Fri, August 19, 2022
The Chamber of Commerce has appealed to the government of Manx to address the high costs of doing business on the island.
An open letter has been published in which the House says that while businesses in the UK are pushing for a reduction in VAT, the Isle of Man cannot wait and action must be taken now.
They say businesses in all sectors are being hit by increases in the cost of electricity, gas, oil and freight. Energy costs are the second largest operating overhead (after payroll) and energy prices here, especially for gas, are around 50% more expensive than in the UK.
The Chamber accused the government of “taking advantage” of high prices while gas supply, electricity supply and transport costs are all under the aegis of the IOM government.
Freight as the main contributor to the high costs felt by businesses. For food and retail businesses, the only option is to pass the costs on to Manx consumers, thereby funding the benefits for the government.
A full copy of the letter is posted below:
Isle of Man Chamber of Commerce: An Open Letter to the Isle of Man Government
Our government must face the gravity of the crisis in the cost of doing business.
The Chamber recognizes that rising costs affect the whole community, especially the most vulnerable members of society and low-wage workers, and welcomed the plans announced by the Isle of Man Government on 4 August providing “targeted support” to help those most in need pay rising fuel bills. However, much more needs to be done to help our members who represent companies that provide over 20,000 jobs.
Businesses in all sectors are affected by increases in the cost of electricity, gas, oil and freight. Energy costs are the second largest operating overhead (after payroll) for most businesses on the island – and energy prices here, especially for gas, are considerably more expensive than in the Kingdom UK (gas is about 50% higher per kilowatt hour). Members are also aware that gas supply, electricity supply and transport costs are all under the control of the IOM government. The Steam Packet Company will make a more normal profit this year, with freight being the main contributor to that. For food and retail businesses, the only option is to pass the costs on to Manx consumers, thereby funding the benefits for the government.
On top of that, businesses are now grappling with the highest inflation in nearly 40 years; the biggest increase in interest rates in three decades.
The Chamber is calling on the IOM government to act now, to use the power at its disposal to deliver vital support to businesses now, and not wait until fall or winter.
UK businesses are lobbying the UK government for a reduction in the rate of VAT from 20% to 5%, and we recognize that if this goes ahead, the IOM will follow. However, we cannot wait for a VAT reduction to help businesses, and the IOM government must come up with other solutions now. Our government has acted during the pandemic and that is just as important. The problems will only get worse as we move into fall and winter.
The recent announcement that the living wage had been miscalculated since 2017 came as a shock to Chamber and our members. Many believe this has unnecessarily fueled inflation in their own businesses. While we recognize that Living Wage is not statutory, many companies use it as a benchmark and align it with their organization’s values as “the right thing to do”. Companies that want to fairly compensate their staff must be able to respond to the government’s figures. More important than that, however, is the effect on the economy of those being paid below the living wage rate. The Chamber calls for a full review of the living wage calculation since 2017 and asks that it be calculated by an independent body such as the Living Wage Foundation using a reliable and recognized formula that is already supported by many companies.
Energy price/cost of living
The Chamber has serious concerns for businesses during the winter, as the cost of energy bills will increase even more. The Chamber therefore lobbied for support for businesses to help them meet the cost of energy bills. Many IOM workers are financially worse off than those on stipends, as they often live in expensive private rentals, face the same pressures on bills, etc., but their salary leaves them with less disposable income to that of many benefit recipients. The Chamber is asking for help for workers who fall into this category. Many people who are NOT receiving benefits are also in an extremely vulnerable position and this does not seem to be recognized in either the assistance or the language or rhetoric of the government.
Skills and labor shortages have reached crisis point for many businesses. The impact is felt on their ability to meet customer demand and forces some to turn down new business because they simply don’t have the human resources. This limits business growth and confidence. This is a serious and urgent problem. More needs to be done to encourage economically active people to re-enter the labor market. The Economic Strategy figure suggests that around 10,000 are in this category. The numbers require closer examination to understand where short-term policy and incentives could get people back into the workforce quickly. We fully support the ongoing work on the Labor and Skills Strategy and call on the government to ensure that this work is given all the resources, and quickly, in order to succeed. Like the UK, we would also like to see a ‘shrinking’ of the fixed-term immigration policy’s ‘skilled worker’ visa categories, to include a much wider range of skills.
Rising shipping costs are affecting the viability of some businesses. If IOM Steam package prices increase in line with inflation, freight transport will simply become unaffordable. The House would like the opportunity to discuss ongoing freight costs with the government and possibly set a cap, recognizing that this is also currently fueling unprecedented levels of inflation.
The lack of affordable housing available on the Isle of Man is stifling growth. We support the government’s recent encouragement to landlords to provide accommodation for key workers. The Chamber would like to see broader plans moving forward for all workers to address the labor crisis. Our think tank produced a paper with suggestions on how IOM could provide more affordable accommodation for key workers. In the short term, we would like to see an agile and phased program to merge all empty public sector housing into one entity, and upgrade and free up these housing for key workers, which would help companies recruit more young workers qualified.
As always, the House appreciates the challenges facing the government. We also welcome the willingness of Ministers to continue the dialogue, which is crucial in helping the public and private sectors work together towards the common goal of growing the Isle of Man economy.
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