Gibraltar Magazine – August 2016
Ian le Breton
I imagine that many readers would be surprised if my piece this month did not look at implications of the recent “Brexit” referendum, when the UK electorate dramatically voted to leave the European Union. This is, after all, the finance column and it is the financial consequences of this decision that we will all have to deal with in the short, medium and long term. As the result came through both currency and stock markets were thrown into chaos and sharp falls (and rises) ruled until some order was restored. As I write, UK commercial and residential property funds are being tested and I am sure there is more volatility to come.
At this point, I should declare my interest. In my pieces written prior to the vote, I was scrupulous in not revealing my intentions for fear that I could be accused of seeking to advance one argument or the other. Now that the referendum is behind us, I can say that my choice – along with 96% of the Gibraltar electorate who cast their vote – was to remain. The result came as an unexpected, and for me unwelcome, shock. But to use the current phrase du jour, “we are where we are”. There is nothing we can do to alter the result and we must all – government, public and private sectors alike – make the best of it.
So where to now? I will explain my rather cryptic headline a little later but for now let’s just consider the facts. First of all, the world has not stopped turning. The Rock is still in place and its principal partner is the UK, which remains the world’s fifth largest economy. Reluctant “brexiters” might well take considerable comfort from that fact: after all places one to four are taken by the US, China, Japan and Germany. Britain and France vie for the next slot but at present “les rosbifs” have it.
Since the vote, we have been treated to the ignominious political fallout in the UK – the resignation of the sitting Prime Minister and meltdown in Her Majesty’s government and opposition. But I agree with all those who are advocating an end to partisanship and prejudice. In a democracy we must follow the majority. Put another way, we are all “brexiters” now.
We all seem to have become experts on Article 50 – the previously obscure treaty mechanism whereby a state informs the EU that is wishes to leave the club. Triggering this will start the clock ticking on a two-year timetable that leads, whatever model is chosen, to Brexit. The EU28 will become 27 and, with the loss of one of its largest member economies, the bloc will shrink. The separation won’t be smooth I’m sure and of course the EU itself will be affected in many different ways.
Locally too, an enormous amount of work will be required. Gibraltar relies on Britain for its international representation. Whilst our 30,000 population represents a very small part of the overall picture, we will be hugely affected by many of the decisions that will be taken in our name over the next year or two.
We owe a debt of gratitude, I think, for the quite splendid effort made by all concerned in Gibraltar’s contribution in the run up to the referendum itself. Politicians on all sides came together with the people of Gibraltar to generate a remarkable turnout and a resounding vote. The publicity generated by our small but vociferous Rock is quite simply invaluable. As the inevitable discussions get underway, I am confident that our voice will be heard in Westminster, Brussels and beyond.
Enough of the politics. What about the effects on business? Much of this remains unknown. I have no doubt that the local economy will continue to thrive. A positive effect of the sharp correction in the pound’s value since the vote is that our goods, services and indeed anything else priced in sterling are now very much cheaper for everyone else. Main Street famously offers some of the lowest cost duty free shopping anywhere in Europe – hence the throngs from Spain or when a cruise ship docks. All of that has suddenly become even more enticing. Expect the summer crowds to grow – and do what I do when needing to head out from my Main Street office. Walk through Irish Town!
I have written many times in the past about the benefits to Gibraltar of its EU membership, particularly in financial services. The ability for regulated firms to “passport” their services into the rest of the EU without the need for separate regulation is one of the most important examples. The extent to which the UK (and hence Gibraltar) will continue to have access to the single market is not yet clear and we face up to two years, or more, of uncertainty as these matters are negotiated. But the City of London has even more to lose and we must hope that pragmatism wins. After all the UK isn’t moving further into the Atlantic; continental Europe will remain on our doorstep and continue to be a hugely important trading area for all of us. Nevertheless, we face a challenging future.
Back then to my lurid headline and a swift reassurance – by “heading south” I do not mean that we are headed for economic disaster. After all, Gibraltar has endured far worse in its history. Rather my suggestion is that we should all look south from a geographical perspective. Europe may be more challenging in certain respects but what can we see (levanter permitting) from much of the Rock every day? Africa.
My monthly column for September 2012 was entitled “Taming the lion” and considered Africa and the enormous opportunity that this continent offers. The piece generated the largest volume of comment on social media that my musings have ever produced – before or since. So maybe it is time to return to the African theme.
There will be people reading this (I hope) who are already very alive to the potential. I am aware of one firm who is trading very successfully in the francophone states of West Africa from their local base. And several law firms have representation in, or are regular visitors to, Morocco in particular. But the continent offers so much more.
Where to start? Many readers will know that I am a great admirer of Tangier and all that the vibrant city has to offer. If it is some time since you have visited the place – or maybe you have yet to go at all – you are in for a big surprise. The port is being completely redeveloped and the investment in local infrastructure runs into millions of euro. It is not difficult to access either by ferry from Algeciras or Tarifa and there are direct flights from Gibraltar. Admittedly these flights are only a couple of times a week at present, but crucially they continue to Casablanca, the fourth busiest airport in Africa, which handles eight million passengers a year and connections to over 100 destinations. This means the rest of the continent can be accessed easily.
The mind boggles at the potential. The challenges are, of course, enormous but they are not surely insurmountable when you consider our capacity for languages, our English-based law and practice and the “can do” attitude for which Gibraltarians are rightly famous. The GDP growth rates in many African states must leave finance ministers across the sluggish EU bloc salivating.
I will return to this theme in greater detail in future columns but I wanted to plant the seed now. Let’s get this debate going and see where it leads. No, I wasn’t amongst the Rock’s 823 “Brexiters” on 23rd June, but let’s not be downbeat. Instead we must deal with the reality, exploit the opportunities that are opening up and face down the challenges that will arise in the exciting years ahead.