annual_report_2008 by Chamber of Commerce Gibraltar

w w w . g i b r a l t a r c h a m b e r o f c o m m e r c e . c o m

The Gibraltar

Chamber Commerce OF

ANNUAL REPORT & ACCOUNTS

2008

L.SACARELLO EST.1923

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2008 ANNUAL REPORT The Gibraltar Chamber of Commerce was founded in 1882. It was established for the “promotion of measures calculated to benefit and protect the trading interests of its members and the general trade of Gibraltar”. More than 125 years later the Chamber’s role is as important today as it was then. Our members employ more than 6000 people which is around half of Gibaltar’s current private sector workforce. It is the largest organisation representing the interests of private sector commerce in Gibraltar. The nature of Gibraltar’s economy has been transformed, particularly over the last two decades. Today the Rock is a service economy revolving around Financial services, the Port & Shipping Services, Tourism, Online Gaming and a very well developed Professional Services Sector. The benefits of being a member of the chamber include: •

Network and meet new business contacts and potential clients

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Advice on local legislation and regulations

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Email alert service on matters affecting the business community in Gibraltar

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Represent your views directly to Government

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Reduced rates on export documentation

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Use of Chamber meeting rooms and presentation suite facilities

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Free subscription to the Chamber’s quarterly publication “B2B”

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Subsidised training courses

Board Members President: E J Nicholas Russo Vice President: John Isola Hon Treasurer: George Olivera Hon Secretary: Jeremy Nicholls Directors: Bruno Callaghan Marvin Cartwright Franco Cassar George Desoisa Ernest Felipes Andrew Haynes Christian Hernandez Peter Isola

96 MAIN STREET • TEL: +350 200 78723 • EMAIL: presstat@gibnet.gi

www.sacarello.gi annual report & accounts 2008

CONTENTS Foreword

Politics

Economy

Wholesale & Distribution

Retail

Finance

Insurance

Port & Shipping Services

Tourism

EU Funding

Financial Highlights

Report Of The Auditors

Annual Accounts

Gibraltar: Key Information

annual report & accounts 2008

FOREWORD 2008 was a watershed year for the Chamber and for the Gibraltar business community in many ways. One of the events likely to affect Gibraltar significantly over the next few years occurred in December: the judgment by the European Court on Gibraltar’s tax status. The court found in Gibraltar’s favour on both material selectivity and, crucially, regional selectivity. Unfortunately, but perhaps predictably, the decision has been appealed by Spanish authorities. They were not even party to the original case, but when faced with the decision, use it as another cudgel with which to bash Gibraltar. It appears that the mask of openness and cooperation promised in the aftermath of the Cordoba Agreement has slipped a little. New airlinks to and from the Rock were initiated during the year by Easyjet and by British Airways and work finally got underway on the construction of the new air terminal. The increased congestion will cause problems for businesses, visitors and members of the public but the end result will, it is hoped, be worth the frustration and the improvements in tackling congestion should have lasting positive effects. If the year will be remembered for anything it will be for the near collapse in economic growth in all of the world’s major economies and the likely impact on Gibraltar. It is clear that the Rock’s economy is seeing a slowing in the growth rate but so far there is no evidence of the recessions being witnessed by our two principal trading partners: the UK and Spain. At the time of the last recession in the early 1990s Gibraltar’s economy was considerably smaller and less diversified and thus more exposed.

annual report & accounts 2008

Although individual businesses and sectors are being affected, your Board remains confident that Gibraltar’s economy is today sufficiently robust to withstand the downturn elsewhere. A related issue was the sharp and sudden decrease in the value of the pound against the euro in the second half of the year. Initially this benefitted some local traders as more people did their shopping locally, but when their inventories had to be restocked and paid for in euros, local businesses saw a sharp and unwelcome increase in costs. The Chamber will continue to lobby Government to minimise the cost base on business and not to substitute the withdrawal of one levy with the imposition of another. Just as the private sector is being forced through economic circumstance to adjust to the harsher trading conditions, our members expect that the Government should exercise a disciplined approach to spending, particularly in those areas where it can control costs if it chooses to do so. The Chamber also celebrated the 125th anniversary since its foundation with an excellent dinner at the Gibraltar Casino and His Excellency the Governor as guest speaker. This marked the end of an era as the Casino moved soon after to its new site at Ocean Village. The economic uncertainty elsewhere looks set to continue into 2009 and beyond. Nevertheless given the resilience of many local businesses coupled with our historic ability to turn adversity into an opportunity there is every likelihood that Gibraltar’s business community will emerge stronger and more competitive from the current malaise. This will help to secure all our futures.

POLITICS

ECONOMY

2009: A time for hard choices

The third and continuing test is the global recession which, until now, has seen Gibraltar only marginally affected. If, as is currently the case, the finance sector, bunkering and retail all remain viable then the worst effects of a recession will be averted, but it would be a serious mistake to assume that the recurring income from these industries will remain as buoyant as before. It is not prudent to assume therefore that we can borrow and spend our way out of recession. If inter bank borrowing remains sluggish why should we expect that our own collateral proves so much more attractive.

In the political game of Snakes and Ladders, 2008 came through with more rides on the ladder for “Gibraltar Inc” and fewer slides on the snake. The difference between the board game and politics is that, in politics, it is not always clear which is which and the art of Govt is turning crisis into opportunity. There have been four significant tests for Government in the last year. This report considers Government’s performance and the challenges ahead. The suspension of the Chief Justice and the convening of a tribunal to consider the matter had all the hallmarks of a very long snake. One which could tarnish both the standing of the legal profession and the reputation of Government. The determination shown by the legal profession in pursuing the matter was ultimately vindicated by the Tribunal’s findings and a collective sigh of relief could be heard, although the matter awaits final determination by the Privy Council which, under the Constitution, is the body that must take the ultimate decision whether or not the Chief Justice should be dismissed. For most observers it was a pitfall avoided and time to move on, but the role of the Opposition in this affair is at best ambivalent. If the Tribunal’s report is upheld, then the Chief Justice has been found wanting in judgement, and the Opposition who supported him either show the same lack of judgement, or have been engaged in mischief regardless of the cost to Gibraltar’s reputation. The second test was self-imposed: Government announced in June that it would make no further representation to the UN committee responsible for decolonising the last remaining countries on their list. The political risk inherent in the unilateral decision by Peter Caruana to desist from the annual pilgrimage to petition the United Nation’s Committee of 24 has been hedged by taking the initiative in the tripartite process. Time will tell whether it is a crisis in the making or an opportunity. Spanish diplomatic pressure makes unattainable any progress within the framework provided by the Committee. Against this the Government of Gibraltar considers that the new constitution closes the chapter on our “colonial” status, which in turn

