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02 | Gibraltar Chamber of Commerce
Contents Foreword 05 Politics 08 Economics 11 Wholesale & Distribution 15 Retail Sector 16 Bank Sector 18 Online Gaming 20 The Environment 21 Port and Shipping 22 Tourism 25 Property 27 Auditor’s Report 29 Annual Accounts 30 Key Indicators 38
Annual Report and Accounts 2014 | 03
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Foreword “ If only Spain’s politicians would recognise that Gibraltar is a force for good when it comes to employment and the economy ”
A corner, half turned After several years of commenting that Gibraltar’s two major trading partners remain in the economic doldrums, it is encouraging that the UK is at last beginning to return to sustained economic growth. This can only be good for Gibraltar over the medium term as investment opportunities between the Rock and the UK increase. During the year the Rock’s GDP continued to grow, continued to create jobs as well as generate year on year increases in government revenues. Gibraltar’s ability to maintain its upward growth trajectory as many European economies continue to be hampered by sclerotic growth, stubbornly high unemployment and historic levels of debt is impressive. There have at last been glimmers of hope for Spain’s economic recovery although the effects do not appear to be widely felt by the average Spaniard and even less so in Andalucia. Gibraltar thus continues to be a beacon of hope for economic and employment growth in the Campo region. The morning rush of thousands of workers crossing the frontier to their jobs in Gibraltar shows no sign of slowing. Provided that Spain’s recovery continues and its growth becomes more evenly distributed this bodes well for Gibraltar.
Times they are A Changin’ If only Spain’s politicians would recognise that Gibraltar is a force for good when it comes to employment and the economy. The temptation to hit out at Gibraltar remains the default position for the PP government albeit with less frequency than two years ago. Perhaps they should take note of President Obama’s change of tack towards Cuba when he lamented that US policies to bring about change in Cuba had failed for 50 years. A
more positive approach to engage and promote good relations is more likely to result in benefits for the EU citizens who live in communities on both sides of the frontier. During the year the GSLP/Liberal government accelerated its programme of delivering their manifesto commitments in housing, the new Commonwealth Park, a new local bank among many others. Collectively these activities have given a significant boost to economic growth and job creation. Although government revenues are healthy a concern has arisen about the levels of government borrowing. Public debate on the issue has generated more heat than light. Perhaps it is time that the government adopted some internationally accepted standards of financial reporting along the lines of the OECD. This would not impose undue strictures on government but it would have the twin benefits of transparency and focus political debate on more progressive and definitive outcomes. Many of the world’s small jurisdictions have adopted such standards. Why not Gibraltar? In the last 12 months there have been fewer power cuts although there is no switch on date for the new power station. This is a critical project for Gibraltar and having an indication at least of when it will be delivered would bring some welcome certainty to local businesses and potential investors. A number of initiatives on which the Chamber has led during the year will have lasting impacts on improving Gibraltar’s competitive position. The first is the consistent and determined work which the Cross Frontier Group has done. As a founding member of this group, the Chamber has helped to steer the lobbying of the EU Commission, UK MPs and a number of Spanish politicians. All of these groups have been kept abreast of attempts
Annual Report and Accounts 2014 | 05
06 | Gibraltar Chamber of Commerce
Foreword - continued by the Madrid government to infringe the rights of EU citizens trying to cross the frontier. This has taken a lot work by members of the board but we think that the outcome has been worth it. The CFG is continuing to explore ways in which they can work together for the benefit of employee and employer groups on both sides of the frontier. Another important initiative has been all the preparatory work for the Chamber’s Agenda for Change in Employment legislation. Although much of the final document is technical, it is not an
overstatement to say that the Chamber’s Agenda for Change is probably the most comprehensive review of Gibraltar’s employment legislation ever to have been undertaken by an organisation outside the government. The Chamber will be discussing the Agenda with the government to see how it can be implemented and adopted. This would bring much of Gibraltar’s employment legislation and practices up to date and bring it more in line with the UK. Christian Hernandez President
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Annual Report and Accounts 2014 | 07
Politics The uncompromising hostility levelled by Madrid against Gibraltar since the advent of the Partido Popular administration of Sr Rajoy has resulted in an adjustment to what is considered “normal” in relations with Spain. By these revised standards 2014 was a quiet year. All the same, repeated incursions by the Spanish navy and Guardia Civil into Gibraltar waters further stretched the patience both of the Royal Navy and Royal Gibraltar Police. Queues at the frontier, if not so frequent were still a relevant feature of disruption and provided a constant reminder of the cynical politics at play in Madrid. The complaints, brought by Spain in the summer of 2013 before the EU, of fiscal and environmental infractions by Gibraltar were all dismissed. No sooner was the ink dry on the ruling when renewed efforts to challenge Gibraltar’s fiscal regime were authorised by Sr. Almunia, Spain’s EU Commissioner. This legal challenge remains pending. Currently there are three potential challenges enquiring into past tax rulings, all running concurrently. Is this a record? Another channel of disruption was opened in 2014 when the PP government resiled from the Cordoba Agreement and instructed its MEPs to block Gibraltar from inclusion in the latest EU Open Skies initiative. This is a political rather than a legal challenge but, as always seems to be the case, Gibraltar has to confront more challenges brought about by Spain’s blind hostility. Despite Spain’s continued diplomatic and political efforts to undermine Gibraltar, relations in 2014 were better than in 2013. It is remarkable how quickly society adjusts. The perception of 2014 as a ‘quiet’ year is only possible because any expectation of neighbourly behaviour from Madrid has been discounted. Sr Margallo acts
08 | Gibraltar Chamber of Commerce
with impunity and he is not criticised in Spain by the media whilst Brussels is always coy on the subject of Gibraltar. Yet for all the lack of censure his actions amount to an unwarranted abuse of power. Sr Margallo’s flagrant attempts to undermine a neighbouring territory, which is both a NATO ally and EU member, bring him and Spain no credit. Sr Margallo is not the first Foreign Secretary to have acted in this way. In the past although not quite so blatantly, previous Madrid governments have sanctioned measures against Gibraltar which amount to bullying and fall short of the standard of behaviour expected of a country aspiring to “first world” status. The view from Madrid has been that, when it comes to Gibraltar, all is permissible. This view, held by successive governments in Spain, has only been possible to maintain because, in the past, the British government has turned a blind eye to all but their worst excesses. British government policy is changing and in the last four years Westminster has been more robust in Gibraltar’s defence and it may be also that in Brussels there is less willingness to tolerate Spain’s obsession with Gibraltar. Meanwhile it is not possible to have any certainty that the frontier queues are a thing of the past. On the contrary we can be sure that the ‘tap’ will be turned ‘on’ and ‘off’ at the whim of the Madrid authorities in the same cynical manner as has prevailed since the Franco era. Nevertheless, an unexpected champion in defence of a free flowing frontier has emerged as a result of the recent Spanish excesses: the Cross Frontier Group. The work of this organisation (one partly instigated by the Chamber) has been a positive step not just because it has challenged Madrid’s
standard response that the queues are an “unfortunate” consequence of appropriate security and customs measures, but because the Cross Frontier Group has established its credentials in Brussels and also in Westminster. It is hoped, this will lead to the establishment of a permanent lobby with the Commission in particular. The PP’s cynical approach to policy is not limited to its antics with Gibraltar and increased prominence earned as a result of Spain’s enhanced status at the UN will only serve to highlight their duplicity. As such, Spain’s efforts to secure a ‘rotating’ seat at the UN Security Council may not prove to be an unalloyed diplomatic triumph. The increased tensions between NATO and Russia, with the backdrop of continuing unrest in the Ukraine will highlight the conflicting messages being sent by our neighbours who, on the one hand, have encouraged the Russian Navy to bunker in Ceuta, and on the other wish to be seen as a trusted ally. Spain cannot remain with a foot in both camps for fear of being doubted by both. It seems, however, that Sr Margallo is determined to continue with his policy of “hunting with the hounds and running with the hare”. If Spain does not clarify its position sufficiently then the strategic value of Gibraltar increases dramatically not just for NATO but specifically for the US. It is encouraging to see increased interest in Gibraltar both in the US media and now in Congress. The efforts by Congressman Holding to obtain a Resolution in support of Gibraltar’s right to self determination will meet continued diplomatic opposition from Madrid. Regardless of the outcome of the initiative to pass the Resolution, renewed interest in Gibraltar by the US is likely to
translate into greater support for Gibraltar generally. Gibraltar is anticipating a general election in the next few months and the focus will turn progressively to domestic politics. The December 2014 ministerial reshuffle was a sign of things to come. In essence Joe Bossano has been moved to a more strategic, less departmental, role. It appears that Mr Bossano has interpreted his new role as one which allows him to exert fiscal discipline over his colleagues. It is generally apparent that government has tightened spending and is showing more restraint than before. This restraint cannot come too soon if we are to avoid pandering to an ‘entitlement’ culture and in any event is more in line with an anticipated shrinking of government revenues. The expectation is that revenue from duty will be down between £20-30 million and this reduction in revenue is expected to continue.
