ANNUAL REPORT & ACCOUNTS 2022

2022 ANNUAL

REPORT

Gibraltar Chamber of Commerce

The

Gibraltar Chamber of Commerce Annual Report 2022 | 1

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The Contents

05 06 FOREWORD

POLITICS AND THE ECONOMY

11 14 RETAIL SECTOR

WHOLESALE AND DISTRIBUTION SECTOR

16 18 FINANCIAL SECTOR

PORT & SHIPPING SECTOR

24 27 TOURISM SECTOR

ENVIRONMENT SECTOR

29 33 PROPERTY SECTOR

ANNUAL ACCOUNTS

Gibraltar Chamber of Commerce Annual Report 2022 | 3

Gib bank

4 | Gibraltar Chamber of Commerce Annual Report 2022

FOREWORD

When the unresolved forces of geopolitics collide with the desire of a tyrant to impose his will, it has the potential to shape a new world order. It is too early to tell how the outcome of Putin’s adventure in Ukraine will affect Europe in the longer term, but the implications are already being felt in a move to greater unity of purpose and increased solidarity.

Although not intrinsically linked, in its own way Gibraltar potentially faces the biggest change to its economic and political structure in forty years. There will either be a treaty with the EU signed on our behalf by the UK or there will be no agreement. Either way our lives, our businesses and our futures are set to change.

The decision which has brought us to this juncture has not been of our making. In the last forty years our economy has been completely transformed from one which was largely dependent on the public sector, to the tune of three quarters of our annual economic output, to one which is now driven mainly by the private sector.

Over this period our economy has also grown considerably. In the last ten years alone it has doubled in size, a remarkable feat considering that most of Europe has spent the last decade recovering from the devastating 2008/9 financial crisis.

Gibraltar’s growth has generated thousands of jobs, both for locals and also for people living in Spain, both Spaniards as well as EU nationals.

The revenues generated by these jobs have also enabled successive governments here to invest in the health service, building new schools, public housing and a new air terminal along with much needed upgrades to the essential infrastructure.

Until the 2016 EU referendum, Gibraltar’s future

was looking bright.

The periodic uncertainties which Gibraltar has had to deal with as part of its existence over the decades then took another massive hit with the Covid pandemic.

After a period of almost six years, our economic future remains far from certain. As we go to press the details of a treaty have yet to be announced, but what it might include has been heavily hinted at in the Spanish press for the best part of a year or so.

Discussions between the parties have been extended on a number of occasions after the initial deadline to reach an agreement expired in June last year. Bridging arrangements have been put in place until such time as an agreement is either reached or abandoned so that some sort of normality can be maintained in the meantime.

We are now approaching the point where the parties involved must reveal what the future holds to all of the citizens who will be directly affected.

The details of any agreement should be clear and announced in their entirety.

Any agreement is likely to be written in the legal language which is so often opaque and incomprehensible to the ordinary person.

Where this is so, it would be useful for more detailed explanations to be given so that any misinterpretation or ambiguity can be avoided.

People can only understand an agreement, and decide on whether to support it or not if they are given all of the relevant information.

Over the years Gibraltar has done well to retain its ability to control its political and economic destiny.

This is something which should never be relinquished.

“We are now approaching the point where the parties involved must reveal what the future holds.”

Gibraltar Chamber of Commerce Annual Report 2022 | 5

POLITICS

& THE ECONOMY The two years of the Covid pandemic have made a lasting impression, not least for the economic uncertainty that has followed in its wake. The dawning awareness of the emerging crisis came with reports of a new coronavirus from China. In February the first epicentres of the infection were recorded in Northern Italy and on the ski slopes of the Alps. The speed with which the virus spread caught the world by surprise and, by March, Europe was in lock-down.

The pandemic waxed and waned and lock-down was followed by periods of relative normality (the “new norm”) and further repeats of the cycle. In that period the United Kingdom took unprecedented measures to support the private sector and to sustain employment, measures that were largely mirrored by the Government of Gibraltar. It was also widely noted that the initiative and financial support offered to the pharmaceutical industry in their search for a vaccine against Covid 19 by Boris Johnson’s administration paid off significantly for the United Kingdom, (and by extension Gibraltar), which was amongst the first to roll-out a credible response to the spread of the infection.

In tandem with the pandemic, but no longer in the glare of media attention, the Brexit negotiations navigated their course following the decisive December 2019 General Election victory by Boris Johnson which brought unity of purpose to the country.

The timelines for finalising the Brexit negotiations were stretched to breaking point and extended to 31st December 2020 but consensus only emerged

6 | Gibraltar Chamber of Commerce Annual Report 2022

as a result of last minute Agreement on the final day. It was also decided by the parties that 2021 was to see the Brexit Agreement formalised into a treaty but this proved unachievable in the original timeframe. The working paper published by the EU in June 2021, which was unthinkable from a Gibraltar perspective, was equally partisan in its approach to Northern Ireland and as a consequence triggered an immediate rejection

by Westminster. This reverse in the process set the clock back and brought into question whether the 31st December Agreement of 2020 had the support of Brussels.

It appeared that before returning to the negotiations for a Treaty it was necessary to address French concerns, which it was widely believed had pressured the negative position adopted by Brussels in June. The negotiating teams scrambled to find a new solution to French demands in respect of fishing rights in UK waters. The fishing crisis was averted and seemingly talks continued to progress towards the new deadline of 31st March 2022. As regards the Gibraltar dimension in the Brexit Agreement, despite a change of Spain’s Foreign Secretary in mid-summer, the incoming Sr. José Manuel Alvares Bueno is seen as holding largely the same objectives as his predecessor in respect of a post-Brexit relationship between Spain, UK and Gibraltar, and it is understood that the parties stand by their 31st December 2020 agreement.

One of the immediate consequences of Brexit was to bring about borders between EU and UK where none had previously existed but it seems that, in the case of Northern Ireland the location of

POLITICS & THE ECONOMY this border is undecided. Although details of the pan-Brexit talks have been largely absent, there is open speculation that a formula to address the competing assurances given in respect of freedom of movement of goods and services between Eire and Northern Ireland, on the one hand, and no border on the Irish Sea between Northern Ireland and the mainland, is proving elusive. The impact this impasse may have for implementation of the general treaty, including Gibraltar, is unknown.

