Gibraltar Magazine – May 2017
Ian Le Breton
At this time of year, I generally take the chance to bid a none-too-fond farewell to a cold, wet winter, acknowledge the promise of spring, and start to consider the prospect of the long, lazy summer that is lying just around the corner. And – for almost ten years now – I have done my best to search out any green shoots of financial recovery that must surely be on their way.
I remember being a young trainee in the City some thirty years ago. In those days my stock broking chums always counselled me to “sell in May and go away”. In today’s “24/7/365” economy – I am reliably informed that’s shorthand for 24 hours a day, 7 days a week, 365 days a year – that is no longer possible but, when I first arrived in Gibraltar, the concept of summer hours brought back memories of those halcyon days.
Physically “going away” may no longer be an option, but surely it’s still OK in 2017 to take your foot off the pedal and enjoy some extended downtime in the summer months? Right? Not so, in my humble opinion. By any measure it has been a very busy winter on the international stage, the results of which will have significant implications for the financial world and, by extension, to all of us.
Think back to the start of the year and consider the uncertainty generated around the world by the first few weeks of the new Trump administration in the United States. Important and unpredictable elections followed in the Netherlands and in France over the spring, which led to rising apprehension and debate across Europe. From time to time this uncertainty inevitably caused markets to wobble.
Closer to home, the full implications of Brexit – and how it might affect Gibraltar in particular – are yet to be clarified, although we are already getting a flavour of the difficult and perhaps ill-tempered negotiations to come over the next couple of years. Local businesses would be well advised to pay careful attention. Whilst new challenges will certainly arise, so will new opportunities and these will need to be exploited swiftly – before someone else does!
It is gratifying to note that, as a territory, we are as involved in this process as any other part of the UK and, I dare to venture, that we are far more engaged than most. Locally, government ministers and others continue to ensure that our voice, whilst coming from a small place, is always heard.
Just as I was thinking we might have had our fill of uncertainty – which as we know is the main enemy of market stability – along comes another curveball. This column appears just as the British electorate is about to return to “las urnas” at a snap general election – the second time they have been asked to do so in two years (not including the referendum). Prime Minister Theresa May gave all sorts of reasons for her decision to go back on previous undertakings but Brits were basically being asked to give a mandate to their preferred Brexit negotiating team.
The results of the UK election will not be known until the early hours of Friday, 9 June. Two years ago I dedicated this column to those of us who practice psephology. For those recent converts to my musings, this word – derived from the ancient Greeks’ practice of using pebbles to cast votes – refers to that branch of political science dealing with the study and statistical analysis of elections. I confess to being an acute sufferer and will certainly be staying up all night to watch as the results come in.
The new British Prime Minister – whoever he or she turns out to be – will then face a two-year struggle with a none-too-friendly European Union and none of us knows at this stage how it will all pan out. As one of the 96% of our electorate who voted to remain in the EU, I am obviously not thrilled at this prospect, but we have to accept the result and hope for the best. In the meantime, we have an economy to manage and develop in Gibraltar.
It will come as no surprise to regular readers that I intend continuing to beat the Gibraltar drum at every opportunity. We know that Gibraltar is an excellent place in which to do business, so it behoves all of us charged with promoting the jurisdiction to do so, safe in the knowledge that what we are saying is true. Not convinced? Then delve a little deeper.
There is no reason to suppose that much of our well-developed finance centre will not continue to thrive post-Brexit. A substantial proportion of the sector’s activity relies not on Europe per se but the UK in particular. Whilst Brexit is likely to impact negatively on our ability to passport financial services to the rest of the EU, the UK will remain our largest target market. Nor should we forget the vast array of possibilities that lie further afield. Sure there are 27 countries in the EU that may not be so well disposed towards us, at least initially, but there are 200 more jurisdictions worldwide. So while the rest of the world slumbers on the beach this summer, let’s make the most of these opportunities!
Last month, I focussed on FinTech as the Gibraltar Magazine paved the way for the inaugural Crypto Currency Summit held on 9 May in Gibraltar. This was just one example of our ability to punch above our weight. One need only look at the range of financial services providers already established here that are competing with traditional banks in the funds transfer and currency exchange areas to appreciate the profound changes that lie ahead. An exciting new world beckons for those brave enough (or should that be far-sighted enough?) to embrace the opportunities afforded by new technology.
While it is vital to keep up with new technologies, there are many other ways in which individuals and businesses can make a significant difference to Gibraltar’s international financial services offering. As a raft of supranational transparency initiatives – not least the Common Reporting Standard (CRS), which introduces a single global standard for the collection, reporting and exchange of financial account information on foreign tax residents – becomes reality, so will the ability of our financial service providers to adapt and ensure compliance with international standards.
Like Brexit, we cannot alter progress in this area, but we can all choose to embrace it positively – and hopefully reap the reputational and transactional benefits by so doing – rather than taking the “ostrich option” of burying our heads in the sand and trying to pretend that nothing has changed. In the latter case, beware. As we all know, sand can get uncomfortably hot.
So can we afford to close up shop this summer, head for the beach and hope for the best? You can if you want to, but I know where I’ll be. Of course a balance must be struck, but this year, perhaps more than any I can remember – and I can remember many summers – a week may certainly be a long time in finance. A whole summer is therefore an opportunity not to be wasted.