“ Despite Spain’s continued diplomatic and political efforts to undermine Gibraltar, relations in 2014 were better than in 2013 ”
Additionally there are economic threats to the Finance Centre, not just from the point of consumption tax (see report on Online Gaming) but from substantial changes to advance the political imperative for greater transparency. These changes are to be invoked by means of new laws which serve as mechanisms for the automatic exchange of information. These laws also mean that government is unlikely to have an easy alternative to make good the losses from duties. It is small comfort, but the uncertainty which is increasingly evident is not exclusive to Gibraltar.
Annual Report and Accounts 2014 | 09
Politics - continued 2015 is an election year for both the United Kingdom and Spain. The new Conservative government headed by David Cameron is committed to holding an In/Out referendum which will add further uncertainty to Gibraltar.
secure adequate provisions for Gibraltar. At least enough for the government of Gibraltar to concentrate on the primary need which is to manage expectations in the context of reduced government revenues.
A British exit would leave Gibraltar potentially exposed. The risks of a “Brexit�, however, also mean that our government is likely to receive strong support from all UK political parties to
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10 | Gibraltar Chamber of Commerce
“ The UK economy has been in a good growth position since 2013 and this is expected to continue through to 2016 ”
The Economy
The global economy continues to recover from the 2008 financial crisis, although recovery rates are generally moderate and unevenly spread. Although there is growth in general, the rate of this growth remains below pre crisis levels. The following table shows how selected economies have moved, in terms of GDP growth over the past two years and also what the expectations are for this year and for 2016. Table 1. Percentage change in GDP growth (2013-2016) shown as %. Country
2013
2014
2015
2016
World
3.4
3.4
3.5
3.8
Advanced Economies
1.4
1.8
2.4
2.4
USA
2.2
2.4
3.1
3.1
Euro Area
-0.5
0.9
1.5
1.6
Germany
0.2
1.6
1.6
1.7
Spain
-1.2
1.4
2.5
2.0
Japan
1.6
-0.1
1.0
1.2
UK
1.7
2.6
2.7
2.3
China
7.8
7.4
6.8
6.3
India
6.9
7.2
7.5
7.5
Brazil
2.7
0.1
-1.0
1.0
Russia
1.3
0.6
-3.0
-1.0
Emerging & Developing Economies
5.0
4.6
4.3
4.7
9.5
10.3
-
-
(Source: IMF)
Gibraltar (Source: GoG Statistics Office)
Overall, the outlook going forward is marginally down from the expectations at this point last year. As indicated earlier, there are growth divergences between the major economic groupings.
The UK economy has been in a good growth position since 2013 and this is expected to continue through to 2016, albeit at a slightly reduced rate. In 2014, the UK grew faster than any other G7 economy. The main driver in terms of output and employment will continue to be the services sector and, while manufacturing and construction have slowed recently, they remain positive. Nearer home, Spain continues its recovery. Indeed the outlook for Spain as a whole is improved compared to this time last year. The manufacturing sector has continued to perform robustly and exports are up. Every month of the last sixteen has seen a strengthening of the sector. The level of consumer confidence is also up, reflected in an increase in domestic consumption demand. At a national level, the rate of unemployment is creeping down, from 27% at the height of the crisis to a current level of 23%. Apart from Greece, this is still the highest level in Europe and remains an issue which needs addressing. (There is much speculation that the ‘real’ level of unemployment is lower as there is a substantial submerged or cash economy). There is also the question of regional imbalances, which are very significant in Spain, with Andalucía in particular lagging behind. For example, according to the Junta de Andalucía, at the end of 2014, the unemployment rate stood at 33% overall, with youth unemployment (16-24 year olds) at a staggering 61%! In Cádiz province, where the Campo de Gibraltar is located, the situation is even worse, with 42% unemployment at the end of 2014, up from 40% at end of 2013. Cadiz is the province with the highest unemployment rate in Spain and probably in the EU. In conclusion, while at a National level Spain appears to be finally headed in the right direction, it remains to be seen how and when this will filter through down to the south.
Annual Report and Accounts 2014 | 11
The Economy - continued Turning now to Gibraltar, what can be said of the state of the economy and its prospects going forward?
Figure 1. Gibraltar GDP £M
2014/15
2012/13
2010/11
2008/09
2006/07
2004/05
2002/03
GDP £M Linear (GDP £M)
2000/01
1800.00 1600.00 1400.00 1200.00 1000.00 800.00 600.00 400.00 200.00 0.00
Sources - Data: GoG Statistics office; Trend: Chamber of Commerce
Looking at the above graph, the picture is clear, with a very positive trend, showing the economy to have almost quadrupled in size between 2000/01 and 2013/14. This is impressive by any measure. While there are no official forecasts for 14/15 or 15/16, if there are no unexpected shocks and the trend continues as above, the economy could climb to over £1.5 billion by 2015/16.
12 | Gibraltar Chamber of Commerce
An “In/out” referendum in the UK in 2017 will create continued uncertainty. An exit vote, although unlikely given the important trade, financial and other links between the UK and the rest of the EU, nevertheless remains possible. A UK exit would, according to the Chief Minister when speaking on BBC’s radio 4 in January 2015, have “an existential impact” on Gibraltar as it would undermine its economy and its ability to stand up to political pressures from Spain. There appear to be no positives to Gibraltar from a UK exit. Gibraltar should support and join the pro-Europe UK lobby group in the event. The Gibraltar government is currently lobbying for a special status with the EU in the unlikely event that Britain does exit, thereby somewhat aligning itself with Wales and Scotland in this respect. The continuing situation at the border, with reduced visitor arrivals, is not good for Gibraltar retail and wholesale business. The ever increasing pressure on tobacco sales is also an issue, with reports of a measureable downturn in trade. The effects of this on Government revenue will be revealed in the 2015 budget, when a reduction in import duty take is likely. It is also likely that sales of petrol to visiting motorists will have reduced as a result of the border restrictions. This is another traditional source of Government revenue that is also at risk. Finally, the appreciation of Sterling against the Euro will not help trade.