makes the work of the Committee of 24 redundant. The logic appears to be that these two seemingly irreconcilable positions can be resolved by changing direction and focusing our energies on the root of the obstacle. It seems a risk worth taking. If Gibraltar can debunk the myth that our finance centre and port activities are illicit we may finally be able to work together for our mutual benefit. The Chamber is currently involved in an ambitious project to establish that, overall, our economy is beneficial to that of the Campo de Gibraltar. The project in question is an Economic Impact study that defines and measures the close links between the Gibraltar economy and that of the Spanish hinterland. The study nets off expenditure in Spain emanating from economic activity in Gibraltar against the inflows into Gibraltar from Spain. The preliminary results indicate that, once all direct and knock-on effects are considered, Gibraltar contributes over £300 million net into the local Spanish economy. This is a substantial and significant contribution into Spain’s regional economy and the indications are that this figure is likely to be conservative. If, however, the price of Spanish economic cooperation is a double taxation treaty agreement, it would be helpful if the Opposition were on board to ensure that all sectors and interests are protected. Disappointingly however the Opposition remain outside the play. The promise of renewal for the GSLP with the imminent departure of Mr. Bossano has yet to develop into a debate for the future direction of the party. After four consecutive defeats the Opposition seems content to wait for the GSD to drop from exhaustion rather than to make the running with a vision for Gibraltar we can all evaluate. The capacity for negative thinking within Opposition ranks is mirrored only by the attitude of the Partido Popular in Spain. It seems that both parties look back with nostalgia to a time of siege and mistrust. The opportunity remains however for the GSLP to build on the achievements of their rivals rather than threaten with their dismantlement. There can be no doubting that the way ahead for the GSLP will require that the party face up to some difficult decisions but hard choices are a better option than a slow fade.

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Now is the time for Government to apply radical thinking to some of the least affordable items of recurrent expenditure. In particular proposals to mitigate the costs of running a general hospital by joint venturing with a private sector entity might provide a significant saving without diminishing services. We should embrace, as opposed to reject, “medical tourism”, as a means of improving our health product and cutting costs in the style of so many American hospitals today. Another item of expenditure that we can ill afford relates to occupational pensions and the continued practice of final salary based pensions for the Civil Service, especially as these are not on a funded basis but are paid for out of current tax receipts. For Government to persist in the practice is a folly that future generations will have to confront, but in the current climate of nervous lending these expensive habits hamper our credit rating. It is never easy for Government to curb expansion. The temptation to command an ever-growing budget and to increase the size of the public sector needs to be resisted. In the teeth of a global shakedown it is time to tackle excess spending and to take a leaf from the first GSLP administration which did so much to restructure a runaway public sector. The GSD have their own hard choices to make and failure to confront them will only lead us to a fool’s paradise. Key in this argument are the various major infrastructure projects recently announced and soon to be started. These include the new airport terminal, the new roads around the frontier, the tunnel at the eastern end of the runway and the conversion of Devil’s Tower Road into an access motorway for Gibraltar.

annual report & accounts 2008

These projects, which total around £150m, have produced controversy and much debate. Do we really need such a large and grandiose terminal, in view of the zero level of additional demand resulting from Cordoba? While this Board is fully supportive of Cordoba, surely a more modest and cost effective alternative would have sufficed while being Cordoba compliant? Setting aside for the moment issues of need or utility, what most concerns us is the level of commitment we have entered into in financial terms. In today’s climate, this is worrying. The impact on Government finances would, of course, be dampened by finance contributions from the EU but on this point the Gibraltar Government is remarkably quiet. We look forward to seeing how Government plans to finance these large-scale developments but without a substantial EU contribution the policy is at best borderline. It should be remembered that Government recently increased its borrowing powers to £200m and we generally agree with the Chief Minister’s budget statement that this level is feasible. However given existing borrowings of about £100m, and all the other projects currently on stream, it is unlikely that these major projects will fit under the existing borrowing powers. Is a further increase in borrowing powers prudent in these times, when there is so much uncertainty? The fourth test has all the hallmarks of a giant ladder: the ruling by the European Courts that gives Gibraltar discretion to devise its own tax laws. This landmark victory is not however an end in itself. It is a significant step in what is a process and one that can yet go wrong. In order for this autonomous right, which we have had recognised by the EU, to turn into a financial marketing tool we will need to show a more united political approach than has been forthcoming. We hope that the Opposition will be able to embrace the project as one that, in time, may become the engine of a future GSLP administration. It seems short sighted for the Opposition to continue sniping and generally adopting a negative approach that will hamper progress for the benefit of political point scoring. Political storm clouds threaten Gibraltar and other finance centres around the globe. Devising the right legislation and steering it will require not only inspired leadership but more joined-up

ECONOMY cont. Government. Bucking the general trend against Government expansion advocated by the Chamber, it is clear that the task of transforming Gibraltar from an offshore to a low tax jurisdiction demands a level of professionalism that will require the recruitment of outside expertise if not the ladder could turn into a wriggling snake.

by an increase in output for emerging and developing economies of 3.3% and a decrease of 3.9% for the newly industrialised Asian economies. World trade is also forecast to reduce by volume in global terms by 2.8%. The situation for the world economy is assessed by the IMF as the worst since World War II.

Turning to the global economic downturn, it is fair to say that, other than an initial softening of some sectors of the property market and some understandable concerns about employment prospects, we have not yet been deeply affected. However, in the light of the reality of unfolding economic events worldwide, it is naive to assume that we will remain immune. Recently, a major bank has announced that there will be redundancies at the Gibraltar office. Is this a foretaste of what is to come?

Few, if any, economies have escaped the consequences of the recession. The USA is suffering its worst overall economic downturn since the Great Depression of the 1930’s. China, famous for prodigious recent manufacturing led growth, saw its exports decrease in January by 15%, the worst result in a decade. Japan also saw January exports overall down by 40% and vehicle exports down by over 60% as international markets dry up. All across the EU, output is dropping and unemployment increasing.

The roots of the current crisis, at a global level, are to be found in the consumer led boom, fuelled by reckless lending policies. Rocketing housing prices led by this demand which included a significant speculative element, and the resultant oversupply of real estate, created a bubble that has been growing to bursting point over the last few years. The prick that burst the bubble was the implosion of the banking and credit system. Catastrophes, such as Northern Rock, the folding of Lehman Brothers, Iceland’s banking crisis and subsequent economic collapse, and the virtual nationalisation of the Royal Bank of Scotland and Lloyds Bank, have provided the banner headlines which heralded the recession. As central banks across the advanced economies pump money at the cost of the taxpayer into ailing banks, the question is where is all this going to end. These policies have undoubted legacy costs. In the UK, for example, it is estimated that it will take at least one generation (30+ years) to simply bring back the level of national debt to pre-crisis levels. The IMF’s end January 2009 update on their World Economic Outlook makes for some grim reading. Compared to the November 2008 update, the outlook for the global economy for 2009 has gone from 2.2% growth to 0.5% or a drop of 1.7 percentage points in just two months! This helps to illustrate the speed at which the recession has been advancing in global terms. This outlook is based on an overall 2% reduction in output for the advanced economies countered

annual report & accounts 2008

Closer to home in the UK, the decline in output forecast for 2009 is 2.8%, the worst for the major advanced economies. The Confederation of British Industry shares this view as does the Bank of England. Concerns include mounting unemployment, estimated to hit over 3 million by 2010 and the soaring level of public debt, which is set to be the highest in the EU. For Spain, output is a little better at an expected decline of ‘only’ 1.7% for the current year. However, unemployment is estimated to hit 19% or more by 2010, the highest in the EU. In Andalucía, it is currently at some 25%, with the Campo Area being even harder hit. Spain’s crucial tourist industry saw a loss of over 2 million visitor arrivals in 2008. In summary, the global recession is very deep and is also very widespread due to the globalised nature of today’s world economy. The onset of the recession turning into a slump cannot be discounted. On these points, there is broad agreement among institutions and Governments worldwide. The crucial question is, of course, duration. How long will this recession last? When will it bottom out and when will we begin to see recovery. On these questions, there is much less agreement. One issue is the various assistance packages we have seen given to banks. The main result of these has been to prevent total meltdown of the banking system. This has become clearer in the

