Manx Parliament

Brexit lessons from a non-EU neighbour

The Isle of Man is part of the British Isles, but it is not and has never been part of either the UK or the European Union. E&T has been to see how it fares, particularly from an engineering point of view.

The air hostess was walking along the aisle with a stack of landing cards, as they do on all London-bound flights from outside the UK. We were to land in 20 minutes, but not a single passenger asked for a card, and there were no immigration controls in the airport anyway.

I was returning from a country which was indeed outside the UK (and the EU), yet still part of the British Isles, the nation that I thought could be regarded as a small and rather sketchy model of Britain, were the latter to leave the EU.

I am talking about the Isle of Man, a British Crown Dependency in the Irish Sea, with a population of 85,000, its own tricameral parliament, the Tynwald (the world’s oldest continuously operating democratic assembly), its own language and legislation, which only fairly recently legalised same-sex relationships, made seat-belts compulsory for motorists and outlawed birching as punishment, but still has not introduced speed limits on the roads outside its capital, Douglas.

The island governs its own domestic affairs and raises its own revenue, but makes a financial contribution to the UK for its defence and international representation.

Apart from having a well-functioning financial system and being, like most offshore British dependencies, a tax haven, the Isle of Man - unlike its Channel Islands counterparts Guernsey and Jersey - boasts a quickly expanding manufacturing sector, with a number of precision-engineering, aerospace, IT and other companies, largely responsible for the mini-state’s 25 years of uninterrupted economic growth and its per capita income almost twice as high as in the UK. The Manx government’s strategy paper ‘Vision 2020’ goes even further and asserts that by 2020, manufacturing will be firmly at the forefront of the island’s economy.

Looking back at the last 30 years of the island’s development, a recent Economic Research Report by Ernst & Young LLP charts the Isle of Man’s “remarkable” transformation from a country heavily relying on finance, agriculture, tourism and fishing into a dynamic industry-based economy, “with per capita income higher that the EU average”.

If we add almost zero crime (the locals still routinely leave their cars unlocked and wake up to newspaper headlines of the type “Driver hits bollards” and “Mindless vandalism as car is scratched” - real lead stories from the Isle of Man Examiner and the Manx Independent), less than 2 per cent unemployment, and the fact that, according to the 2016 ‘Isle of Man in Numbers’ report, immigration to the island “continues to fall”, it is easy to jump to the conclusion that we are dealing with a near-perfect mini-state, with flexible job market, accessible government, no recession, no over-regulation, no external borrowing and no EU membership fees - the paradise island where most of the problems faced by mainland Britain have been resolved.

As such, it appears to present a very convincing argument for Brexit. But the true picture is far more complicated than that.

Similarities and differences

“Of course, there will be similarities between the Isle of Man and a Brexited UK,” Phil Gawne, Minister for Infrastructure and MHK (Member of the House of Keys, the lower chamber of the Manx parliament), told me. “The key difference, however, is the scale of our respective economies. The UK is much bigger, so it can exert influence on its European trading partners whether it chooses to quit the EU or remain inside. As the Isle of Man is much smaller than the UK, it has to be much smarter and more nimble in fighting its corner internationally. On the other hand, being outside the EU for most purposes, the Isle of Man has the ability to pick and choose which EU-generated legislation it wishes to adopt and thus avoid over-regulation. Yes, being outside of the EU has helped our economy to a certain extent. That said, it has also meant that we have been unable to access certain markets.”

While holding neither full nor associate membership of the EU and being outside the EEA (European Economic Area), the Isle of Man still enjoys a very limited legal relationship with the European Union, regulated by a special “Protocol 3 to the UK’s Act of Accession” which allows for free movement of manufactured and agricultural Manx goods (but not Manx workers!) within the EU. Unlike Guernsey and Jersey, which are outside the VAT area, the Isle of Man is inside it as well as inside the Customs Union.

With all of the above in mind, one can begin to understand why the Manx people still care about the EU referendum result. Last January, actor John Rhys-Davies, a ‘Lord of the Rings’ star who lives on the Island, even launched a campaign demanding the right for the Manx to vote in the referendum. His efforts were rebuffed by the island’s Chief Minister Alan Bell: “As the Isle of Man is not part of the United Kingdom nor of the EU, we cannot expect to be included in a referendum... but we follow the debate and any potential impact on the Isle of Man, particularly the UK’s relationship with the EU.”