Recurrent Expenditure & Revenue Using figures from the Government estimates reveals the following recurrent expenditure and revenue progression: Figure 2. Recurrent Revenue & Expenditure £M 600 500
Revenue
Expenditure
400 300 200 100 0
Actual 2010/11
Actual 2011/12
Actual 2012/13
Forecast Outturn 2013/14
Estimate 2014/15
This represents a 45% increase in expenditure over a 5 year period. The actual outcome for 2014/15 will most likely be above the estimate as has invariably been the case in the past. We project expenditure could hit £540m in 2014/15. On the revenue side an increase 41% over the same 5 year period is shown, broadly in line with expenditure increase but flattening out over the last two years. Expenditure is beginning to creep up on revenue. The above will be played out come budget time. With the threats to indirect taxes (import duties) described above, it would surprise no one if revenue for 2014/15 fell short of expectations. Could we even have a deficit? The other threats to Gibraltar’s economy, as described elsewhere in this report, will also impact negatively on Gibraltar’s finances if they materialise, although these are likely to be medium term events rather than the more imminent threat from import duties.
At this juncture, and perhaps even more so than in the recent past, there is a clear need to further control expenditure. This issue even caused unprecedented agreement in Parliament in January 2015, when the Hon. Joe Bossano and the Leader of the Opposition both said that it was time for caution in expenditure. Hopefully, this philos ophy will transpose into meaningful action to contain expenditure going forward. The other issue which has again been a long term concern of the Chamber over the last decade and more is that of Government debt. We have always urged moderation and we continue to do so. Looking at the debt figures as published in the Government’s 2014/15 estimates, gross debt is projected to grow from an actual £375M as at 31 March 2013 to an estimated £450M for 31 March 2015, for an increase of 20%. With GDP a pproaching £1,500M, this debt is some 30% of GDP. This is well below the Maastricht criteria for the Gross Debt/GDP ratio which is 60%. “Net” debt has also increased from £206M to £304M in the same period which is an increase of 50%. The reason why “Net” debt has risen at a higher rate than gross debt is due to a reduction in cash reserves from £274M to £146M over the same period. The problem with using “Net” debt as a measure is that it is only representative at a moment in time and it can vary dramatically with changes in cash reserves as the latter are put to different uses. The point here is that changes in cash holdings have no influence over longer term financial commitments. This is why Gross debt is the real measure, as witnessed by its adoption by Maastricht and also in most international debt comparisons. Still, the picture on Government debt, as presented in the 2014/15 Estimates, passes scrutiny. It remains to be seen how large upcoming public infrastructure Projects will impact on the debt issue going forwards.
Annual Report and Accounts 2014 | 13
The Economy - continued The Government has been very successful in attracting around a £1BN of investment into the Savings Bank by offering a high interest rate on debentures.
into account in the overall debt picture, which would then change appreciably. Certainly, these guarantees are a contingent liability for Government going forward.
The big issue with the Gibraltar Savings Bank is whether its investments are part of Government debt or not. Certainly they do not appear on the Government’s balance sheet. However, given Government’s ultimate responsibility for savers’ funds, there are some grounds for taking this
What is really needed is a clearing of the air on the issue. This would reassure businesses and individuals alike. As one pundit elegantly put it “…I am afraid that, so far, the information that I have seen does not entirely satisfy.”
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14 | Gibraltar Chamber of Commerce
Wholesale and Distribution More of the same The old sores which have affected Gibraltar’s wholesale sector for years are still there to be seen: unregistered traders who come to ply their wares into the local market, cars and bikes parked illegally in loading bays for hours without any sanction, permits and licences being rented out to non-local operators who then undercut bona fide operators. Competition is a fact of commercial life and the sector does what it can to meet it. Local knowledge and close customer relationships help, but as Spain’s economic slump shows little signs of recovery, despite the increasingly desperate hyperbole espoused by the ruling politicos in Madrid, it seems that Gibraltar’s wholesale sector at least is under some sort of sustained onslaught from outside interests. No particular sector appears to have been singled out and by definition it is difficult to know quite how many unregistered traders there are or what they do. Nevertheless, according to members in the sector there has been a significant jump in the number of companies coming to do business in Gibraltar without them having any local infrastructure in Gibraltar. No local staff, no local premises, no local vehicles, no local equipment. Just local clients. To the outsider this implies that everyone must be doing well. The reality is that the cake is having to be shared by more and more but it does not actually get bigger. It is worth emphasising to those not involved in the wholesale sector that these unregistered companies do not pay any social insurance, income tax or corporation tax or licence fees or permits into the local economy. But they do take money out of the local economy.
Take one example. In construction alone, over 80 companies have applied for and received a trade licence since 2012. Some of these are one man bands but others are established firms from elsewhere which have come to Gibraltar for a particular project. The Chamber welcomes the establishment of these 80+ new businesses. It shows commitment and a willingness to invest in the local economy. But what members get agitated by is the number of other unregistered and unlicensed companies which come into the local market, cut their prices to get a job or sell some goods and then go back across the border leaving nothing behind. The new Fair Trade Act should be able to deal with these miscreants provided that the Office of Fair Trade is sufficiently well-resourced. The Chamber has been actively engaged with the government in helping to develop this piece of legislation and we look forward to its introduction. For all local wholesalers the local market is their only market. They do not have the choice to seek out customers elsewhere. So when the local market becomes increasingly crowded by unregistered, unlicensed operators from elsewhere who leave little behind, it is all the more galling that the government’s labour inspectorate continues to be under-resourced. The Chamber urges the government and the Unions to work together on this in the interests of Gibraltar as a whole.
“ The Chamber welcomes the government’s commitment to support this sector which along with retail employs around one sixth of Gibraltar’s workforce ”
The Chamber welcomes the government’s commitment to support this sector which along with retail employs around one sixth of Gibraltar’s workforce. To this end the continued operation of the discount for the prompt payment of rates is appreciated. It would be good if such measures could be extended to other areas.