ECONOMY cont. successive rounds of support, when it has been found that losses and exposures have been far worse than initially estimated. (Recent financial results posted by RBS and Lloyds underline this). Certainly, there has been no assuring sign of an easing in credit, seen as a pivotal point for the roots of a recovery. The IMF says that we should begin to see the start of a recovery towards the end of 2009 and with the beginnings of growth in 2010. To this statement, the IMF add a caveat that this recovery assumes stability in the financial markets and that the proper corrective actions by central Governments are taken. This is a bold assumption indeed. There is a wide-ranging debate as to whether announced stimulus packages will be effective. Eminent economists, including Joseph Stiglitz, a widely respected Nobel Prize winner, argue that the US stimulus plan of $1.5 trillion announced by the Obama administration may not be as effective as its proponents suggest. In particular, there are concerns that tax credits may not be effective in stimulating spending.

We are also seeing the rise of the spectre of protectionism. This is evident in elements of the US stimulus package, with ‘Buy American’ clauses. In France, the Government has unilaterally decided to support its home grown car industry, despite an intention to standardise such incentives across the EU as a whole. State aid rules are effectively out the window as individual countries increasingly seek to look after their own. The medium term effects of protectionism are well documented. For example, protectionist measures put in place during the Great Depression of the 1930s had the main effect of increasing unemployment and significantly delaying recovery. Have we learnt anything in 70 years? In the UK, we now have the Brown administration, having essentially exhausted conventional monetary policy with the latest interest rate drop to 0.5%, now resorting to ‘quantitative easing’ (i.e. printing money) in what looks like a desperate attempt to inject liquidity Overall, there is a growing feeling that policy makers simply do not know how to get out of the

ECONOMY cont. crisis. Is it possible to arrive at a conclusion in the face of so many conflicting ideas and theories? The simple answer is no. The current world crisis is unprecedented and there are no manuals that provide a blueprint for getting out of the hole. How will Gibraltar weather the storm? The Chief Minister’s New Year message is typically robust in this respect. He is bullish about Gibraltar’s ability to ride out the storm: “Our economy and public finances are strong and robust, the largest parts of our economy are stable and on a secure footing,” and “our economy will be able to absorb any disruption that may occur to job and employment prospects”. As said earlier, we are in broad agreement with the current reported strength of the Gibraltar economy and, consequently, support the Chief Minister’s view but only if the world does indeed start pulling out of recession later in the year and reverts to growth in 2010. Available evidence suggests, however, that it will likely take appreciably longer for the tide to reverse. The longer the recovery takes, the more difficult it will be for Gibraltar to remain unscathed. The risks that Gibraltar runs in such a scenario have been played out in other countries. Ireland’s recent experience, after riding high on a property boom and much success based on Finance Centre activity, is a case in point given the parallels to Gibraltar’s economy. The impact of reduced interest rates on savings, retirement schemes and pension fund income attracts less media coverage than it deserves in the current debate which has majored on the plight of debtors and less so on that of savers. Given recent huge stock market losses, the impact on pension fund values is obvious. This will adversely impact on non Civil Service pensioners in Gibraltar, as an overall erosion of income from savings and pension funds. The risks remains that this will contribute to the continuing loss of confidence which has brought about the downturn. The recent announcement by the Chief Minister to put a 3% floor on interest receivable by pensioners from savings is a positive move.

The argument that expenditure on public sector infrastructure will help stimulate the economy has, cost implications aside, some merit. However, in Gibraltar, this is tempered by the fact that most such contracts, and certainly the major ones, are or will be let to outside contractors, building materials are all imported, as is the majority of the labour force. This represents a considerable leakage from the economy which is much larger than is the case in similar programmes elsewhere, such as that recently announced and implemented in Spain. The main benefit to the economy, on current account, will be limited to PAYE receipts and possible elements of sub-contract work. A prolonged downturn in economic activity will adversely impact on Gibraltar as much as it does in any other economy. In such a scenario, Government’s financial position will be equally hit, with reduced income by way of taxation and property sales and increasing demands on the exchequer by way of unemployment benefits and increased loan servicing requirements. As has been seen around the world, the speed at which countries’ fortunes have turned around is breathtaking. It is a downside of globalisation. The Chief Minister says that Government will remain vigilant and will be ready to intervene, as necessary, if things turn and remain bad. Government’s ability to deliver will depend primarily on the interplay between revenue and expenditure. In its planning and preparation for such a scenario, Government will need to curb recurrent expenditure, as revenue options will be limited. Government will also need to work in close liaison with representative bodies like the Chamber to ensure a two-way flow of ideas and information with the private sector. In the difficult times ahead, Government would do well to adopt a consensual approach to the problems that arise rather than risk alienating or damaging the private sector on which our economy depends. 2009 is, indeed, a time for hard choices.

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WHOLESALE & DISTRIBUTION The last year has proven to be an extremely challenging for the wholesale, distribution and retail sector. Being a service economy and due to our geographical location, the majority of products imported into Gibraltar originate from the Eurozone and as such the continued strengthening of the Euro against Sterling by 25% has been the principal challenge facing trade in general and in particular this sector. Passing the totality of these increased costs onto the consumer has proven extremely difficult and as such a sizeable portion is being absorbed by the wholesalers, distributors and retailers themselves and this in turn has eroded their margins. Businesses in this sector have considered sourcing products from outside the Eurozone to balance this trend. This natural shift has primarily focussed on the United Kingdom as there is no exchange fluctuation risk, however identifying new suppliers that are non-British and ensuring continuity of supply and efficient logistics to ensure that the consumer is provided the quality and service that they are accustomed to has proven difficult. The strength of the Euro has also resulted in fewer visitors by British tourists to southern Spain and as a consequence there have also been fewer British tourists visiting Gibraltar, who in some form or another purchase or consume products in Gibraltar. By the same token, shoppers from Spain have taken advantage of the strong Euro as this has increased their spending power in Gibraltar and this has attracted higher than normal visitor numbers in December and early January.

consolation is that the Bank of England base rate is currently at itâ&#x20AC;&#x2122;s lowest in decades and therefore if renewal terms remain unchanged, businesses will benefit from lower borrowing costs. Inflation in Gibraltar peaked at 4.7% in July 2008 and then dropped to 4.5% in October 2008 and is expected to drop to more manageable levels in line with the rest of Europe for the following quarter. It is therefore surprising that the minimum wage in Gibraltar has been increased on 1st January 2009 from ÂŁ 4.50 per hour to ÂŁ5.00 per hour, which represents an increase of over 11%, nearly four times the rate of inflation. Needless to say, this increase has affected all sectors of the business community as well as the wholesale, distribution and retail sector, which is a labour intensive sector and employs many persons within this bracket. As the Chamber has mentioned before, it would be better if government adopted a clear policy of annual inflation-based increases rather than a large one-off increase every four or five years. Businesses could plan and budget accordingly and the government would benefit likewise.