Why does this relationship matter for the islanders? I put this question to Laurence Skelly, the island’s Minister for Economic Development. “It is simple,” he replied. “If the UK votes to remain in the EU, Protocol 3, regulating our limited relationships with Brussels, will stand. If the UK votes to leave, then Protocol 3 will fall, as it is dependent upon the UK being an EU member state.” I often heard on the island that if the UK were to leave the EU, it would eventually have to conclude a bilateral agreement with Brussels similar to Protocol 3. One official I spoke to even claimed that the ‘Brexited’ UK will have to have a limited relationship with the EU similar to the one the Isle of Man is now enjoying with the UK.

A rather confusing picture indeed, but let’s try and understand what all those complicated protocols and agreements really mean. What is it like to live and work in a part of the British Isles that is outside the EU, particularly for engineers?

Change of direction

I first came to the Isle of Man in 1993, when it was in the throes of deep economic recession, and its tax haven status did not seem to help. The island was also suffering from a loss of its old and much-publicised identity as one of the premier resorts for British holiday-makers. Those days were gone, with the sunshine-hungry Brits now opting for warmer - and cheaper - destinations like Majorca, Benidorm and the Costa del Sol.

“We are like a funfair at the end of fun,” a Manx government official told me then. Indeed, the decline seemed terminal, and the Smile of Man logo, which used to advertise the island during happier times, had faded to the point when it began to resemble the rictus grin of a dead man.

On my next visit to the island in 1999, however, I witnessed a big change. The Manx government had decided by then to rebalance the economy, putting greater emphasis on manufacturing, IT and online ventures, and the results were already visible with a naked eye: the place had become brighter, fresher and had acquired a kind of modern buzz.

Well, 17 years later, in 2016, the Isle of Man has over 200 engineering and manufacturing companies employing thousands of people. Twenty-two of those companies are members of the Aerospace Cluster and are actively involved in aerospace design, manufacture and service provision. Jointly, they employ over 800 highly skilled engineers. The recent figures show a 28 per cent growth in employment over the last seven years within the Aerospace Cluster alone.

By all estimates, the Isle of Man has now become an acknowledged international centre for engineering and technology, with a highly qualified workforce, extensive apprenticeship schemes and its own Advanced Manufacturing Training Centre.

But how much of it all was due to the small nation’s status outside the EU, which, in the words of Michael Crowe, director of the Grant Thornton accountancy business on the Isle of Man, still remains the island’s “vital trading partner”?

Standards and work permits

John Bevan, a retired chartered engineer and former director of Manx Electricity Board, declares “I would definitely vote to leave the EU, if we had the right to vote in the referendum on the Isle of Man, because of the costs involved and due to its lack of democracy,” before adding unexpectedly: “But as an engineer, I would stay due to the importance of common standards and specifications. It is much easier for engineers to sing off the same hymn sheet, so to speak. If we want to buy switchgear from Germany or trains from Italy, they will be all made to our specifications - it works both ways. Before coming to the island, I used to work as an engineer in the UK, in the EU that is, and the only difference was that when the EU directives were issued, we had to follow them to the letter, whereas on the Isle of Man we could pick and choose.”

Bevan then spoke on the right to work in the Isle of Man for the EU and UK citizens, both of which categories require work permits - a situation similar to the one that may arise in the UK if there is a vote in favour of Brexit.

Possible similarities do not end here.  When a Manx citizen travels to the UK, he or she is entitled to free medical assistance, due to the existing bilateral agreement, but when the same person goes to any EU country outside the UK, they have no such right. Citizens of a ‘Brexited’ UK are likely to find themselves in the same boat.

“I now hold an Isle of Man passport which I received after five years of living and working on the island, but as a former UK passport holder, I have freedom to work in the UK, whereas a native Manx person doesn’t,” explains Bevan.

Work permits

I posed the same question to Francisco Martinez, engineering team leader at Prometic BioSciences Ltd and a Spanish national.