Annual Report and Accounts 2014 | 15
Retail Sector Mixed fortunes as shopping habits change If there is an industry in Gibraltar that stumbles along year in and year out without any real and recognisable help from successive Governments, the Retail sector must surely be the winner. This is despite many pronouncements in Parliament over the years that the Government is doing this and that to help the sector. Yes and No. It is true to say that successive Governments have reduced import duties to minimal and unimportant percentages but this is, in the main, counterproductive. The argument has always been that for Gibraltar retail to be competitive it needs to be priced the same or below its competitors be they in the hinterland or the UK. This is basic economic rationale for most businesses and retail is no different. By reducing import duty, it of course increases the competitiveness of the sector but it also helps to change the habits of the consumer in online and shopping in Spain. It is not possible for Gibraltar’s retail sector to compete with Online Internet shopping or with competition from Spanish retailers where individuals have the VAT refunded at the border. Customs have taken it upon themselves (or so it seems) to arbitrarily decide that a small percentage is not worth collecting from the consumer yet charge it on commercial imports into Gibraltar. This has been a 20 year gripe of the Chamber which has campaigned for either a different rate between
16 | Gibraltar Chamber of Commerce
personal and commercial imports be it through Import Duty or a handling charge, as has been the case for many years in the motor industry. It is also true that the reduction for early payment of rates is a help to the sector, as is the freeze on electricity charges and social security. However, these must soon no doubt increase. The twin above inflation increases to the minimum wage also did not help the retail sector. So, the retail sector bumps along from year to year whilst shopping habits change. Generally, it is said that customer service levels are not good enough, Gibraltar is competitive and that it is fit for market. There is no doubt room for improvement. It is fair to say that improvements have been seen from the increased number of tourist visitors arising from cruise liners. The land frontier access is a lot better but not (and never will be) stable. This helps both ways but when there is little inwards and more outwards, it works against the local trade. A strong sterling pound is also not helpful inwards. The total Gibraltar retail sector has some great brands, great products, great prices and has a lot going for it but it needs in some ways a little help for this to flourish and take it to a different level. In the meantime, the sector bumps along and manages to hold on to its thin lifeline. There is no doubt that in percentage terms, 2014 has been negative on 2013 for most in the sector and the outlook will be similar in 2015.
“ The total Gibraltar retail sector has some great brands, great products, great prices and has a lot going for it but it needs in some ways a little help for this to flourish and take it to a different level ”
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Annual Report and Accounts 2014 | 17
Financial Services As we go to print we are conscious that, for banking in particular, the landscape in this sector of the economy is about to change forever. Banking is of course the oil in the engine of an economy, but no one can deny the damage wrought, post 2008, by the banking sector’s inability to ‘oil’ economies with liquidity. Barclays has had a rolling programme of notifications during the year that they will close at the end of May 2015. Interestingly the ads in the Chronicle also remind us that the Gibraltar International Bank is already open and hopefully there will be a seamless transfer of activity especially in the context of the Main St branch. There will still be a need for many business and personal clients to have a banking hall to transact business. Fingers crossed that it will be alright on the night. Meanwhile, NatWest and Jyske Bank have been taking up the slack left by imminent Barclays’ departure. None of this hides that fact that Gibraltar is too small an economy to attract another international bank so the home grown model is the only viable alternative. Setting up a bank within the EU is not easy and hoops are still aplenty and are being jumped through as we speak. It has been a herculean task by all involved to get this far in such a short space of time. It is not an ideal situation but fast forward 12 months but hopefully we shall have what we need in terms of meeting and fulfilling the banking needs of the local economy. Further ahead we should be investing time and effort in attracting smaller regional banks rather than waste time wooing those big names that have no interest in smallness. This is mainly because smallness flies in the face of economies of scale and megabanks would not be able to continue squeezing savings
18 | Gibraltar Chamber of Commerce
out of small operations in far flung places. On the regulatory front it is likely that politicians will be held responsible for protecting us as they wind up those in regulation who in turn take a sledge hammer to crack each regulatory nut. The increasing amount of regulation has made many operational models unviable with spiralling costs, chasing of tails to justify existence and paperwork trails beyond even the wildest of imaginations. Just think back to a time and not that long ago, when it was possible to open an account in just one day. And once it was opened, account holders were never again asked for any paperwork to prove who they were or where they lived. “Progress” takes many forms and not just the ones to fill in! Diseconomies of scale are a fact of life in a small jurisdiction like ours. However, when it comes to regulation in financial services, on current forecasts it is likely that only the largest and most established operators will be able to afford to comply. What chance has a start up got? With respect to the other parts of the Financial Services sector, we have now had a couple of full years of additional resources manning the front line of the government’s marketing efforts with high profile individuals pushing Funds, Insurance, Private Clients, Pensions and generally selling Gibraltar to markets near and far. The government’s strategic plan is definitely unfolding but it is relatively difficult to assess the tangible results of this significant investment. Parts of the finance sector appear to be busy but one wonders if the sectors being targeted are actually delivering additional new business to justify the investment. Overall competition from other jurisdictions continues in varying degrees and Gibraltar continues to battle the inequities of being within
the EU but not as a full member. Sometimes this means that Gibraltar does not always benefit from what should rightfully be ours.
The majority of local financial practitioners work extremely hard to market Gibraltar as a high quality jurisdiction and seek to attract clients not only to base their investments here but also, if appropriate, consider moving here as well.
An example is being blacklisted by other EU member states despite having signed Tax Information Exchange Agreements with those states. Of course we still await our first Double Tax Treaties, despite having offered them to anyone that would listen. All of this makes it very difficult to maintain levels of business like trust and company management which are our stock in trade.
Getting the mix of financial products and the marketing right has been important but sometimes the sector feels let down by a lack of support from the local infrastructure. Everything from the availability of taxis to customer service in some shops and government departments. All of these have an influence over whether an investor stays or takes their money elsewhere. We all need to play our part and realise that everyone in their own way is an ambassador for Gibraltar. How visitors are treated affects our reputation and in financial services reputation is a big part of success.
An efficient and lucrative Finance Centre needs to be good at strategy, deliver on its commitments and achieve a standard of service to clients who are generally mobile and savvy about what else is on offer. Otherwise, like the banks, they will find Gibraltar is not the place to do business.
“ Getting the mix of financial products and the marketing right has been important �
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Watergardens 6, Suite 24, P.O. Box 629, GX11 1AA, Gibraltar Tel.+350 200 79013 l l Email info@europa.gi www.europa.gi Financial Services Commission Licence No 00108B Gibraltar Registration No 10511 Annual Report and Accounts 2014 | 19
Online Gaming “ The Rock’s online gaming industry continues to grow and as a consequence Gibraltar has become a genuine e-commerce hub ”
Despite the imposition of a point of consumption licensing and tax (POC) regime in the UK, Gibraltar continues to grow and evolve as a gambling jurisdiction. The handling of the POC changes by the UK government and regulator are a great example of something which the Gibraltar gaming industry had warned about. Despite making non-UK business more attractive by eliminating gambling duties on foreign customers, the UK has managed to scare even more operators away from the UK by the manner in which it has implemented the new POC regimes. The Gibraltar Betting and Gaming Association (GBGA) spent considerable time during the year preparing a legal challenge to the lawfulness of the new UK POC tax. The GBGA’s challenge has two strands. The first is that the POC tax is a restriction on the freedom to provide services contrary to Article 56 of the Treaty on the Functioning of the European Union; the second is that the purpose of the restriction was to raise revenue and create a competitive advantage for UK operators, neither of which is a legitimate justification. As a restriction without legitimate justification, the POC tax is therefore unlawful. The Government of Gibraltar argued that the position under EU law was not sufficiently clear for the High Court to decide the case. Instead, questions should be referred to the Court of Justice of the European Union. The GBGA’s primary position is that the High Court should declare the POC tax to be contrary to EU law. However, in the alternative it supports a reference to the European Court. As this report went to press the substantive hearing of the GBGA’s challenge to the POC tax regime in the Finance Act 2014 and associated HMRC guidance was being heard in the UK.