The turmoil in the world financial markets over this year has also impacted on the cost of services in Gibraltar. Increases in fuel costs have also affected not only the man in the street but also the distribution sector which is reliant on their delivery fleets to distribute goods and once again these costs have eroded margins. Costs of other services such as electricity have also increased and have had to be absorbed by these businesses.

Congestion has been an ever-increasing problem that the sector and the community have had to deal with on a daily basis over the last decade. It is hoped that the new road to the airport and frontier will alleviate some of these problems, but the completion is still a few years away and there is no immediate solution to this problem. The opening of Dudley Ward tunnel would alsomt certainly alleviate the current congestion. Deliveries into Main Street and other pedestrianised areas continue to be a topical subject as there are not enough loading/ unloading bays in the area or vicinity and all deliveries need to be made before 10 am. Most distributors continue to divert all their resources and delivery fleets to deliver within this tight window. The problem is exacerbated by the fact that many of the loading bays are not policed effectively with non-delivery vehicles using the bays as free parking.

With the problems facing the banking sector and the resultant mergers and restructuring within this sector, businesses are aware that their banking facilities may be renegotiated upon their yearly renewal and that their banking costs may also be subject to increases. The only

The introduction of the 5% Ad Valorum Tax on alcoholic beverages a few years ago has had the effect of making Gibraltar wholesalers uncompetitive when trying to supply these products on a duty-free basis to vessels calling at Gibraltar. This business is now being carried

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WHOLESALE & DISTRIBUTION out by brass plated Spanish ship chandlers, who merely transit their goods through Gibraltar, do not pay any duties, taxes, overheads or contribute to the economy. This needs to be reviewed so that there is a mechanism where there is a level playing field and Gibraltarian businesses can compete in their own market. The year ahead will force most businesses in this sector to review their overheads, capital expenditure programmes, sourcing of products and supply chain, borrowing costs and maybe even head count to ensure that they remain competitive and in business.

Inflation (%) 1999 - 2008

5.00

3.75

2.50

1.25

0 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Period January to January

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RETAIL The gradual transformation of Main Street continued during 2008 and several shops refurbished their premises with cleaner and fresher looks. This makes for an attractive and pleasant shopping experience that will be much needed in the next couple of years. Notable improvements were the Newcastle Building Society, Bang & Olufsen and Oasis. That said there are a number of vacant properties on Main Street. Whether this reflects the upward rise in shop rents or not it is hard to tell but landlords should be sympathetic to their tenants. During the year the commercial units of Ocean Village came on stream. This ambitious development effectively doubled the number of bars and restaurants available in the adjoining Casemates/Waterport area of town. Openings were staggered as the shopfitters could not physically finish all at the same time. The development has not generated sustainable levels of traffic yet and the quiet winter season has not helped. Over time though it will give locals and visitors a wider choice of venues and opportunities to spend money that is to be welcomed.

FINANCE In the busy Christmas shopping season the Chamber embarked on an initiative to attract shoppers from along the coast to come and do their shopping in Gibraltar (see picture below). The limited advertising campaign focused on the twin attractions of informing people about the number of well-known UK retail brands available in Gibraltar and the strong euro that gave visitors greater buying power on the Rock. It is difficult to know with any certainty the extent of the campaign’s success but we do know that many members benefited and appreciated the initiative. The Chamber will continue to look at ways in which it can help its members during 2009, whatever sector they are in.

The last quarter of the year saw unprecedented changes in the global financial markets and the impact on Gibraltar’s largest banks was both immense and immediate. The rather cosy world which local retail and corporate customers had become used to over many years came to a pretty abrupt halt. Like elsewhere, the big Bank’s capital and liquidity constraints forced Chief Executives to turn their attention to the cost and availability of credit, resulting in a significantly less fluid the benign lending environment that had been a common feature in many of the world’s economies were by year end being replaced with much more stringent criteria. Whether the client is corporate or personal, lending is still available locally, but the cost of borrowing has risen. Not only that, but the credit analysis process has become more demanding. Banks are scrutinising borrowers’ requests much more closely. Over the last ten years or so, the pricing of banking products has been

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driven to a large extent by customers. The lenders who needed to compete continued to shave margins in order to secure the business. This era is now over and it is unlikely to return in the foreseeable future. In future, borrowing costs will be driven to reflect actual costs rather than by competing to lend. Gibraltar’s advantage is that traditional relationship banking, where customers are known to their managers, has continued. However, the cost of providing this personal service in the future will be reflected in the rising cost of products and in account charges. In other words, business has become much tougher and the prospects over the next two years and beyond will probably be more of the same. All local banks are affected by their head offices elsewhere and the quest to maintain margins and cut costs is intensifying as banking groups seek to rebuild their balance sheets. Gibraltar is

FINANCE not excluded from the turmoil which exists elsewhere and just as the Rock has benefited from globalisation, so too will it continue to be affected adversely by the downturn. Personal defaults remain low compared to other jurisdictions although this reflects Gibraltar’s stable employment market. Of greater concern though are the two largest markets on which Gibraltar depends– the UK and Spain. These remain weak and so Gibraltar’s banking sector will continue to see slow growth for the foreseeable future. The drive to centralise noncore functions elsewhere means that further reductions in headcount cannot be discounted. In a connected financial world, Gibraltar is not immune to events elsewhere. Those offering pure wealth management services are also suffering as the value of assets under management has been hit by falls on all the main bourses. Management fees are generally based on a percentage of the value of funds managed. Until bourses recover these operations are also likely to see some retrenchment. Another example of events elsewhere affecting the local market was shown clearly in the disappearance of ABN Amro during the year. Whilst the name went, many of the operations and staff were snapped up by the local branch of SG Hambro.

annual report & accounts 2008

Local banks continue to invest in the local market in terms of local facilities: expanding the local ATM network and adding more customerfacing staff. Lloyds TSB Bank (Gibraltar) Ltd defied the gloom elsewhere to extend its local operations and by virtually doubling its workforce on the Rock. The bank’s product range includes investments and life insurance products for personal clients resident throughout the EEA and Money Market deposits for locally based corporate clients. At a time when the sector is retrenching worldwide this is a welcome display of confidence in Gibraltar’s financial sector in the future. There are still a number of good quality institutions in Gibraltar and the challenge for the sector is to retain as many of these as possible. With the current downturn, the uncertainty will continue, but this should be somewhat mitigated by the positive outcome of the ECJ decision. Industry and Government now need to work closer than ever together to develop a medium to long term strategy built upon the new tax regime in an onshore environment as further challenges to traditional Offshore Centres increasesThe earlier that the Government can give clarity to corporate tax rates in the next two years the greater the level of comfort that can be taken from the sector as a whole.