Although two years have elapsed since the UK and Gibraltar left the European Union, the ties of commerce still bind: trade in goods and services between the UK and Spain in 2021 amounted to a total of £34.2 billion, making Spain the UK’s 9th largest trading partner. Indeed, the UK has been the biggest recipient of Spain’s investment overseas reaching a total stock of €154 billion according to the Spanish Chamber of Commerce.

In turn, the UK is the second largest investor in Spain after the US. In 2019 the UK had a total stock of Foreign Direct Investment (FDI) in Spain valued at some £75.2 billion*. (*Source: UK Dept for International Trade Feb 2022) Despite the huge numbers of retired British nationals who returned from Spain to live in the UK after the 2016 referendum, there are still 360,000 registered British nationals living in Spain, although when unregistered Brits are included the number is believed to be closer to three times this figure. The new requirements by Spain mean that non-EU residents now have to prove a minimum monthly income. How this will be policed and whether or not it will have localised economic benefits or result in fewer UK residents is unknown.

Apart from the demands of dealing with the pandemic, the Chief Minister was also engaged in intense shuttle diplomacy with frequent visits to both London and Madrid during the whole of 2021. Although the details of these discussions have not been subject to “leaks” the general impression given by all three sides to these talks is positive.

It is apparent that whilst the Chief Minister, to his credit, has had his objective clearly focused on maintaining a fluid frontier, some senior members of Parliament, have openly questioned whether a

fluid frontier is in fact a key factor in any economic modelling for a future Gibraltar. Your Board is concerned that such a populist view can only be explained in the context of theories that belong to the “antivaxxer” wing of economics and have no place in any serious analysis. Gibraltar has long been required to live with uncertainty and for the private sector the sacrifices required to adjust to this reality have always been accepted as the cost of doing business. The pandemic has brought the level of uncertainty to a new “high” and our politicians turned “antivaxxers” may reap the whirlwind by threatening to divide public opinion.

Your Board supported the bi-partisan approach to the Brexit referendum which saw Gibraltar’s united response. Government and Opposition explained their view of Brexit as an existential threat to Gibraltar. The perceived risk was Brexit’s threat to a fluid frontier but now it seems that some parliamentarians have changed tack. The concerns they brought to our attention in 2016 appear to have vanished and the new message is that a fluid frontier is not a prerequisite for our economic model. Your Board disagrees.

In large part as a result of Government intervention, Gibraltar’s economy has managed to weather the worst of the economic storm caused by the pandemic and successive lockdowns. The private sector has responded well and output in many sectors are near pre pandemic “levels”, but Retail, Tourism and Hospitality remain well below their 2019 levels. The continued uncertainty as to whether or not a treaty can be agreed is a concern, even if largely relegated to the background.

On the positive side, the worst of the pandemic appears to be over but the deterioration in the Government’s finances, which is a similar theme across Europe, raises challenges at home.

Despite Fabian Picardo’s 2011 election victory being premised on his concern that Peter Caruana’s expenditure was out of control and if elected, the GSLP promised to address Government debt and bring the economy into balance, the objective has eluded him. The view of your Board is that we stand at a cross road. Government’s capital projects, including refurbished schools, public housing and energy infrastructure have resulted in significant borrowing. We face the prospect of repaying these monies, not from the position of Gib Inc producing an annual surplus, as in years past, but from a position of relative weakness.

Gibraltar Chamber of Commerce Annual Report 2022 | 7

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only

POLITICS & THE ECONOMY

Government Revenue, Expenditure & Surplus (£M) 700

70 53

525

35 18 0

350

-18 175

-35 -53

0

2010/11

2012/13 Revenue

2014/15 Expenditure

2016/17

2018/19

2020/21

-70

Surplus/Deficit (RH scale)

*Figure 1 SURPLUS MORPHS INTO DEFICIT Pre-pandemic, the current administration’s forecasts for economic growth had been exceeded every year it had been in office. Similarly, its level of recurring expenditure rose to match this (see table above). As your board highlighted in its 2018 report, the annual budget surplus was shrinking as a percentage of both revenue and expenditure. In 2018, the surplus was less than half what it was in the government’s first term of office, so there was an insufficient margin of safety if growth slowed or if the knock-on effects of Brexit turned out to be worse than feared.

Against this background, calls by the Unions for continued pay rises are irresponsible, particularly in the public sector. Sir Joe Bossano has pointed out the absurdity of continuing to tax the low paid in the private sector just to increase the salaries of public sector workers, who on average are much better paid. Greater restraint and moderation needs to be shown by those involved.

All the doubts and uncertainly deriving from Brexit and Covid 19 are gradually reaching their natural conclusion; pandemics end and the world learns to live with its consequences and negotiations also reach a conclusion. The expectation is that, as planned, negotiations between London, Madrid and Gibraltar will result in an agreement by the end of March 2022 and it is hoped that

by Summer the pandemic will be over. It may be a moment to breathe a sigh of relief but not for Government. The forecast of an agreement is premised on Brussels moving from a negotiating position where “nothing is agreed, until everything agreed”, to one of accepting a ‘stand-alone’ agreement for Gibraltar. The end of the pandemic is predicted on either the super infectious Omicron variant giving rise to “herd immunity” on a world scale, or future variants being ever more “benign”.

The pandemic has made matters worse and your Board’s concerns regarding an insufficient margin of safety have come to pass. The government has had to increase borrowing by at least another The “new norm” to be brought about by the end of Brexit negotiations and the end of the pandemic £300 million* in the last 2 years alone. The cost of servicing and Net debt & budget surpluses/(deficits) £m repaying this additional debt will 600 90 make Government’s obligations to recurring expenditure more difficult 68 to fulfil with all the attendant risks of 450 45 increases to taxation.