20 | Gibraltar Chamber of Commerce
Specifically the questions that it was said should be referred to the European Court were: 1. What are the legal principles governing whether a tax measure is a restriction for the purposes of Article 56? 2. What are the legal principles for determining whether there is a legitimate justification for a restriction? 3. How does Article 56 apply as between Gibraltar and the UK? These are complex legal arguments and just as Gibraltar has been the pioneer jurisdiction for the online gaming industry, this case too will be significant and viewed by others as clarifying and setting precedents for future cases. The UK POC changes highlight that tax alone is not sufficient to encourage inward investment when other factors are relevant. Gibraltar’s strength also lies in having a favourable political and regulatory environment that encourages good businesses to invest here. The Rock’s online gaming industry continues to grow and as a consequence Gibraltar has become a genuine e-commerce hub with skilled people from around the world moving here to work with local businesses developing Gibraltar’s wider e-commerce ambitions. GIbraltar’s success in creating new e-commerce clusters such as in e-payments and e-money is one tangible example of how expertise gained in one area (gaming) can be adapted and scaled up in others. Gibraltar now enjoys a respectable mid-table ranking within the EU for e-money issuers and e-payments companies. That puts it on the same level as much larger players such as Sweden, France and Germany.
The Environment Internationally climate change has fallen down the political agenda in the last couple of years as other issues such as the Ukraine crisis, Syria and closer to home, Greece and the euro crisis have gained greater importance. Election cycles in Europe particularly have meant that the Environment, whilst important as a general political issue, does not feature very highly on the short term political agendas of many leaders who seek re-election. Electorates care more about jobs, immigration, economic growth, health and education. Most agree that the Environment as an issue is important, but rarely one which decides the outcome of an election. So the committed local group of environmental campaigners continue to do their bit, recycling where possible, walking or cycling in preference to using a car. And when they can, using action days such as the Clean Up the World Day to highlight the importance of looking after our environment. This is all highly creditable but it needs much greater involvement if it is to have any wider impact. In the last 12 months it is the government which appears to have been making most of the running concerning environmental issues in Gibraltar. Last year we commented that the business community will need more than tax breaks if it is to embrace the government’s objective of moving towards a target of Gibraltar being carbon neutral in the next five to ten years. The Department of the Environment has been guided by key policies such as energy efficiency, wider use of recycling, air and water quality management and sustainable waste management. A few initiatives have shown that it is not just talk. There is action too. The swimming pool at GASA is now heated by a solar thermal system. A pilot project using photovoltaic panels is providing light in the public areas in one of the residential blocks in Sir William Jackson Grove. These projects are small but the important thing is that they have started.
document which is long on policy and is well intentioned in its concern for achieving a number of environmental objectives. Nevertheless, Gibraltar has the highest per capita car ownership in the world. This is simply not sustainable given the very finite amount of space available and if the carbon targets have any expectation of being met. Gibraltar will be fined by the European Commission unless there is progress in meeting these targets. Then we will all be the poorer. The nettle needs to be grasped. A big part of the plan is to encourage much greater use of public transport as well as bicycles and walking. Another big policy issue has been sustainable energy generation. The government has consulted extensively on its selection of meeting Gibraltar’s future power needs. The choice of location and solution (dual power diesel and LNG) of the new power station has caused understandable alarm among some in the local community. The government needs to communicate its message on this more clearly and not get tempted by an opportunity to score political points. Gibraltar’s need for a new power station is long overdue. The power cuts experienced in 2014 were some of the worst in recent years and whatever the causes, they do not create the impression of Gibraltar being a modern and efficient jurisdiction.
“ In the last 12 months it is the government which appears to have been making most of the running concerning environmental issues in Gibraltar ”
Once again the Chamber urges the government to work with the private sector to come up with some specific measures which will actively encourage businesses (as well as individuals) to adopt more environmentally-friendly behaviour. Tax breaks are all very well for businesses which are flush or fast-growing. But for the others which are the majority, it will probably take grants or feed-in tariffs to bring about a real change in behaviour.
Similarly the drawn out process of the new Traffic, Transport and Parking plan has produced a
Annual Report and Accounts 2014 | 21
Port and Shipping “ Gibraltar has always thrived, and been a market leader in the bunkering business ”
The first issue we need to report on, is that Capt. Stanbrook, who had well settled in and become a very dynamic and popular CEO/ Capt. of the Port, listening to, and actively engaging with local Port Operators, driven by his familial links, decided to open up a new chapter in his life and migrate to Australia where he has taken up a role as Harbour Master for the Port of Melbourne Corporation. They say that every cloud has a silver lining and the above move brought about the engagement of our very own fellow Gibraltarian Commodore Bob Sanguinetti, who has enjoyed a great and long career in the Royal Navy and not only brings with him great maritime knowledge and experience, but also that extra Gibraltarian connection to the post. He has landed well and made a great start to his new appointment. Gibraltar has always thrived, and been a market leader in the bunkering business, in the old days with coal and later with fuel oil, primarily because of the reliable and excellent services provided at the port. But it was also because of geography, reasonable pricing and enhanced by the high standards set through the Authority’s established and acclaimed Code of Practice. However, competition from hinterland ports, and Algeciras in particular, for many years has been quite limited, and as we mentioned in last year’s report, this situation is now changing. The figures below speak for themselves when one looks just
at actual calls without taking into account bunker volumes delivered at each port. The trend is clear. It is clear that the opening up of additional bunker land storage facilities at Algeciras Port has led to their receiving significant increases in bunkering volumes this past year. We need to remain vigilant, efficient and cost effective if we are to retain our market share. The quality of the service we give must be maintained and enhanced across all port activities. Whilst it is true that Gibraltar might theoretically be at a disadvantage with our direct competitor, Algeciras, insofar as land resources are concerned, we should be doing everything possible to maximise our own potential. Ideally we need to create sufficient land storage infrastructure to maintain and/or increase the peak levels (4,500,000 metric tonnes) reached between 2007 and 2009. This is especially important now that the Gibraltar anchorage (now free of floating storage vessels) can accommodate more ships at any given time. The main reason for doing so is not just to recover the lost ground and with it the obvious loss of spin-off business to shipping related companies (as per our 2013 report). It is also to be able to depend on our own resources for a healthy competition without fears of external political manipulation. Like so many other areas of Gibraltar’s economy, for our own future security we need to become self-sufficient in this industry. This is a real challenge for this sector because of our limited size and resources.
Year
Cruise vessels
Cargo
Bunkers
Repairs
Off Limits
Other
2008
222
253
5965
154
2006
2009
238
193
6712
132
2010
175
178
6724
2011
187
164
6181
2012
173
161
2013
180
2014
180
Vessels on Eastern side
Total No calls
Gross Tonnage
301
9749
288,409,608
1460
543
10042
276,370,000
128
1365
505
11134
258,148,181
117
1492
597
10350
275,168,505
6362
127
1259
444
9581
277,483,060
164
5988
115
1175
248
9140
253,843,589
20
5475
48
1181
1414
8512
238,409,636
194
Note: Port statistics are now compiled differently as there was a possibility that some categories were previously being duplicated, thus, the perhaps somewhat visibly drastic change to two of the brackets and the creation of a completely new one.
