financial and business services.

Insurance was the single largest contributor to the economy in 2023-24, generating £956,826,000 (£956 million) and accounting for 16.9 percent of total output, despite a two percent year-on-year decline.

Other finance and business services contributed £575,604,000 (£575 million) representing 8.6 percent of the economy, and recorded growth of 21 percent.

Several domestic-facing sectors saw notable contractions: construction output fell by 12 percent to £249.5 million, while transport and communications declined by 27 percent to £193.8 million.

Information and communications technology experienced one of the sharpest falls, dropping by 39 percent to £246.6 million.

Public administration generated £232.7 million in 2023-24, representing 8.9 percent of Manx-sourced income, while education and health services recorded moderate growth, rising by seven percent and 14 percent respectively.

Overall, total Manx-sourced income declined by two percent to £5,650,150,000 (£5.6 billion) in 2023-24, reflecting the broader contraction in real economic activity.

The report also shows a divergence between GDP and Gross National Product (GNP), with GNP rising by 7.8 percent in real terms in 2023-24.

GNP is defined as the total market value of all final goods and services produced by a country’s residents and businesses, regardless of where the production occurs (domestically or abroad). This means output generated locally does not always translate to income retained locally.

While the Isle of Man continues to generate a high level of economic output relative to its population, the figures indicate the Island is navigating its most significant economic slump since the pandemic. While the labour market remains tight, the underlying 'real' activity has been in a steady retreat, with heavy losses in ICT and construction outweighing marginal gains in other sectors.

In a statement, Treasury Minister Alex Allinson says: "There has been considerable work carried out by government over the past few years through the Island Plan to work with key sectors to understand their needs for skilled workers and enable economic growth within our diversified economy."

Manx Radio has approached the government for interview.