INSURANCE Gibraltar is still a small jurisdiction although the expertise it has gained in the last ten years make it well-placed to go out and entice more companies to set up here. The objective must be to continue developing this sector so that insurance remains one of the core knowledge clusters of the finance sector.

ahead. Tapping the markets is no longer an option even for those operators with the strongest credit ratings. Even in those sectors where there have not been significant changes to the claims histories, rates will almost certainly harden, which will have consequences for our members.

As with banking, the insurance sector has seen a slowdown during the year although the reasons differ. Over the past eighteen months Gibraltar has lost out to other jurisdictions because of the continued uncertainty over the future of Gibraltar’s tax regime. The immediate future is uncertain but the initiative needs to be regained. Gibraltar now needs to market itself – and it’s promised low tax rate – to likely new entrants. Lloyds syndicates and UK corporates, currently based in Bermuda, who need an EU presence could be a lucrative source of new business, particularly when this is combined with Gibraltar’s experience in particular structures and special purpose vehicles.

Domestically the broking sector continues to suffer from too many players chasing a finite level of business but with just three general insurers there remains insufficient competition at the provider level.

The industry’s performance has been aggravated further by the turmoil in financial markets during 2008. The cost of insuring against corporate defaults has risen substantially and this, coupled with significant falls in income generated from investments in both equities and bonds, has made the sector more risk averse. This has postponed decisions on new investments and as a consequence Gibraltar has not seen any new entrants setting up shop during the year. Insurance companies are under huge pressure like other parts of the financial sector. In an attempt to ensure that they have enough capital and can maintain margins, they are left with little choice but to increase premiums in the year

Life Non-life Reinsurers Captives Total

annual report & accounts 2008

During the year there was a noticeable and welcome increase in consultation of the sector by Government on a range of issues that impact the industry. Such interaction is critical at a time when the entire financial sector is under scrutiny. Gibraltar can and should be able to hold its head high as an example of best practice in regulatory supervision when compared with other leading jurisdictions. We congratulate Andy Baker of Argus and Penny Hudson of Caledonian Insurance for the great progress they have made forming the local branch of the Chartered Institute of Insurance. Raising the level of qualifications among practitioners adds further to Gibraltar’s reputation as a transparent and professional jurisdiction. Penny has also worked very effectively as Chair of the Insurance Association during the year and the Chamber congratulates her on her tireless dedication. The next couple of years will be challenging for the insurance sector. In terms of how this affects Gibraltar, rates will harden to make up for the short fall in investment income. This in turn will increase costs to all businesses at a time when turnover growth is forecast to slow.

No of authorisations

Gross premiums (£millions)

Net premiums (£millions)

Total Assets (£millions)

848

1045

718

2001

148

472

1266

805

3321

PORT & SHIPPING SERVICES

Workboat Hire & Plant Machinery

GIBRALTAR’S maritime sector continues to tap into the steady growth of shipping activity in the Bay of Gibraltar.

storage, making the Rock one of the few ports in Europe where ship-to-ship fuel transfers are conducted on a regular basis.

Bunkering

One option under consideration is widening the port’s Detached Mole, to enable the installation of a land-based storage facility. However, a more likely solution to the storage problem is the use of the King’s Lines fuel depot once it is transferred to Gibraltar Government ownership by the Ministry of Defence.

Bunkering remains the key area of business for Gibraltar, but the port offers numerous other services to ship owners ranging from ship repair to food supplies and crew changes. Ongoing fleet investments by physical bunker suppliers based on the Rock have helped consolidate the port’s role as the leading refuelling hub in the western Mediterranean at a time when other ports in the region – notably Algeciras and Tangier – are jealously chasing a bigger slice of the market. Yet Gibraltar has not escaped the impact of the global economic slowdown, which has hit shipping hard and led to plummeting freight rates across all areas of trade. Ship owners are seeking ways to cut costs and many ships are lying idle in the expectation of an upturn in the months to come. This has generated more activity on the east side of the Rock, which provides a sheltered spot where ships can wait – sometimes for weeks on end – for new orders. This is good news for local agents and companies involved in the supply of provisions and other basic items needed by vessels, but bleak sentiment in global market is being felt in the local bunker sector, where volumes last year fell by 6% to just under 4.2m tonnes last year. That compares to 4.5m tonnes in 2007, which amounted to 13% growth over 2006. Operators say part of the reason for the drop is that ship owners are seeking greater efficiencies and limiting their bunker purchases to the bare minimum.

TARIK SHIP AGENTS & BUNKERING SERVICES LTD Gibraltar Straits • Iberian Peninsula • Morocco Appointed agents for Briggs Marine.

Tel: +350 200 72836

Gibraltar nevertheless still retains the dominant regional position in the bunkering sector, and by a long margin. And though the rate of supply eased a little last year compared to 2007, high bunker prices meant suppliers’ profit margins remained healthy for much of the year. The strength of the market – coupled to new EU rules that came into force last year - has encouraged operators to invest in new doublehull tonnage for the Gibraltar market.

E-mail: tarikgib@gibraltar.gi

In the long term, there are reports that the Government of Gibraltar is exploring schemes to relocate bunker supplies onshore and eliminate the use of floating storage tankers in the port’s anchorage.

Website: www.tarik.gi

The shortage of land is the main reason that Gibraltar’s bunker sector relies heavily on floating

Fax: +350 200 72861

annual report & accounts 2008

The plan is still in its infant stages but was listed as a manifesto commitment by the ruling GSD party during the last general election. If it materialises, the move would represent a radical restructuring of Gibraltar’s bunkering sector. Agency business Although bunkering business continues to provide the backbone of the local maritime industry, 2008 saw vibrant activity in other areas too. At last count there were nearly 20 agency companies licensed to work in the port, handling everything from routine paperwork to organising crew changes, provisions and the delivery of spares. There is a complete range of support services on offer on the Rock and, with nearly 10,000 ships calling at Gibraltar every year, independent agents continue to do a healthy trade despite competition from in-house agency services offered by most bunker suppliers. Much of the work is being handled on the east side of the Rock, where vessels often wait for a slot to bunker in the Bay of Gibraltar. Although bunkering is not permitted on the east side anchorage, small launches and tugs based in Gibraltar are able to deliver stores, supplies and personnel to waiting ships. Some local agents have recently invested in new vessels to ensure they can continue to maintain service levels to the increasingly busy port. Cruise Sector In the cruise sector, the trend toward larger ships has prompted the Gibraltar Government to invest in deeper berths and larger passenger facilities. Gibraltar is expected to handle a record 244 vessels this year, up from 224 in 2008, which potentially means up to 365,000 passengers. This increase is welcome and is a credit to both port agents and tour operators alike given that money will be tighter in the next two years. It is all the more important then that all traders play their part in welcoming visitors and ensuring that their