“When my wife went to do her PhD in Glasgow, I wanted to be closer to her, so when I saw a position on the Isle of Man advertised, I came here for an interview. To my surprise, the HR person told me I needed a permit to work on the island, despite being an EU national. I didn’t realise then that the Isle of Man was outside the EU. They explained that the island’s regulations demanded that they should try and employ a Manx person first, and if they want to hire a foreigner, even from the UK or the EU, they have to prove that there are no local contenders for the same position. When a work permit is issued, it has to be renewed every year during the subsequent four years, after which a foreigner gets a ‘Manx worker’ status and doesn’t require the permit any longer.

“It took my future company a month and a half to prove that there was no Manx electrical engineer with focus on automation - my specialism - available to carry out the job, after which I received my permit and started working. For me, it was easier, because my future company sponsored me, but had I been self-employed, it could have taken much longer. As an engineer, I think that having such strict work permit rules can be counter-productive, for you are going to miss out on lots of well-qualified people, so - again as an engineer - I would want the UK to stay in the EU and not to follow the Isle of Man example.”

Martinez was also worried that Brexit could lead to a “technological disengagement and a throwback to old engineering standards”.

So, if the UK does leave the EU and adopts employment legislation similar to the existing Manx rules, work permits for all foreign workers would become routine, which could potentially exclude a number of useful and innovative people. That in itself could slow down the country’s economic growth and technological progress.

Not all Manx engineers believe that work permits for EU nationals can be harmful.

I travelled to the town of Ballasalla to visit Kiartys - a small manufacturing company, and a member of the Aerospace Cluster, supplying precision engineering components to customer specifications to the UK, Europe and beyond.

“There is a definite economic advantage in employing the locals first, particularly on the Isle of Man, with its historic shortage of engineers,” said Steve Riding, Kiartys’s sales director, who is himself a Manx-naturalised native of Liverpool. “It doesn’t impede us in any way,” he added.

I realised what he meant during a quick tour of the company’s state-of-the art workshop, where, alongside other workers, several young apprentices, all local lads, were bending over their tools, absorbed in their work. The island’s extensive apprenticeship scheme does give preference to Manx youngsters, who normally return to work for the local companies that have sponsored them.

This doesn’t mean there are no EU nationals among the engineering apprentices on the Island. All of them, however, would also require a Manx work permit, just like Veselin Ivanov, who moved to the Isle of Man from Bulgaria a couple of years ago “looking for better opportunities”, when his country was already an EU member state. He had an automation engineer’s diploma from the University of Gabrovo, but was unable to find an engineering job and had to work for over a year in a pizza shop, for which he needed a Manx work permit too!

While delivering pizzas, Veselin heard of a new apprenticeship scheme in manufacturing engineering. It was a different area from the one he had been educated in, so he applied for it and was accepted after an aptitude test. He is now finishing the course and will soon start working as an engineer for one of the three local companies that have jointly sponsored his apprenticeship. Reassuringly, job offers came from all three. He told me there were 25 young lads in his course (no girls, alas), and 22 of them were Manx.

Who will walk the dog?

I met another aspiring Manx engineer on the way to the airport. His name was Konrad Krajewski, and he was my cab driver. Konrad had come from Poland where he studied environmental engineering at the University of Warsaw, but for personal reasons did not complete the course and came to the Isle of Man, where, just like Veselin, he worked in a pizza restaurant before becoming a taxi driver. He now ran a small cab-driving business of his own, but hadn’t given up on engineering. “I have just applied for a construction engineering course at the Isle of Man College,” he said from behind the wheel. “I will study during the day and will drive the cab in the evening. I know I can do it. I need to move on.”

Meeting Veselin and Konrad made me think that, no matter what happens after the referendum to the Isle of Man and to the whole of Britain, and whether or not the latter is going to adopt the Isle of Man model, one thing is certain - engineering will carry on. No political system in the world can stop creative and innovative people from working hard to engineer their dreams.

As Steve Riding remarked as I was leaving Kiartys’s premises, “Referendum or not, engineering is not going to change, for someone will still have to walk the dog”. *

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