23

*Sources: Gibraltar Government Estimates 2021/22 Page ix: Net Public Debt + GBC Viewpoint with Hon Sir Joe Bossano MP, January 2022. *Figure 2

300

0 -23

150

-45 -68

0

2012/13

2014/15

2016/17

Net debt (£m)

2018/19

2020/21

-90

Surplus/Deficit (RH scale)

Gibraltar Chamber of Commerce Annual Report 2022 | 9

POLITICS & THE ECONOMY will be a bruised Western economy trying to recover from where it left off, only to find that the supply chain is inverted and a spike in energy prices is fuelling an increase in overall costs.

Gibraltar is not alone in finding itself facing the cost of its pandemic bail-out, but it will have to forge its own path to economic stability. In Gibraltar’s case it will be necessary to factor-in the expected short term commitment provided under its Brexit agreement. It is widely anticipated that the parties will agree to a four year “Schengen” frontier with no guarantees thereafter.

The concern for your Board is that the Chief Minister goes with a short term remedy for a short term agreement. In this instance a short term approach would be for a policy premised on economic growth only. In the event that the government’s primary objective is to recover that level of popularity which swept it into power three years ago, the risk is that all the underlying risks which threaten our economic wellbeing will be swept under the carpet with populist rhetoric.

The graph (*Figure 1), shows how our economy has moved from a surplus to a deficit in recent years. The primary culprit is “recurring Government expenditure”. The figure continues to rise and overall Government expenditure now exceeds Government revenue. The choice for Government is simple: duck the issue, or try and rein-in the unaffordable excesses of Government expenditure. Clearly Government expenditure is in need of a reality check. Essentially we have four years, the four Schengen frontier years, to recalibrate our economy and balance the budget in order to prepare for whatever may be in store beyond. In the view of your Board the existential threat we were alerted to by Government and Opposition in 2016 will not have been averted simply by signing a Brexit Agreement with Spain. It will however buy us time. If there is no determined effort to address the issue of recurrent expenditure on what basis can we expect to rely on our friends in Westminster at some future juncture?

It is not all bleak however and there have been positive indicators.

In particular, the leadership shown by the Chief Minister when he extended furlough payments to cross frontier workers and similarly included cross frontier workers in the vaccine roll-out, not only

10 | Gibraltar Chamber of Commerce Annual Report 2022

won Gibraltar many friends but showed a deep understanding of the sense of community which can and should exist on both sides of the border.

Another positive to give confidence was the spirit of compromise which made possible the meeting of minds to achieve a Brexit solution for Gibraltar. The four Memoranda along with the Tax Information Exchange Agreement negotiated between London, Gibraltar and Spain during 2020, helped to align the different interests not just in tobacco prices but across a wide range of interests. Even if the effect is to limit the economic gain to Gibraltar in certain sectors such as tobacco, the advantage of being “open for business” is and should be enough for Gibraltar to rise to the challenge.

The same determined approach is required to address Government recurring expenditure. The unwanted consequence of a Gibraltar Brexit agreement may result in breaching one of your board’s “red lines”: VAT, but if Government shows that it is willing to tackle its expenditure, it may generate a spirit of compromise between Public and Private Sector that allows the burden to be shared.

There are tough decisions ahead.

RETAIL SECTOR

RETAIL

SECTOR The speed with which the pandemic spread caught most businesses unprepared. This was particularly the case for the retail sector. Local traders had been preparing for the start of the busy tourist season which traditionally coincides with the Easter holidays.

When the pandemic struck a number of local retail businesses were putting the finishing touches to their recent shop refurbishments or taking delivery of new season stock. The hotels, bars and restaurants were getting ready to serve the influx of customers in the warmer spring sunshine.

Within a few days in the middle of March 2020, the first lock down hit. Every business was forced to close. With the exception of supermarkets and pharmacies, every shop, hotel, bar and restaurant had to close. Unless the latter offered a takeaway service.

No-one had ever experienced such a collective closure of normal life before. Even those who had experienced the evacuation during World War II were taken aback at the drastic measures which were introduced with such little notice.

For a community which lives so much of its life outdoors the sight of police checkpoints at major road junctions stopping and questioning people on where they were going was quite surreal.

Whilst life continued with a degree of normality behind closed doors, Gibraltar’s shop keepers were faced with a very bleak future. Many retailers had received stock for the entire spring and summer season just days before the lockdown was enforced and they were forced to close.

The cash squeeze on local businesses was intense, particularly as rents for the second quarter also fell due at the beginning of April.

The Chamber worked quickly to present the Government with a set of detailed proposals

which local businesses would need in order to remain solvent.

In turn, the Government acted swiftly with a comprehensive set of measures to alleviate the immediate pressure on businesses which had been forced to close. Waivers of government rent, rates, social insurance and income tax were granted for the first three months of the pandemic. Businesses which had been forced to close were invited to apply for wage subsidies for their employees and for the hospitality sector there was compensation for the loss of perishable stocks.

Never had there been such a comprehensive set of measures to help local businesses. Nobody knew how long the lockdown or the wider pandemic would last. What we did know is that at some point in the future it would come to an end and Gibraltar, like elsewhere would need to rebuild its economy. Keeping as many businesses afloat was critical if Gibraltar was going to have a chance to rebuild once the restrictions eased.

It is not an exaggeration to say that the BEAT measures developed between the Chamber and the Government were critical for many traders’ economic survival.

Out of the pandemic’s adversity came an opportunity for many retailers. A number of local food delivery services which had started a few years previously came into their own during the first lockdown. The demand for their services grew exponentially as more and more local restaurants signed up for their services. If bars and restaurants could not serve people at their place of business then they would cook and deliver to peoples’ homes. It would not replace the loss of earnings but it would at least put some money into the tills.

The delivery companies then broadened their services to deliver non-food items as a number of local retailers used them to fulfil what in many cases were hastily created online sales channels.