PORT & SHIPPING SERVICES brief stopover in Gibraltar is a memorable one for all the right reasons. Port Authority & Ship Registry The Port of Gibraltar continues to be a leading and active member of Medcruise, the Association of Mediterranean Cruise Ports. Representation in this organisation, coupled to proactive marketing at key industry events, helps Gibraltar to maintain its position as one of the most important and popular cruise destinations in the Mediterranean. In another area that generates knock-on business, local shipyard Cammell Laird continues to tap its strategic location and position as the only large shipyard in the region, enjoying a busy turnover of vessels coming in for repairs. On land, the Gibraltar Maritime Administration reported solid growth in the Gibraltar ship register, which attracts many international owners and has a solid reputation as a quality and wellrun flag. Gibraltar enjoys White List status under the Paris MoU and in 2008 was invited to join the US Coastguard’s QualShip 21 scheme, of which only 11 other registers are members. The Gibraltar flag has grown exponentially over the past decade. In 1997 there were just 27 ships on the register but that figure has risen to close to 300 ships and over 1.7m gross tonnes in tonnage terms. In previous years the Chamber has called on the government to make some much needed investment into the basic port infrastructure. Areas such as lighting, life buoys and improved road surfaces are not a luxury but a necessity in a busy port. Effective, secure and accessible storage would also be welcome although this is understandably harder to achieve given the space restraints. Many of the port users among the membership continue to feel that they are not getting value for money for the various dues they pay. Addressing some of these issues would probably assuage these concerns. Expanding the local talent pool The Administration, working with the Education Ministry and private sector companies, is helping to promote the maritime sector amongst Gibraltar’s youth as a serious and challenging career option. This is seen as an important step in order to ensure Gibraltar has local expertise available in the future. The hope is to deepen the local skills base as a vital element in expanding Gibraltar’s role as a hub for maritime services, both at sea and on land. The options available to youngsters include well-funded cadet schemes at top maritime schools in Britain and elsewhere.

annual report & accounts 2008

The maritime sector also continues to provide good business for local law firms, where a number of specialist lawyers have enviable international reputations after years of experience in the sector. Gibraltar lawyers handle everything from ship registrations and financing to admiralty arrests. Gibraltar is known as a good arrest port because its UK-based legal system allows for swift resolution of often-complex situations, which proves beneficial for all the parties involved in a dispute. As the global downturn hits markets around the world, the expectation in the legal community is that the months ahead will bring ample business of this nature. A review of 2008 would not be complete without a mention of the Fedra casualty and the New Flame saga. Gibraltarian and Spanish rescuers have garnered well-deserved international praise for the dramatic and risky operation to save 31 seafarers on the Fedra after the ship ran aground at Europa Point during a violent storm in midOctober. Also worthy of praise is Titan Salvage, which was involved in the rescue and has overseen the removal of both wrecks during last year. That task is well-advanced but has yet to be completed, with operations regularly hampered by inclement weather. Both these incidents highlighted the need for tight controls over navigation in an increasingly congested bay. The Gibraltar Port Authority will during 2009 invest in a new vessel monitoring system that should enable it to closely monitor all ships on both sides of the Rock. In the political sphere, the governments of Gibraltar, Spain and the UK again expressed their commitment to establishing closer contact on maritime issues, particularly in respect of navigational and environmental safety. The matter was discussed at ministerial level during a trilateral meeting between Gibraltar’s chief minister Peter Caruana, British foreign secretary David Miliband and his Spanish counterpart, Miguel Ángel Moratinos. Despite the persistent controversy over the status of waters around the Rock, the three countries have set out a framework for future negotiation, focusing on issues including traffic coordination and harmonised contingency planning.

TOURISM At the 2008 AGM it was evident that the membership felt a need for greater focus on the tourism sector and the perceived benefits this would have for the business community and Gibraltar as a whole. Specifically, it was felt that whilst tourism is a pillar of the economy, the sector did not appear to have the investment, focus and strategy required to take it to another level. The Chamber formed a sub-committee in order to consult with a small number of private sector players to shape a more focused policy to advance this sector more aggressively. The consultation process consisted of a desktop SWOT analysis of the industry in general followed by a presentation to the board of some recommendations on the way forward. As part of the review the Sub-Committee also referred to the last two significant reports prepared for the tourist sector, namely, “Strategic Plan for the Development of Tourism to Gibraltar” - prepared by the British Tourist Authority in March 1996

TOURISM “Gibraltar as a Tourism Destination” - prepared by The Tourism Advisory Board in January 2006. The Chamber is not aware of any other significant study which had been conducted on the sector since 1996. If it had been it did not appear to be readily available. One point which became clear was that the Government had implemented a number of the recommendations made in both these papers in the intervening period, ranging from the beautification programmes to infrastructural improvements to tourist facilities such as the land and sea entry points. The success in the development of the cruise line sub-sector was of particular merit. But other destinations have also been hard at work and further improvements in the tourist infrastructure are still needed urgently. From consultations made by the sub committee, there is a growing belief that tourism requires a higher rung in the priority ladder of Government, building on some of the good foundations that have been created over the last ten years or so.

One key point raised early on in the consultation process was the apparent lack of reliable statistical information which would help both Government and private sector operators interested parties fully understand the economic benefit to Gibraltar and to plan accordingly. This is because tourist related spending has a number of spin-offs into every reach of our commercial, wholesale and retail sectors. What is available however provides conflicting indicators. For example:• Based on Government statistics, tourist spending in 2006 was £231m • 9.4 million visitors came to Gibraltar in 2008 • In 2006/07 site receipts generated £2.8m of income spread over 800,000 visitors. This equates to £3.50 per head. • Taking these same statistics, this suggests that under 10% of all visitors to Gibraltar visit our key destination – The Upper Rock Nature Reserve. What are the other 8.6 million visitors doing and how can we encourage them to spend more

during their visit? There is also a very valid question about the quality of the tourist which Gibraltar attracts. Gibraltar has many critical and unique strengths its wealth of heritage and culture, language, convenient location, shopping attractions, weather, ease of access among others. But whilst visitor numbers have continued to rise year on year, per capita spending of each visitor remains low. Other destinations have invested hugely in their tourist infrastructure and are reaping the benefits as a result. There does not appear to have been any meaningful investment in existing or new government run tourist sites in many years, most especially in the Upper Rock Nature Reserve and related facilities. It is a patch-up job at best and parts of it are a public liability at worst. This gives a terrible impression to visitors and must also be highly discouraging for the dedicated workers of the Tourist Board.

The Rooftop Bistro with panoramic views over the Straits of Gibraltar, Africa, Spain and the Rock and Town of Gibraltar, offer a splendid choice of dining, where guests can enjoy our international cuisine blended with the finest regional wines, truly make for a memorable dining experience.

TOURISM Granted the Government is currently spending unprecedented sums on the airport and related works. The timing might be unfortunate given the current economic downturn but such infrastructure improvements are necessary. Nevertheless, a much lesser amount could make some stunning and long overdue improvements to the tourist product, particularly on the Upper Rock. And as each year passes the state of dereliction worsens. If the Government has the vision to spend £12m of taxpayer’s money building a modern leisure centre for the local population then surely with a little imagination and a similar sum some fantastic improvements could be made to refurbish many of the derelict sites on the Upper Rock. It is simply not good enough to say that this is a matter to be left to the private sector. Gibraltar’s heritage and its tourist sites belong to the people of Gibraltar and the Government should use taxpayer’s money to ensure that these state assets are maximised for the benefit of all its citizens.

