How Britain's crown dependencies plan to cash in on cannabis
Just miles off the coast of the UK, Britain’s crown dependencies smell opportunity in the air.
Typically known for their tax-friendly regulation and as an outpost for wealthy entrepreneurs, the Isle of Man, Jersey and Guernsey have all introduced new legislation allowing for easier investment in a new and emerging market - medicinal cannabis cultivation.
In January, the Isle of Man’s parliament approved plans to sell licences to grow and export cannabis for medicinal use. As a crown dependency, like both Guernsey and Jersey, it is self governing - meaning it does not need to wait for permission from the UK government.
Enterprise minister Laurence Skelly said new regulations on cannabis cultivation had been a “long time coming”. He’s hoping the island can steal a march on the UK.
“We want to make sure it [medicinal cannabis] is a high quality product so we’re at the top end of the market and we’re attracting the right investment. We’ve put the framework in place and already the interest has been fantastic,” he said.
Medicinal cannabis oil can be prescribed to people with severe epilepsy or MS.Credit: ITV News
“All we’ve done is managed to accelerate things but competition will come along, whether from the UK or elsewhere. What we’ll try and do is carve out a niche market that’s at the high end of the market. We’re a small nation but we’re a diverse economic community.”
Dozens of firms, both overseas and locally, have enquired about setting up on the island. One local entrepreneur is already planning to build a 150,000 square foot indoor premises to grow medicinal cannabis. Other firms could also be up and running as early as this year.
“If we need to create legislation which suits an industry that we think will benefit us, we’ll do that,” Mr Skelly said. “The regulation is key to our success.”
Mr Skelly said one firm had enquired about setting up inside the Isle of Man’s ‘airport technology gateway’, connecting it to the island’s freeport. In turn, this would mean the business would not pay import, export and excise duty, helping to reduce costs and making it a more competitive.
Freeports were a key policy pledge at the Budget earlier this year, but the Isle of Man has had an operating freeport for several decades, making it an attractive proposition for businesses looking to enter the market now while saving on costs.
“As I see it, it’s another opportunity to facilitate easy access and low-level bureaucracy to enable businesses to do what they do well,” Mr Skelly said.
Rishi Sunak (pictured with Boris Johnson) spoke about the economic opportunities freeports could bring to the UK.Credit: PA
“The one big one [cannabis firm] we’ve got is specifically designed to be in what we call the airport technology gateway, which as the name suggests is right next to our airport, so you can export this far and wide very quickly.
“I would suggest it’s a logistics benefit more than anything else. I think one of the key elements in the UK was to avoid import taxes if you operate out of a freeport.“
Jersey is also trying to establish itself in an emerging market, issuing its first licences for the commercial growing of medicinal cannabis - the first of its kind in the Channel Islands.
Economic development minister Lyndon Farnham hailed the move as the “birth of a new economic sector” for the island.
Senator Farnham said: “It will have an important economic impact, driving high-value economic diversification, creating jobs, encouraging inward investment and generating tax new revenues to support economic recovery.
“I see the Island’s growing medicinal cannabis sector as the ideal base for companies across the world, looking to expand into the European market.
“Jersey is perfectly placed to be part of a new industry that is about the provision of medicine, innovative cutting-edge science, high-value agriculture, the creation of intellectual property and global regulation,” he told the Jersey Evening Post.
Northern Leaf was awarded a licence to grow cannabis for medicinal use in Jersey earlier this year. It became only the second company to be granted a UK licence for commercial marijuana cultivation after GW Pharmaceuticals, which was first granted its permit in 1998.
CBD, a non-psychoactive element in cannabis, is sold on UK high streets.Credit: Unsplash
Meanwhile, in Guernsey, ministers issued clarification on potential Proceeds of Criminal Acts (POCA) conflicts, designed to make it easier for people and businesses looking to invest in medicinal cannabis production.
If a UK-based person or company invested in a medicinal cannabis firm which also had a recreational cannabis arm to its business - such as in the USA or Canada where both are legal - they could face a prison term or heavy fine as any dividends could be classed a proceeds of crime, as recreational cannabis remains illegal in the UK.
But under new guidance in Guernsey, firms can invest in recreational cannabis if it is lawful in the country of origin.
Robert Jappie, a partner at Ince Gordon Dadds, said: “The Crown Dependencies are taking the lead in creating favourable regulatory environments for cannabis business to operate in.
“By providing detailed guidance on compliance requirements, they have become increasingly desirable jurisdictions for cannabis companies. The licensing regimes are well structured, and the regulators are supportive.”
Meanwhile, on the mainland, the UK remains a big player in the global market, exporting more medicinal cannabis than anywhere else in the world.
However, new entrants claim that the Home Office, which signs off on cultivation licences, is reluctant to help develop an emerging market. GW Pharmaceuticals and its suppliers retain a tight grip on the market, as it is one of the only firms allowed to grow cannabis strong enough for medical use.
A Home Office spokesperson said: “Companies wishing to cultivate cannabis require Home Office Controlled Drug licenses to lawfully undertake these activities.
"The Home Office Drugs and Firearms Licensing Unit operate a robust but proportionate licensing regime which permits cannabis cultivation for lawful purposes. The licensing regime exists to protect the public by enabling safe and lawful access to drug materials, whilst preventing diversion of drugs or their unlawful or unsafe use.”
Cannabis is legal in some US states and products containing CBD - items derived from cannabis but without the THC - are sold across the UK.Credit: PA Images
Ant Lehane, head of communications at Volteface, an advocacy organisation which seeks to reduce the harm drugs pose to individuals and society, said: “Legal sovereignty post-Brexit simplifies many of these previously complex issues, such as policy related to hemp and the extraction of CBD - Volteface will be providing the solutions to these issues in our upcoming report Pleasant Lands.
“The fact that Novel Foods legislation kicks in later this month, legal clarity primes the UK to take a march on the EU and make the UK the European hub for cultivation, extraction, investment and export.”
Medicinal cannabis is becoming an increasingly attractive market for businesses across the world. As more research is carried out into how medicinal cannabis could help treat multiple conditions, from everything from cancer and Crohn’s disease, to epilepsy and glaucoma, venture capital firms are increasingly attracted by the high growth potential in the market.
Worldwide, the global medicinal cannabis market size was valued at £5.64 ($7.8bn) in 2020. The IMARC Group, a leading management strategy group, estimate the market is expected to grow by 15.3% from 2021 to 2026.
But the UK could have a fight on their hands. The head-start Britain's crown dependencies have got over the UK, coupled with the added benefits of 0% corporation tax, could prove too enticing to pass up on.
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