The lockdowns forced many traders to accelerate the development, or in some cases begin, to offer their products and services online to local consumers. The delivery companies provided a lifeline for many local businesses as the pandemic took hold. Without them and the means to fulfill sales, it is likely that many retailers would probably

Gibraltar Chamber of Commerce Annual Report 2022 | 11

RETAIL SECTOR about

our heritage and our town if we cannot do even simple things to make it more presentable?

The relief for many retailers in being able to operate without retrictions is palpable, although new hurdles have been imposed: sharp rises in fixed costs such as the 20% increase in social insurance, a 20% increase in electricity pricess and fuel cost increases continue to put enormous pressures on the retail sector. not have survived.

Online shopping went into overdrive during the lockdowns as people working from home had more time to shop online and with local shops closed, for many this was the only alternative to purchase goods and services. This move added has further to the demise of the local retail sector and is making its subsequent recovery that much more difficult.

In the two years which have elapsed, the series of lockdowns and other restrictions has eased and businesses are adjusting to a new but precarious form or normality. The assistance given to the retail sector from the BEAT measures have all ended but the revenues have not resumed to where they would expect (or hoped!) to be. This is due to the lack of tourists.

The local hotels had a bumper summer season between June and September 2021 and these visitors certainly helped local retailers enjoy a limited recovery. However, compared to previous years there were very few day trippers from along the costas and the number of passengers from cruise ships was at its the lowest for many years.

This was followed by autumn and winter months which were much quieter than normal in terms of tourist visitors.

Those tourists who did choose to spend their holidays in Gibraltar were subjected to littered streets, grubby pavements and a generally run-down appearance. What a contrast to the experience many had in other smart and well-presemted tourist destinations in Spain, Portugal or Italy. Many of the the main tourist areas in Gibraltar have shabby and uncared for appearance. How can we expect visitors to care

12 | Gibraltar Chamber of Commerce Annual Report 2022

In addition to these domestic burdens, it appears that there are few, if any, controls being enforced

by Gibraltar Customs at the frontier for personal imports. Most local residents who purchase goods in Spain more often than not, exercise their right to reclaim VAT on their Spanish purchases but usually drive straight through the green channel on re-entry back into Gibraltar. The lack of frontier checks has got to the point that takeaway restaurants in La Linea are now delivering orders to addresses in Gibraltar on a regular basis. Why is this not controlled properly?

The effect of these combined pressures may appear to be negligible, but over time the slow drip of Gibraltar’s competitiveness will be drained away and there will fewer shops employing fewer people locally. The knock on effect on Government revenues in terms of taxes to pay for schools, healthcare and other essential services will mean less for everyone.

With so many competitive pressures on the retail sector, it is a wonder that many retailers have the will to carry on. The broader economic outlook remains uncertain. Should a treaty lead to a fully open border it is difficult to see how the local retail sector will be able to compete with shops in Spain whose operating costs in terms of rents, rates, electricity and wages are considerably lower than those in Gibraltar. Taxes may be higher in Spain, but they are rising in Gibraltar too and with the additional increases in government borrowing, local taxes as well as other costs are unlikely to be reduced for the foreseeable future.

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WHOLESALE & DISTRIBUTION SECTOR

Current shipping of foodstuffs from the UK has become unreliable with services sometimes delayed or suspended at short notice, often without reason. This makes life for local wholesalers, retailers and their customers very difficult.

Where foodstuffs are chilled or have a degree of perishability this is hugely wasteful but the bigger issue for wholesalers is that it is a huge drain on cash flows. Goods ordered must be paid for even if they are not bought by the end customer.

The Covid pandemic has exacerbated the problems of erratic inventory levels and extended delivery times and this has been evident in many local shops, not just supermarkets. The demand for additional documentation created by the UK and Gibraltar having left the EU has been enormously costly for the transport and distribution sectors and they have no choice but to pass on these extra costs to the end customers. The curse of inflation, which for decades has been such a benign force, is once again squeezing margins and increasing the cost of living.

Fuel costs which had been at historic lows at the start of the pandemic rose sharply in the second half of the year at the same time as local operators were faced with hikes in electricity and social insurance. A triple whammy!

14 | Gibraltar Chamber of Commerce Annual Report 2022

The increased documentation costs for trucks using the Algeciras ferry link are unsustainable without public subsidy as the increased costs make the cost of importing fresh produce uneconomic. There have been instances in the past year where a tiny administrative error in one document has led to an entire truck being unable to proceed to Gibraltar.

Wider inflationary pressures are set to continue for a while yet and this will feed through into higher operating costs.

As we report in the Port & Shipping sector, the government is looking to increase fees as well as fines significantly this year. There were even rumours that these would be levied retrospectively, although hopefully this will not come to pass.

Against a backdrop of sharply increased operating costs, staff absences due to isolation and erratic delivery schedules, it is surprising just how well the local wholesale operators have coped over the past two years. Like so many sectors in Gibraltar, businesses adapt. Having coped with all of the difficulties presented by the pandemic in 2020, trading did improve in 2021 although it has yet to return to the levels seen in 2019.

The prolonged uncertainty over whether a treaty

WHOLESALE & DISTRIBUTION SECTOR

might be agreed between the UK on behalf of Gibraltar and the EU on behalf of Spain has had the effect of postponing many decisions on investment for the future unless those investments have been absolutely necessary.

The additional documentary requirements, along with other restrictions, which are being imposed

by EU and Spanish authorities on freight which is destined for Gibraltar has also added to the costs for local transport companies, importers and wholesalers.

There are also a series small differences which individually seem insignificant, but when taken together can have a pronounced and damaging effect on local operators. For example, many local importers source products from regional suppliers in the Campo or in Andalucia. These individual purchases may not amount to much but collectively may run to between 15-20 per cent of their product or service offering. The new documentation requirements by the EU make supplying or transporting goods to Gibraltar an unwanted administrative hassle, so the Spanish wholesalers have stopped supplying local importers with these goods. Local importers thus have fewer goods to sell, so their turnover and profits are reduced. Over time this may lead to businesses needing a smaller premises, a smaller workforce and thus less revenue for the government. Little by little, Gibraltar’s economy is being hollowed out and there will be less prosperity to share. The lack of border controls merely accelerates this process.