22 | Gibraltar Chamber of Commerce
One might be forgiven for believing we are perhaps placing too much emphasis on bunkering, but we need to remind ourselves that it is this industry that generates up to 90% of the callers to our Port, which as a consequence might then take advantage of other support services. We must maintain these and other new services to remain attractive to our shipping customers. Ministers with responsibilities for Maritime Services and the Port, together with a determined CEO/Capt. Of the Port, are also keenly intent in maximising our potential within the shipping related fields other than just bunkering, at the same time focusing (just as with the Bunkering Code of Practice) on improving service levels and quality measures. It is refreshing to note the energy and determination to instil the Gibraltar trademark within the Shipping industry, emphasising the benefits Gibraltar continues to offer as a port. They are listening and keen to work with the sector. Proof of this initiative and determination is the trip undertaken in November by a delegation headed by the then Minister for the Port, the Hon. Minister Neil Costa, and CEO/Capt. of the Port, supported by a contingent of Port Operators, who visited a wide variety of leading Ship Owners, Ship Managers and other Maritime related organisations in Hong Kong, and then hosted an extremely well attended reception which proved very valuable in pursuing the above mentioned objectives. These initiatives not only go a long way in promoting Gibraltar Port to distinguished organisations, but also provide an invaluable opportunity for our very own decision and policy makers to hear what these organisations require and are looking for. Much has been said regarding LNG Bunkering. Industry experts are indicating that the main stream shipping industry is not ready to adopt LNG as a fuel, and that a knowledge build-up of at least 10 to 15 years is needed. LNG bunkering will require time and careful planning to come into fruition, it is currently available as a bunker fuel for maritime and inland shipping at the ports of Antwerp, Amsterdam, Rotterdam, Zeebrugge and Stockholm. Many other ports are planning
to implement LNG bunkering in the next years, and perhaps so should we. It is obviously prudent for us as a port to be considering these issues now for various reasons, firstly because the opportunity to combine this industry with developments to our electricity generation projects is there now, and secondly, because if we are truly and seriously intent in entering this field, now is the time to lay the foundations and not lose out on opportunities. We already have the experience of the valuable time lost on fuel bunkering through lack of foresight or complacency during the last 20 years. This year will see a welcome increase of just under 15% in cruise liner vessels calling at this port, with 216 scheduled as opposed to 180 last year, but with increasing numbers of passengers as the ships continue to carry larger numbers of passengers. Notwithstanding this, operators still feel there is substantial room for improvement in our shore excursion product and transportation issues. It is felt there should be a wider variety of choice and every effort should be made to avoid decongestion at prime touristic sites, some of which are perhaps under sold and others over exploited. Passenger expectations when it comes to Gibraltar, are very high and given the history, features and peculiarities held within the rock, perhaps we should be able to improve our product considerably and provide a true experience to cater for all visitor tastes. An area where there has been substantial concern is ship agency representation. Traditionally the role of the ship agent has been a very important one, however due to various influencing factors this has been reduced in a substantial percentage of cases to just catering for basic minimal unavoidable ships formalities. This in turn has led to agents having to drastically reduce their fees to be able to compete in the market, but what is worse is that what this translates to is a deterioration in the services provided to our customers and more importantly, the quality of the services we provide. We have worked hard for many years to develop a reputation of quality in the Port, and it would be a real shame if this level of competition in this sector led to a serious deterioration in these.
Annual Report and Accounts 2014 | 23
Port and Shipping - continued Lowering the income generated can and will lead to a lack of training of personnel and consequently a lack of availability of high calibre and experienced personnel in this field. A highly contributing factor to the onset of this practice is created by the interest in just working on large volumes (of bunker calls) primarily through Charterers, requiring minimal service, and often dictating what they should be charged, which some bunker suppliers, also offering agency services within their organisation are able to afford without any major issues. This above is not an issue affecting just Gibraltar, it is affecting other ports too, but where other ports may be able to make a living out of other shipping related business, we must be intent in maintaining high levels of services to shipping and not just rely on provision of a minimal formality service, as
24 | Gibraltar Chamber of Commerce
eventually we shall end up losing valuable expertise and know how. It is estimated that there are between 70,000 and 75,000 ships transiting the Straits on a yearly basis, and out of those about 50% actually call into the bay of Gibraltar, with only 3 out of 10 of that 50% doing so at Gibraltar Port. Clearly there is room for improvement, even if perhaps we should only concentrate on our realistic possibilities and capabilities, without a fixation on volumes hinterland ports are able to reach. We are well placed to continue to develop our Port facilities but it requires each of the Operators in the sector to commit to work towards a common goal of quality service at an efficient price caring for all the needs of shipping Principals.
Tourism On the surface, it is easy to identify a whole raft of positive initiatives that are helping improve this sector. Of most significance are the dramatic improvements to our beaches and in particular the greatly enhanced Sandy Bay (or Hawk’s Beach as some now affectionately name it). Whilst locals are the greatest beneficiaries this is undoubtedly a major improvement to the tourist offering and the announcement of the possibility of a small boutique hotel on Eastern Beach will be a welcome addition. On the subject of hotels, we have all seen the press releases and now await with baited breath to see the holes in the ground – The impressive Marriot, Devil’s Tower Road, Engineers Lane, Upper town and a refurbishment of the Caleta Hotel are all on the cards. If delivered, this will transform the Hotel offering and indeed provide a more diverse product with 2/3 to 4 star plus facilities. In the meantime we shall be grateful for the tasteful refurbishment of the Rock Hotel coming to fruition and the improved conferencing facilities provided by the Sunborn Hotel. The Upper Rock has and continues to see some improvements particularly with the opening up of new pathways, toilet facilities and safety features. As per previous reports, our position however remains the same – The Upper Rock needs and deserves a wholesale transformation. The transport system continues to creak at the seams, the entrance points are ugly and the opportunity to open up a whole new experience is still very much a “vision”. Works have started on the area of the Northern Defences and the Chamber looks forward to see how this develops into a real improvement to the tourist product. We encourage the Tourism Advisory Board to really focus on working together to deliver a holistic, long term, transformational plan for our greatest tourist asset. Transport
On the wider transport agenda, it is evident to the Chamber that the Government is working hard to bring new air routes to the Rock and opening a Bristol route is an excellent opportunity delivered. The Marrakech flight clearly did not have the right credentials, be it pricing or timing and ability for the operator to sustain a period long enough to develop its franchise. We hope the proposed Tangier route has more success. With months remaining on the Government’s first term of office, it is disappointing to see that the manifesto commitment on transforming the City taxi service remains outstanding. The Chamber continues to receive complaints of poor service and this is clearly an important facet to our tourist offering. Event Led Tourism Whilst it remains difficult to have a concise measure of the impact on increasing visitor numbers and spend, there is no doubt that the focus provided to this segment is producing results and can only grow.
“ In the last 12 months it is the government which appears to have been making most of the running concerning environmental issues in Gibraltar ”
Events such as the Chess Festival, Music, Jazz and Literary festivals have consolidated and are growing and this is a clear way to attract visitors and potentially higher spend to the Rock. The excellent conference facilities at The Sunborn supported by no doubt improving facilities at other hotels should now be a spur to growing Gibraltar as a conference destination. This can attract 3/4 night stays and improve average spend. Statistics, statistics, statistics So whilst there is clearly effort being made within this sector the data supporting it doesn’t paint as healthy a picture. Admittedly, much of this is down to the severe frontier issue, which grew in intensity from the summer of 2013 however they should not be ignored.