Regain control of the Tourist Product The staple Rock Tour is tired and offers in reality quite a limited experience for the tourist. Also the price of these Rock Tours for the tourist crossing the land frontier is expensive even with a stronger euro. A growing trend over the years has been by Spanish tour operators who organise group tours from along with coast charging a premium to their customers on the one hand, but secure discounts from Gibraltar tour operators on the other. The real winner here is the Spanish tour operator who brings them into Gibraltar. We need to regain more control of the Gibraltar tourist product and keep the money spent in Gibraltar. More niches please The shopping experience has much improved in the last five years although there is still more to do. Customer service in some outlets needs to raise its game. The Weddings market has been very successful and local hotels have been instrumental in developing this valuable market segment. The

TOURISM

EU FUNDING

increase in the number of Registrars is a welcome development as is the expansion in the number of locations where ceremonies can be conducted.

In time, a purpose-built conference and exhibition centre would be something to aim for. Only then could Gibraltar target this market more actively.

Other niches continue to develop albeit from small bases: Ornithology tours, botanical tours, natural history and military heritage tours are all niches which Gibraltar could develop and serve well.

Conclusion

Then there is the whole sporting-related area. Over the last few years Gibraltar has hosted very successful dog shows, chess and darts tournaments among several other well-attended competitions. These events give a very worthwhile boost to local business as the participants spend money in local hotels, bars and restaurants and additional visitors are drawn to the Rock to attend these events. The hosting of some events during the quieter winter months also boosts hotel room occupancy. It is premature to be looking at the developing the conference and seminar niche over and above what Gibraltar already caters for. However, once the airport developments are complete new hotels may be attracted to set up on the Rock.

The tourism sector carries the greatest growth potential given the opportunity for job creation and significant wealth generation both to Government and to local private enterprise. To achieve success in the various niche markets, however, the product and infrastructure require major investment followed by a structured marketing and promotion plan. The Government would also need to provide incentives to encourage private sector investment into a coherent and long term strategy. Central to all of this will be the need for a commitment to “liberalise” the transport system serving the industry. In conclusion, the Chamber seeks Government’s commitment to raise the profile of this sector and work with private enterprise to develop it as a sustainable, vibrant and dominant pillar of the economy.

Gibraltar receives a small allocation on EU funds through the European Regional Development Fund (ERDF) programme. For the 2000 – 2006 round of ERDF Programmes, Gibraltar was allocated over £5.9 million. Between 2007 and 2013, Gibraltar will benefit from an investment of a further £3.9 million of ERDF. The 2007/13 Programme is geared towards implementing the Lisbon Agenda for growth and jobs in Gibraltar alongside domestic policy priorities. Three quarters of the Programme’s expenditure will target Lisbon activities. The strategy for regional development hinges on the Gibraltar Government acting as a catalyst, thereby enabling the private sector to consolidate existing jobs, create sustainable new jobs and diversify into new areas of activity. The Operational Programme is also expected to encourage the introduction of new technology and IT, in addition to boosting the tourism sector. Funding grants are awarded by committee on which the Chamber is represented. The Programme is expected to deliver a whole series of outputs, including: •

Increasing the size of the labour market by 5% and generating 850 new jobs;

•

Creating 200 new jobs in the small and medium-sized enterprise (SME) sector or safeguarding them;

•

Providing 30 existing SMEs with EU funding, with a further 15 SMEs starting up;

•

Ensuring a 10% increase in SMEs using IT (700 new connections);

•

Introducing electronic tendering with a resulting impact on SMEs and their IT capabilities;

•

Creating 1000m2 of environmentally enhanced areas as well as 1000m2 of new green areas on urban sites – interface between urban regeneration/encouraging SMEs;

•

www.gibraltarchamberofcommerce.com

Any legally registered company, business or sole trader operating in Gibraltar can access EU funds. The range of businesses eligible for funding is extensive although the areas of activity that are NOT eligible for EU funding include; •

Wholesaling

•

Retailing

•

Financial Services and Mobile Investments

Funding is available, amongst other things, to: •

Assist new businesses to start-up;

•

Assist innovative projects not already present in the local market;

•

Assist business expansions and diversifications;

•

Facilitate access by SMEs to EU funding, particularly with a view to job creation;

•

Encourage further and wider use of IT;

•

Regenerate urban areas & enhance the environment.

Who can apply? In the first instance applicants should contact the Chamber or EU Funding Advisor at the EU Programmes Secretariat directly in order to establish if the proposed activity is eligible for funding and to develop a project in accordance with Structural Funds Regulations. The application process for grants is thorough but is designed to be expedited as quickly as possible. The team at the EU Secretariat will go out of their way to help companies apply for funding. In addition they keep applicants fully informed about every stage of the process and let them know when their application has been successful. www.eufunding.gi

Levering £3.9 million in tangible and intangible investments.

annual report & accounts 2008

FINANCIAL HIGHLIGHTS Annual turnover shows steady growth at (2007: £88,876) Non-subscription income up 12% to (2007: £40,939) Cash balance at year end (2007: £53,054)

REPORT OF THE AUDITORS To the members of the Gibraltar Chamber Of Commerce.

£94,163

We have audited the financial statements on pages 34 to 39, which have been prepared under the historical cost convention and on the basis of the accounting policies set out on page 33.

£46,049

£65,216

Respective responsibilities of the honorary treasurer, directors and auditors It is the responsibility of the honorary treasurer to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Chamber and of the surplus or deficit of the Chamber for that year. In preparing those financial statements the honorary treasurer is required to: • Select suitable accounting policies and then apply them consistently; • Make judgements and estimates that are reasonable and prudent; • Prepare the accounts on the going concern basis unless it is appropriate to presume that the Chamber will continue in operation. The honorary treasurer is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Chamber. The directors are also responsible for controlling the funds of the Chamber and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Basis of opinion We conducted our audit in accordance with International Audit Standards. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Chamber’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Chamber at 31 December 2007 and of its surplus for the year then ended, according to the best of our information and the explanations given to us and as shown by the books of the Chamber.

BAKER TILLY (GIBRALTAR) LIMITED Chartered Accountants Honorary Auditors

Date: 27th May 2009.

www.gibraltarchamberofcommerce.com

annual report & accounts 2008

THE GIBRALTAR CHAMBER OF COMMERCE INCOME & EXPENDITURE ACCOUNT

THE GIBRALTAR CHAMBER OF COMMERCE BALANCE SHEET

for the year ended 31 December 2008

As at 31 December 2008

INCOME

2008

2007

46,725

46,710

1,389

1,227

46,049

40,939

Notes

Subscriptions Deposit interest Other income

2008

2007

Notes

10,360

13,915

Stocks

552

Debtors

21,083

14,722

Cash at bank and in hand

65,216

53,054

86,851

68,328

(16,796)

(5,787)

NET CURRENT ASSETS

70,055

62,541

TOTAL ASSETS LESS CURRENT LIABILITIES

80,415

76,456

80,415

76,456

TANGIBLE FIXED ASSETS

CURRENT ASSETS Total income

94,163

88,876

EXPENDITURE Staff remuneration and social insurance

37,001

37,372

Office rent

6,408

Rates, electricity and water

1,034

2,369

37,617

23,400

2,610

270

5,534

5,977

90,204

75,796

General administration

Bad debt written off Depreciation

Total expenditure

CREDITORS: amounts falling due within one year

ACCUMULATED FUND SURPLUS FOR THE YEAR

3,959

13,080

There are no recognised gains or losses other than those shown above.