For many outside the sector, the wholesaling business may be a hidden or even unappealing aspect of modern day life. The reality though is that it is a critical part of the modern infrastructure of Gibraltar, as essential as electricity or the water supply. It involves a number of disparate parts: transport, storage, logistics, inventory management and planning.

This has been developed over the years by local companies which have continued to invest in systems, staff, training, equipment and premises to ensure that all of the products which Gibraltar imports arrive in time and are delivered to local businesses and individuals. The considerable additional burdens which have been placed on the sector, first by Brexit, many of which remain, and secondly by the pandemic, present enormous risks to the local economy.

The thousands of local businesses which rely on Gibraltar’s wholesale sector for the timely supply of goods will also be adversely affected if there is continued uncertainty over the transport and documentation requirements to cross from Spain into Gibraltar and back again.

For these reasons, the importance of buying locally and supporting local Gibraltar businesses has never been more important. Keeping local wages circulating within the local economy means that it goes on to create jobs and generate wealth again and again in Gibraltar. Once spending leaves Gibraltar to be spent Spain or through the internet, it is gone. Forever.

“Keeping local wages circulating within the local economy means that it goes on to create jobs and generate wealth again and again in Gibraltar.”

Gibraltar Chamber of Commerce Annual Report 2022 | 15

FINANCIAL

SECTOR

While Covid and Brexit have continued to dominate the news during 2021, with businesses still having to rely on contingency plans or having implemented changes to their operational models in adaptation to these disruptive developments, Gibraltar continues to experience business growth. This has been reported by several leading financial services providers including traditional banks, investment firms and insurance companies. However, it was the growing number of young startups in the blockchain/crypto space which grabbed most of the local industry headlines. During 2021, Gibraltar, through its Finance Centre, ministerial support and efforts from the professional services industry, has been busy promoting its expertise and desire to continue growing the blockchain sector, thus swimming against the tide of many other finance centres.

The local regulator, the GFSC has so far approved 15 cryptocurrency and blockchain licences opting for quality over quantity and in this way adopting a similar strategy to the approach taken two decades ago with the Gaming sector. Even the GFSC CEO, Kerry Blight, recently described Gibraltar as a ‘hot bed of DLT activity’, giving rise to the assumption that there is significant interest in Gibraltar for new applicants in the blockchain space.

Elsewhere, it was announced that the government had partnered with two DLT firms in a move to use blockchain technology as part of its e-Gov proposition, creating a decentralised ledger to store civilian data and documents digitally and securely and therefore improve the delivery of public services. In doing so Minister Isola who is responsible for digital and financial services said that ‘this is another step in the development of Gibraltar as a jurisdiction supporting innovation in blockchain technology’ and that ‘Gibraltar has

16 | Gibraltar Chamber of Commerce Annual Report 2022

successfully positioned itself as a forward-thinking jurisdiction for innovative businesses developing and offering blockchain-related solutions’.

While Gibraltar’s bold move into the DLT and crypto space is supported by government, there are risks associated in doing so. A recent article in the international press warned that Gibraltar could face sanctions by countries such as the US, given concerns around the role of cryptocurrencies in money laundering and terrorist financing. Gibraltar, however, benefits from having a regulatory framework in place with the GFSC responsible for licensing, regulating and supervising the sector.

Indeed the recent follow up visit by MoneyVal last year (see below) endorsed the additional measures and procedures which local authorities had put in place since its last visit in 2019. MoneyVal’s updated assessment was that there had been significant protections added to the regulatory and enforcement regimes in Gibraltar in the last two years.

GFSC REORGANISATION A number of other changes were also announced by the regulator during the year; from the restructure of its Prudential, Authorisations and Conduct of Business teams to the appointment of a new Head of Resolution and Compensation Unit as well as a newly appointed Head of AML/CFT. The GFSC continues to evolve and in part attributes the changes to a commitment to improving the working relationships with local licensed entities and service providers, delivering on their objectives and dealing with the growing volume of applications and complexities of regulation. The regulator, alongside the banks and with support from the Royal Gibraltar Police’s financial crime unit, have also played an active role in raising awareness on fraud and scam prevention. Like elsewhere, Gibraltar has experienced a rise in cyber fraud and scam attempts, particularly via

FINANCIAL SECTOR

SMS and email. As part of the World Investor Week held during 2021, a symposium led by international financial regulators, the GFSC focused on this theme to raise awareness and explore ways to mitigate such risks.

MONEYVAL Another development of significance in 2021, which captured the attention of both the local and international press, was a report by the Council of Europe’s committee of experts on money laundering and terrorist financing (MoneyVal) which affirmed that ‘Gibraltar has improved measures to combat money laundering and the financing of terrorism, demonstrating significant progress in its level of compliance with Financial Action Task Force standards’. This, in turn, has resulted in MoneyVal assigning a higher compliance rating to the relevant areas, which has positive international value in Gibraltar’s journey to being recognised as a credible, resilient, transparent and compliant international financial services centre.

Equally as important was having our access to the UK market reaffirmed; Gibraltar is the only jurisdiction outside of the UK that can offer unobstructed financial services access into the UK. This market access, and the resulting alignment of standards between the two jurisdictions, protects the existing Gibraltar financial services industry, given that the UK is the primary market

for many locally based firms. It also creates a growth opportunity for Gibraltar in attracting EU businesses to set up a Gibraltar subsidiary to passport its services into the UK, from a location with a lower cost base and which offers regulatory speed to market, among other benefits.

Gibraltar Finance, the government’s financial services marketing arm, announced that it had signed a ‘Statement of Intent’ with trade association, Insurtech UK, ‘for both parties to work together in order to raise awareness of the Gibraltar insurance market’.

Overall Gibraltar seems to be well-positioned and has the necessary elements to face the challenges that Brexit will surely bring. Whether Gibraltar can also develop business within the EU in a post-Brexit environment will be largely driven by the outcome of the EU/UK negotiations on the future of Gibraltar’s relationship with the UK. If not, the already well cemented GibraltarUK trading affiliation will become more important than ever before. Gibraltar must remain adaptive and alive to the global changes in regulation and consumer trends to ensure that it capitalises on any opportunities that may arise in the fastpaced, ever-changing global financial services environment so that it continues to mature as a leading finance centre.