Through our annual report, we have consistently argued that underpinning such a change must be to address the transport system and work towards a “hop-on hop-off” solution. Visitor numbers to the Upper Rock will remain static as long as we entertain the status quo.
Annual Report and Accounts 2014 | 25
Tourism - continued Arrivals by air is the one encouraging piece in the jigsaw puzzle. However, most other indicators reflect a downward trend or in the case of cruise liner passengers a good improvement on 2013 but still well below the peaks of 2010/11. One element that has not attracted much comment is yachting and the number of calls reducing dramatically over the last few years. This may be partly due to the loss of berths. However, this should be a concern as our understanding is that yachting does bring a good average spend which is well spread across the business sector. As Gibraltarians manage frontier nuances the real and current danger is that there is a lag effect between locals venturing outwards and tourists returning overland in larger numbers. This will be felt by businesses’ exposed to the tourism sector. Perhaps the government should consider a positive media and direct campaign to travel agents and hotel chains along the Costas to reassure providers of trips to the Rock that fluidity is returning and hopefully the new investment at the Border will improve this further as will improved parking facilities now being completed in La Linea. In summary, the Chamber is pleased to see some good results in improving what Gibraltar has to offer. No one believes this is an easy task and Neil Costa must be commended for his hard work, enthusiasm and positivity over the last 3 years. We wish him well in his new areas of responsibility and look forward to inviting Minister Sacramento to meet members of the Board soon in order to share our views and learn of the new Minister’s plans.
26 | Gibraltar Chamber of Commerce
Property After six years of very little new office supply, the World Trade Center and Midtown are finally under construction. This new supply will deliver a total of 33,000 square metres of modern grade A office space (WTC: up to 18,000 sq m, Midtown: 15,000 sq m). This is currently lacking in Gibraltar. Commercial property rents have risen significantly over the last few years as tenants chase the minimal space available. Owners of properties in the town centre have been responding to the lack of supply and a number of buildings have been converted from residential to commercial use to help meet the office demand. However, in 2017 (most likely), this trend is likely to reverse as office tenants move into these new buildings leaving behind some of the older stock currently occupied. The new supply will undoubtedly put a brake on the relentless increase in office rents (where rents of over £300 per square metre can now be considered the norm) and give tenants much needed respite. Whatever the demand is for new office space, it is not 33,000 square metres so we would expect take up to be one or two years. Victory Place (8,000 sq m of office space) and the Marriott Hotel are, at the time of writing, on the cusp of being live projects adding further quality and quantity to the office market and a new hotel choice. The Sunborn Hotel has added quality and quantity to the hotel sector, giving visiting business executives (and holidaymakers) a choice of location, price and style. This activity is most certainly a vote of confidence by developers, and off-plan investors, in the future of Gibraltar as a commercial centre. The challenge of course is what becomes of Main Street and the town centre generally if tenants migrate to the new office buildings, which many will. Coupled with the threat to the retail sector generally from the internet, there does not appear to be any cohesive plan to help maintain the town centre as an on-going tourist attraction and the centre of Gibraltar’s social life.
When benchmarked against other competitor jurisdictions, as many incoming companies do, Gibraltar is fighting back on the cost and choice of office supply. However, companies will also look at the cost and availability of residential property for their staff and similarly to office supply, the supply of residential property has dwindled gradually over the last few years forcing up prices, most notably rents. Availability of rental accommodation at local agents was reduced to just a handful of units during 2014, although this has started to reverse in early 2015. The demand for rental properties at £800 pcm £1,500 pcm rents is near insatiable. Of the 8,000 workers crossing the border each day, many would prefer to live in Gibraltar if they could afford it. The knock on effect to the local economy if there were more available residential property (restaurants, shopping, leisure etc) is clear. The stress on local services (schools, hospitals etc) is the downside. Regardless, Gibraltar needs to increase its supply of affordable housing available to workers in order for it to compete against other jurisdictions vying for the same companies.
“ The challenge of course is what becomes of Main Street and the town centre generally if tenants migrate to the new office buildings ”
The Crane Index The number of cranes is testimony to the fact that Gibraltar is entering another building boom. This is not just government/taxpayer funded, but is balanced by a number of private developers too, both local and from outside Gibraltar. Given the massive overhang of property available in neighbouring Spain and the continued difficulty in obtaining credit, this should be taken as a significant vote of confidence in Gibraltar’s future economic prosperity. The last boom building in Gibraltar between 2005 and 2009 raised concerns about where the money was going to come from to buy or rent all the property which was being built. They were all sold or occupied and their success has proved the sceptics wrong. The main difference this time is that the majority of the developments under construction are for office/commercial use. The previous boom focused primarily on residential development. Once more similar questions are being asked: where are the occupiers and where is the money coming from? It may be premature to say but all the main developers are displaying signs of outward confidence that there is more than ample demand their projects.
Annual Report and Accounts 2014 | 27
28 | Gibraltar Chamber of Commerce
Directors C Hernandez President J Isola Vice President
Report of the Auditors
M Cartwright Hon Secretary M Nicholls Hon Treasurer E Felipes A Haynes N Russo F Cassar J Bonavia J Nicholls G Desoisa G Dyke Honorary Auditors Baker Tilly (Gibraltar) Limited Regal House Queensway Gibraltar Registered Office 2/6 Casemates Square Gibraltar
to the members of The Gibraltar Chamber of Commerce. We have audited the financial statements on pages 30 to 37 which have been prepared under the historical cost convention and on the basis of the accounting policies set out on page 33. 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;
Basis of opinion We conducted our audit in accordance with International Auditing 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
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the accounts on the going concern basis unless it is inappropriate 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.
In our opinion the financial statements give a true and fair view of the state of affairs of the Chamber as at 31 December 2014 and 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. Ian Collinson Statutory auditor for and on behalf of BAKER TILLY (GIBRALTAR) LIMITED Chartered Accountants Honorary Auditors Date: 12th May 2015
Annual Report and Accounts 2014 | 29
The Gibraltar Chamber of Commerce
Income and Expenditure Account for the year ended 31 December 2014 Notes 2014 2013 ÂŁ ÂŁ INCOME Subscriptions Deposit interest Other income
1
55,415
53,768
87
134
24,877
32,747
Total income
80,379 86,649
EXPENDITURE Staff remuneration and social insurance
44,929
41,606
Office rent
7,571
7,571
Rates
2,151
(866)
983
952
34,615
30,394
1,455
1,445
-
3,395
2,306
2,022
Electricity and water General administration
2
Bad debt written off Provision for bad debts Depreciation
3
94,010 86,519
Total expenditure (DEFICIT)/SURPLUS FOR THE YEAR There are no recognised gains or losses other than as shown above.