Approved by the board on 27th May 2009.

G A Olivera Honorary Treasurer

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annual report & accounts 2008

THE GIBRALTAR CHAMBER OF COMMERCE CASH FLOW STATEMENT

THE GIBRALTAR CHAMBER OF COMMERCE PRINCIPAL ACCOUNTING POLICIES

for the year ended 31 December 2008

Notes

2008

2007

BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention and in accordance with Gibraltar Accounting Standards.

NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES

12,752

23,455 DEPRECIATION

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

Fixed assets are depreciated over their expected useful lives as follows:

Interest on deposit account

1,389

1,227

CAPITAL EXPENDITURE Payment to acquire tangible fixed assets

INCREASE/(DECREASE) IN CASH

(1,979)

12,162

(1,785)

22,897

Furniture and fittings

15% on cost

Office equipment

15% on reducing balance

Computer equipment

25% on reducing balance

Air conditioning units

20% on cost

Leasehold improvements

Over 9 years

STOCKS Stocks are valued at the lower of cost or net realisable value.

FOREIGN CURRENCIES Transactions denominated in foreign currencies are recorded at the rates of exchange ruling at the dates of the transactions.

www.gibraltarchamberofcommerce.com

annual report & accounts 2008

THE GIBRALTAR CHAMBER OF COMMERCE NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2008

OTHER INCOME ATA Carnets Fees for certificates of origin and invoices

2008

2007

1,180 19,037

FIXED ASSETS Furniture and fittings

Office equipment

Air conditioning

Computer equipment

Total

1,098

Leasehold improvements

18,246

35,515

9,128

21,721

6,527

8,750

81,641

620

760

599

1,979

35,515

9,748

22,481

6,527

9,349

83,620

28,280

8,612

18,016

6,527

6,291

67,726

3,946

154

670

764

5,534

32,226

8,766

18,686

6,527

7,055

73,260

3,289

982

3,795

2,294

10,360

7,235

516

3,705

2,459

13,915

Surplus on:

Cost

- Business centre

9,315

6,945

As at 1 January 2008

- Chamber dinners

4,684

5,664

Additions during the year

- Publications

9,430

7,800

- Other sales and services

2,403

1,186

46,049

40,939

As at 31st December 2008

Depreciation 2008

2007

Advertising

3,435

955

Telephone

2,795

2,983

Printing, postage and stationery

4,842

4,006

Miscellaneous expenses

664

1,259

Insurance

378

Entertaining

4,379

4,376

Office cleaning

1,828

1,604

Net book value

Repairs and maintenance

1,698

1,308

As at 31st December 2007

Training

3,295

910

2,395

603

784

1,250

1,725

12,450

717

37,617

23,400

GENERAL ADMINISTRATION EXPENSES

Equipment hire Subscriptions Accountancy fees Professional fees

www.gibraltarchamberofcommerce.com

As at 1 January 2008 Charge for the year

As at 31st December 2008

Net book value As at 31st December 2008

annual report & accounts 2008

THE GIBRALTAR CHAMBER OF COMMERCE NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2008

STOCKS

2008

2007

Commemorative books, booklets and First Day Covers

252

Ties and shields

300

552

Stocks at the year end comprised of the following:

ACCUMULATED FUND

2008

2007

Balance at 1 January

76,456

63,376

Surplus for the year

3,959

13,080

80,415

76,456

Balance at 31 December DEBTORS

Subscriptions Other debtors Prepayments and accrued income

2008

2007

6,551

8,631

14,280

5,839

2008

2007

252

21,083

14,722

3,959

13,080

(1,389)

(1,227)

2,570

11,853

5,534

5,977

NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of results for the year to net cash flow from operating activities

Surplus for the year Interest on deposit account

CASH AT BANK AND IN HAND

At 1 January Net cash inflow/(outflow) At 31 December

2008

2007

53,054

30,157

(Increase)/Decrease in debtors

(6,361)

7,321

12,162

22,897

Increase/(Decrease) in creditors

11,009

(1,696)

65,216

53,054 12,752

23,455

Depreciation

Net cash inflow/(outflow) from operating activities CREDITORS: amounts falling due within on year

Creditors and accruals PAYE and Social Security

2008

2007

12,994

2,397

3,802

3,390

16,796

5,787

OTHER FINANCIAL COMMITMENTS

Operating leases on land and buildings which expire: £ Over five years

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annual report & accounts 2008

6,408

GIBRALTAR: KEY INFORMATION (All figures relate to 2008 unless otherwise stated) Population:

28,779

Total land area:

6.5 sq km

Natural resources:

None

Head of State:

Her Majesty Queen Elizabeth II

Chief Minister:

Hon Peter Caruana QC, MP

Legislature:

Parliament (no upper house)

Languages:

English & Spanish

Business hours:

9am - 5pm Monday to Friday

AIRLINES & HOTELS:

Inflation rate:

2.8% per annum

Minimum wage:

£5.00 per hour (£195 per week)

Average earnings:

£21,585 (2007)

Registered employed:

19,696

Registered unemployed:

2.5%

Imports:

UK: 60%, Spain: 30%, Other EU: 10%

www.ba.com www.flymonarch.com www.easyjet.com www.andalus.es www.caletahotel.com www.rockhotelgibraltar.com www.ocallaghanhotels.com/eliott

USEFUL WEBLINKS:

Employment Growth 1996 - 2007

www.gibraltar.gov.gi www.fsc.gi www.gibraltarport.com www.companieshouse.gi www.gibraltarlaws.gov.gi www.gibyellow.gi

GDP Growth 1996 - 2008 (£m)

20000 18000

800

16000

700

14000

600

12000

500

10000

400

8000

300

6000 200 4000 100

2000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Females

1996/7 1997/8 1998/9 1999/00 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

£m

Males

Corporation Tax Resident Companies Small companies rate (Profits of less than £35,000 pa)

Tax Payable 27% 20%

Personal Income Tax £0 - £4000 Annual gross income £4001 - £16,000 Annual gross income Over £16,000 Annual gross income

Tax Payable 17% 30% 40%

No capital gains taxes No Inheritance tax/ death duties or estate duty

No tax on dividends No wealth, gift or capital taxes

Special Status personal tax rates Qualifying individuals who are non-resident and derive no income from Gibraltar other than from an exempt company can apply for Category II resident status.

Tax Payable 2% of worldwide income subject to a maximum tax payable of £20,000 per annum.

Applications should be made to the Finance Centre Director, info@financecentre.gov.gi