Gibraltar Chamber of Commerce Annual Report 2022 | 17

PORT & SHIPPING SECTOR The effect of the pandemic to the port is somewhat difficult to explain and perhaps understand.

2019 saw a slight increase in callers to the port, although there were also increases in numbers of ship calls during 2020 and then again in 2021.

Given the general slowdown in global trade this was perhaps unexpected. What transpired demonstrated that Gibraltar can ably deal with exceptional circumstances and provide services not available elsewhere.

BUNKERING As is well known in global shipping circles, Gibraltar is one of the major bunkering ports in the Mediterranean, certainly the largest in the Western side which accounts for around 20 per cent of all bunkers supplied in the Mediterranean and the Black Sea. As with all business sectors, this industry has it’s peaks and troughs. In 2017 the number of ship calls specifically for picking up bunkers rose to a peak 6,298. The following year would probably

18 | Gibraltar Chamber of Commerce Annual Report 2022

have been higher if it hadn’t been for the demise of one of the main local bunker suppliers. This created a temporary void in the market until other physical suppliers were able to re-adjust their operations to take up the slack. We understand that Cepsa has also recently ceased bunkering operations in Gibraltar without any official notice or further information. This reduces competition and creates added uncertainty.

On a more positive note, the proposed sizeable expansion project of storage tanks at the North Mole by World Fuels (through their local arm, Gib Oil) has finally received the green light. Gibraltar needs the presence of fully functional and strong players to ensure continuity in the market.

The Chamber firmly believes that Gibraltar needs to have as many different physical suppliers as our territorial constraints permit. This is not just to cater for the variety of demands for vessels which call, but also to ensure a healthy competition. It also demonstrates a strong commitment to the

PORT & SHIPPING SECTOR

Off Limits

Other

Vessels on Eastern side

Total No calls

Gross Tonnage

57

1071

1668

131

9464

275,347,179

5829

65

1045

1719

157

9107

268,985,938

78

5383

53

1253

2012

174

9149

275,490,869

5

76

5249

85

1606

2176

283

9480

279,919,787

46

53

5331

70

1136

2076

164

8885

249,596,764

Year

Cruise Vessel

Cargo

2017

235

4

6298

2018

243

49

2019

196

2020 2021

Bunkers Repairs

* 2021 figures are missing December numbers, which were as yet unavailable at time of production of report, by law of averages total number of calls that year could amount to circa 9693 introduction of more environmentally-friendly fuels to ships as soon as the market might require. This is very much in line with International Maritime Organisation (IMO) objectives.

global shipping industry to reduce its emissions.

It aims to reduce emissions by half of the 2008 total by 2050 and to achieve a reduction of at least 40% by 2030.

REDUCING SHIPPING EMISSIONS Reducing carbon emissions is an issue on everyone’s minds. However, there are sometimes uninformed comments made relating to this issue in the context of shipping. Considering that the Port’s activities are one of Gibraltar’s main economic pillars it is worth taking some time to put Gibraltar’s maritime sector into some sort of context.

The Global Transport sector accounts for just under one quarter of the total global emissions

In November 2021 Gibraltar hosted the second Maritime Week event. The event was well attended and attracted many visitors and a number of interesting presentations were given.

There was one presentation in particular which looked at global shipping emissions compared to other industrial sectors. One slide from the presentation is reproduced below to put these in context.

The IMO has set some ambitious targets for the

GLOBAL ANNUAL CO2 EMISSIONS • 31.5 GT (GIGATONNES) Total transportation • About 23% of total Shipping contribution • About 2% of total

Gibraltar Chamber of Commerce Annual Report 2022 | 19

PORT & SHIPPING SECTOR and within this, shipping accounts for around 2% of the total. The international nature of shipping makes it difficult to regulate but easy to blame.

fully in agreement with the policy taken within the Climate Change Strategy with regards to bunkering.

As mentioned within the Government’s Climate Change Strategy, emission readings in Gibraltar were unsurprisingly lower during the lock-down period, which was welcome news. However, what did not receive a mention, at least publicly, was the fact that ship call numbers actually increased during that period. This indicates that road transport rather than ship emissions are the main cause of local pollution in Gibraltar.

The average percentage of bunker callers to the western side of Gibraltar (i.e. the Bay anchorage and alongside berths) over the total number of calls were approximately 74% between 2015 and 2019, whilst in 2020 it fell to just over 69%.

More generally, the average percentage of bunker callers against the total number of ship calls, including Off-port limits operations and East side calls were 63.3% between 2015 and 2019 as opposed to 55.3% in 2020 and 60% in 2021, this is actually quite welcome news since it proves that Gibraltar port is able to provide more varied valuable services than just purely bunkering.

Nevertheless, it is felt that there is still room to attract new services that would in turn materialize

The Chamber of Commerce will always be a permanent, willing and proactive partner, to work hand in hand with the Government of the day in seeking means and ways of reducing emissions and environmentally friendly measures, and is

Year

Total visitor arrivals by air at Gibraltar

Estimated ship crewmember arrivals by air at Gibraltar

Percentage of ship crewmember arrivals over total air visitor arrivals

Estimated ship crewmember arrivals Gibraltar via land frontier

Estimated number of ship crewmembers requiring hotel accomodation

2015

188,217

5,460

2.9%

1,092

13,104

40%

2016

231,071

5,784

2.5%

1,157

13,882

35%

2017

243,314

5,322

2.2%

1,064

12,772

31%

2018

183,691

3,814

2.1%

763

9,154

20%

2019

208,368

3,948

1.9%

790

9,476

21%

2020

76,924

5,804

7.5%

1,160

13,928

56%

2021

127,062

4,350

3.4%

870

10,440

N/A

20 | Gibraltar Chamber of Commerce Annual Report 2022

Estimated percentage of ship crewmembers requiring hotel accomodation

PORT & SHIPPING SECTOR in more callers making use of our port other than just for bunkering, and perhaps more importantly make better use of our East side anchorage facilities.

operators but also through the award which Gibraltar received from the MedCruise Association as the most proactive port in the Mediterranean during the pandemic.