30 | Gibraltar Chamber of Commerce
8
(13,631) 130
The Gibraltar Chamber of Commerce
Balance Sheet as at 31 December 2014 Notes 2014 2013 £ £
3
9,129
6,045
Debtors
4
28,829
24,960
Cash at bank and in hand
5
63,049
68,780
TANGIBLE FIXED ASSETS
CURRENT ASSETS
CREDITORS: amounts falling due within one year
6
91,878
93,740
(22,823)
(7,970)
69,055
NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES
85,770
78,184 91,815
ACCUMULATED FUND
7 78,184 91,685
Approved by the board on: 12th May 2015
M Nicholls Honorary Treasurer
Annual Report and Accounts 2014 | 31
The Gibraltar Chamber of Commerce
Cash Flow Statement for the year ended 31 December 2014 Notes 2014 2013 £ £
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
8
(429)
(173)
87
134
(5,390)
(225)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest on deposit account
CAPITAL EXPENDITURE Payments to acquire tangible fixed assets
3
(DECREASE)/INCREASE IN CASH
32 | Gibraltar Chamber of Commerce
5 (5,731) (264)
The Gibraltar Chamber of Commerce
Principal Accounting Policies BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention and in accordance with Gibraltar Accounting Standards. DEPRECIATION Fixed assets are depreciated over their expected useful lives as follows: Furniture and fittings Office equipment Computer equipment Air conditioning units Leasehold improvements
15% on cost 15% reducing balance 25% reducing balance 20% on cost 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.
Annual Report and Accounts 2014 | 33
The Gibraltar Chamber of Commerce
Notes to the Financial Statements for the year ended 31 December 2014 1.
OTHER INCOME 2014 2013 £ £
ATA Carnets
Fees for certificates of origin and invoices
Surplus on:
- Chamber dinners
- Publications
- Other certificates
- Training
- Office hire
- Other
2,450
1,225
12,395
8,177
611
7,162
7,591
11,687
330
758
-
1,200
1,500
943
1,595
24,877 32,747
2.
GENERAL ADMINISTRATION EXPENSES 2014 2013 £ £
Advertising
2,122
4,403
Telephone
2,212
2,470
Printing, postage and stationery
8,262
4,937
Miscellaneous expenses
1,066
775
435
422
Entertaining
4,604
4,371
Travel
1,715
3,060
Office cleaning
2,655
2,282
Repairs and maintenance
3,807
3,870
585
436
Insurance
Subscriptions
Accountancy fees
1,200
1,200
Professional fees
5,405
510
Training expenses
547
1,058
Equipment hire
-
600
34,615 30,394
34 | Gibraltar Chamber of Commerce
The Gibraltar Chamber of Commerce
Notes to the Financial Statements for the year ended 31 December 2014 3.
FIXED ASSETS Leasehold improvements £
Furniture and fittings £
Office equipment £
Air Conditioning £
Computer equipment £
Total £
35,755
11,856
24,207
8,647
12,011
93,476
Additions during year
-
-
154
5,235
-
5,389
Disposals during year
-
-
-
(6,527)
-
(6,527)
Cost: At 1 January 2014
At 31 December 2014
35,755 11,856 25,361 7,355
12,011 93,338
Depreciation: At 1 January 2014 Charge for year Eliminated on disposals
35,637
11,014
21,882
38
608
-
8,647
10,251
552
698
440
2,306
-
(6,527)
-
(6,527)
87,431
At 31 December 2014
35,675 11,622 22,404 2,818 10,691 87,431
Net book value:
At 31 December 2014
80 234 2,957 4,537 1,320 9,128
Net book value:
At 31 December 2013
118 842 3,325 - 1,760 6,045
Annual Report and Accounts 2014 | 35
The Gibraltar Chamber of Commerce
Notes to the Financial Statements for the year ended 31 December 2014 4. DEBTORS 2014 2013 £ £ Subscriptions
4,897
3,935
Other debtors
14,994
20,686
Prepayments and accrued income
8,938
339
28,829 24,960
5.
CASH AT BANK AND IN HAND 2014 2013 £ £
At 1 January
68,780
Net cash (outflow)/inflow
(5,731)
69,044 (264)
At 31 December
63,049 68,780
6. CREDITORS: amounts falling due within one year 2014 2013 £ £ Creditors and accruals PAYE and Social Security
22,065
7,211
758
759
22,823 7,970
36 | Gibraltar Chamber of Commerce
The Gibraltar Chamber of Commerce
Notes to the Financial Statements for the year ended 31 December 2014 7.
ACCUMULATED FUND 2014 2013 £ £
Balance at 1 January
(Deficit)/Surplus for the year
Balance at 31 December
8.
NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of results for the year to net cash flow from operating activities
91,815
91,685
(13,631)
130
78,184 91,815
2014 2013 £ £
(Deficit)/Surplus for the year
Interest on deposit account
(13,631)
130
(87)
(134)
Depreciation
(Increase)/decrease in debtors
(Increase)/decrease in stock
(Decrease)/increase in creditors
(13,718)
(4)
2,306
2,022
(3,870)
(7,207)
-
552
14,853
4,464
Net cash (outflow) /inflow from operating activities
9.
OTHER FINANCIAL COMMITMENTS
At 31 December 2014 the Chamber had annual commitments under non-cancellable operating leases as set out below:
(429)
(173)
Operating leases on land and buildings which expire:
Less than 5 years
31 December 31 December 2014 2013 £ £ 7,571 7,571
Annual Report and Accounts 2014 | 37
Gibraltar: Key Information (All figures relate to 2014 unless otherwise stated)
Population:
32,734 (2013)
USEFUL WEBLINKS:
Total land area:
6.5 sq km
www.gibraltar.gov.gi
Natural resources:
None
www.fsc.gi
Head of State:
Her Majesty Queen Elizabeth II
www.gibraltarport.com
Chief Minister:
Hon Fabian Picardo, MP, QC
www.companieshouse.gi
Legislature:
Parliament (no upper house)
www.gibraltarlaws.gov.gi
Languages:
English & Spanish
Business hours:
9 am – 5 pm Monday to Friday
Inflation rate:
0.8% per annum
www.flymonarch.com
Minimum wage:
£6.15 per hour (£239.85 per week)
www.easyjet.com
Average earnings:
£27,986 (2013)
www.caletahotel.com
Registered employed:
22,907 (Oct 2013)
www.rockhotelgibraltar.com
GDP per capita:
£43,137 (2013/14)
www.ocallaghanhotels.com/eliott
lmports
UK: 60%, Spain: 30%, Other EU:10%
www.sunborngibraltar.com
AIRLINES & HOTELS www.ba.com
GIBRALTAR GDP 2000-2016 (£m)
Employment Growth 2000 - 2013
2000
25,000
Female
Male
20,000
1500
15,000
1000
Jan 12
Jan 10
Jan 08
Jan 06
Jan 04
Jan 00
2015/16
-
2010/11
0
2005/06
5,000
2000/01
500
Jan 02
10,000
Corporation Tax
Tax payable
Resident Companies
10%
Utilities Companies
20%
Personal Income Tax
Tax payable
£0-£10,000 of annual gross income
6%
£10,001 - £17,000 Annual gross income
20%
No capital gains taxes
No tax on dividends
No Inheritance tax/death duties or estate duty
No wealth, gift or capital taxes
Special Status personal tax rates
Tax payable
Qualifying individuals who are non-resident and derive no income from Gibraltar can apply for Category II resident status.
Minimum tax payable of £22,000 per annum up to a maximum tax payable of £30,000 per annum.
Applications should be made to the Finance Centre Director, info@ financecentre.gov.gi.
38 | Gibraltar Chamber of Commerce
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