CREWCHANGES One of the many services available to ships calling at Gibraltar and one that has always been very popular to shipowners, has been the availability of crew changes. Gibraltar, like elsewhere, was hit drastically by flight disruptions during 2020.

However, that did not deter some operators looking into alternative means (e.g. charter flights) to be able to provide an all-round service. In particular, some cruise liner operators used these services to repatriate their crew members, in some cases numbering well into the thousands, home to their families at the peak of the pandemic. Gibraltar’s assistance and proactivity in this was greatly welcomed by crews and their employers alike.

We may be a small port but we did not choose the easy option and just hang up a “temporarily closed for business” sign. We made a difference.

Amongst the many commercial operations carried out during the pandemic, there was at least one involving the disembarkation of an elderly local resident whose round the world lifetime dream holiday was cut short when the pandemic broke out. The cruise vessel was forced to return to its home port in the UK, where this gentleman would have been stranded had his SOS call not been attended to whilst the ship was transiting the Straits of Gibraltar. In typical Gibraltarian hospitality, his disembarkation, together with that of two Spanish nationals, who grasped the opportunity to return to their home in Seville, was coordinated by the Port and local agents at no cost to the very grateful passengers.

The figures above highlight the degree to which Gibraltar stepped up to help during the pandemic.

It also demonstrates just how well and to what degree the Port infrastructure as a whole, which includes the ships Agent coordinating operations overall, Civil Contingencies coordinators, Port Authority, Health Authority, Airport Management, BCA, Airport Ground Handlers and specialised bus transport service providers, operationally adapted to the Covid circumstances and protocols established.

This collective effort between local private businesses and the public sector has been duly recognised not just by individual cruise vessel

LACK OF SUITABLE ACCOMMODATION FOR CREW CHANGES The issue of providing crew change services has been raised in previous Chamber reports, but the shipping sector has an acute problem in Gibraltar due to lack of suitable accommodation as crews wait to transfer from vessel to flights and vice versa. This creates a lost business opportunity and creates a bad image for Gibraltar. In previous years there were several hotels that provided accommodation for crew members embarking and/or disembarking here, but most of those hotels have now disappeared, or are about to disappear. New hotels which are being built are of a higher or more expensive standard which make crew changes uneconomical for the shipowners. Proposals to create dedicated accommodation to cater for this specific market have been made but for some reason these have not been progressed.

The opportunity exists but it will not last forever as other ports will step in to fill the need.

Shipping business, as can be observed from the above figures is the one business sector that

Gibraltar Chamber of Commerce Annual Report 2022 | 21

PORT & SHIPPING SECTOR continuously provides customers to the hotel industry, the port and other service providers e.g. taxis, coach and launch operators, yet the lack of suitable accommodation is an issue that has deteriorated over time and has not been addressed.

as a whole, we need to analyse the possible repercussions to the shipping industry Becoming part of the Schengen zone may be welcome news for local residents but it may lead to additional bureaucratic hurdles for crew changes, possibly an outright ban for non-EU nationals.

Excellent flight connections via London Heathrow (although sometimes somewhat expensive), combined with the UK airside transit visa waiver for certain popular seafaring nationalities and ILO 108 ratified Seamans Book holders, also allow some to transit landside. When linked with the facilities enjoyed at Gibraltar visa free crew changes can be effected. Guarantees in terms of passport handling and security are ensured by ship agents in coordination with the BCA. This has allowed Gibraltar to have the edge over a substantial number of ports that require these seafarers to be in possession of visas, which sometimes prove to be a lengthy and cumbersome exercise to obtain.

Uncertainty remains over whether we will be allowed to keep the same formalities that permit us to maintain this all-important service to shipowners. Alternatively, would we be allowed, as happens at some external border airports with the EU to issue single entry visas upon arrival and departure of seafarers? Only time will tell.

At the end of 2020 we received the news of the draft agreement reached between the UK, Spain and Gibraltar on a post-Brexit Treaty for Gibraltar.

Despite it being welcome news for Gibraltar

As is well known, the Straits of Gibraltar, year in year out sees the transit of some 60,000 to 80,000 ships, most of them averaging some 20 to 25 crewmembers on board, except for cruise vessels who obviously carry several hundred. Gibraltar has traditionally been the main port of call whenever medical assistance has been required by a vessel in the area. It has also long been a recognised port by maritime medical institution CIRM and a fully certified Yellow Fever Vaccination Centre. The Covid pandemic requires the global population to be vaccinated and receive booster jabs.

Gibraltar should consider capitalising on the expertise which it has amply demonstrated during the last two years to create a medical hub for the maritime sector.

It would be most welcome news for the industry and probably greatly appreciated by organisations like the WHO, IMO and ILO, which in turn would bring further positive international recognition for Gibraltar.

CRUISE SHIPS The table below showing business between competing neighbouring ports sums up the issues which Covid has brought about. The Chamber has urged for continuous improvements to the tourist product beginning with an integrated transport plan that

22 | Gibraltar Chamber of Commerce Annual Report 2022

PORT & SHIPPING SECTOR can cater for the increasing numbers that the new generation cruise liner vessels now cater for.

The indications from some of the top cruise operators are that they will reduce their number of calls to Gibraltar in 2022 compared with previous years. It may be that some operators will take longer to revert to the previous number of cruise calls to Gibraltar but the figures below show that neighboring ports are recovering more quickly than we are.

Gibraltar needs to consider what else needs to be done if it wants to re-attract and increase the number of cruise calls.

An EU Customs Union arrangement might possibly have an adverse effect on the cruise liner business. Having been outside the Customs Union whilst we were still within the EU, Gibraltar offered added incentives to the cruise operator when their ships called at this port, as they were able to take advantage of a VAT break as well as VAT free shopping for their passengers.

In addition, if Gibraltar were to enter into a Customs Union this might affect business from yachts and superyachts which have historically called at Gibraltar for the breaks required to comply with EU’s length of stay regulations. These calls were also used by owners to stock up locally on everything from fuel to food, charts and other consumables.

With the ongoing uncertainty surrounding a possible treaty, a number of contingencies have been put in place in the port. However, until the outcome of the current discussions is known we cannot be sure that these measures will be sufficient to deal with the level of seaborne trade. Preparing for every eventuality has been an almost impossible task.

CRUISE LINER VESSEL CALLS Port Malaga

Gibraltar

Cadiz

2008

N/A

241

231

2009

N/A

252

221

2010

217

182

294

2011

312

193

296

2012

296

188

275

2013

247

198

296

2014

226

195

279

2015

237

213

284

2016

258

224

273

2017

283

235

291

2018

274

243

322

2019

288

197

323

Total Calls

2628

2561

3385

Average number of calls

264 per year

213 per year

282 per year

Covid Period 2020

20?

5

24

2021

114

46

128

Expected Calls 2022

293

178

340

Gibraltar Chamber of Commerce Annual Report 2022 | 23

TOURISM SECTOR

SIGNIFICANT NEW INVESTMENT BODES WELL FOR FUTURE OF THE ROCK’S

TOURISM SECTOR

24 | Gibraltar Chamber of Commerce Annual Report 2022

TOURISM SECTOR The lack of tourist visitors to Gibraltar over the last two years dealt a huge blow to the sector in general as well as to the wider economy. Those that could, adapted their business to service local residents and a number were quick to innovate their offerings to attract local clientele.

The BEAT measures which the government introduced early on were a life saver for many local businesses, not just in terms of providing muchneeded finance but also for giving relief from the various bills which needed paying.

As we saw in other sectors, a number of local operators used the lockdown and ensuing pandemic to pivot their business to new audiences. New tourism-related services were created at the start of the lockdown and some of these were adopted by willing participants. E-bike tours provided an enjoyable and environmentally friendly way to familiarise or in in some cases reacquaint local residents with the numerous tourist sites around the Rock.

The lockdowns and periods in between provided time to take stock and see how Gibraltar could prepare itself for when people would be able to travel once again.

In some cases this meant that new investments have been made to existing attractions. The new laser and light show in St Michael’s Cave has turned the old, rather passive wander though dark caves into a much more immersive and educational experience. It also puts the enormity of the Cave’s creation over the millenia into a modern but impressive context. The investment for this represents a large initial capital outlay but over the years this will be seen by hundreds of thousands of visitors so it is worthwhile spending the money as the returns will be repaid many times over.

Gibraltar needs to continue reinvesting both in new attractions but also to maintain existing ones.

Without continued investment Gibraltar’s tourist product will just look old and tired and visitors will go elsewhere and it will be even more difficult to get them to come back again. New attractions offer new experiences and together these will attract new visitors as well as encourage those who know the Rock to want to return.

We have seen this happen for many years in

the reduced number of passengers on cruise ships who opt to remain on board when calling at Gibraltar as they have visited the Rock before and been on most of the excursions. We need to give these people good reasons to disembark and come and see what is new in Gibraltar and what has changed since their last visit. This includes new attractions, new shops and also the warmth of the welcome they receive.

Although it is not yet open to tourists, the newly refurbished Northern Defences has the potential to become one of Gibraltar’s biggest attractions to visitors.

LACK OF INTEGRATED TRANSPORT SYSTEM PERSISTS Of course, as we mentioned in our 2018 Tourism Report, there is still an urgent, (but unresolved) need to introduce an integrated transport system to bring visitors into town as well as transport them to the different tourist sites around the Rock.

The last two years presented an ideal opportunity for all parties to agree a common way forward on this so we could be ready when people were free to travel again. This was a missed opportunity.

After several false starts the new expanded Cable Car received full planning permission during the year. The new, larger cabins will be able to transport many more visitors to the top of the Rock quick and safely. Being electric it meets all the environmental criteria as well. Replacing the existing top and bottoms stations and installing newer pylons will take time but as with St Michael’s Cave, the large initial investment will be used for generations and enable hundreds of thousands of visitors to access the Upper Rock.

The pandemic delayed the opening of one of the new hotels as construction difficulties halted the works. It is hoped that this project will be completed by the end of this year. Gibraltar also said farewell to the Caleta Hotel at the end of 2021. It is being demolished to make way for a larger and more modern hotel offering the guests the very latest facilities. No firm date has been set for the replacement’s completion date but it is likely to be sometime in 2025 before the new hotel opens its doors.

This is another example of significant capital investment being made in Gibraltar’s tourism sector. This is both welcome and much needed and further demonstrates the confidence which

Gibraltar Chamber of Commerce Annual Report 2022 | 25

TOURISM SECTOR local as well as international operators have in the future of Gibraltar’s economy.

MORE FLIGHTS = MORE VISITORS The old chicken and egg argument about the lack of flights restraining the demand for new hotels looks to be well and truly decided. Two new hotels have opened in the last 6 years and there are still not enough beds available to meet the demand during the busy tourist season. Once the new runway tunnel is open operating (later this year), there are likely to be many more flights to and from other European destinations. The passengers travelling to Gibraltar will increase the demand for more hotel rooms.

As we saw during the lockdown, much of this excess demand which cannot be met by local hotels has been filled by the private short term rental sector. These rentals are not all listed on AirBnB and many which advertise their properties as being in Gibraltar are in fact, in Spain.

Nevertheless, they are fulfilling a need and if it means that these people travel or spend time in Gibraltar during their stay, whether it is eating in a local restaurant, shopping on Main Street or visiting the attractions on the Upper Rock, they are to be welcomed. It all helps the local economy, creates jobs and generates income.

CRUISE BUSINESS As highlighted in the Shipping report, cruise calls with passengers to Gibraltar ceased in mid March 2020. There was a slight recovery in 2021 but the overall numbers were well down on what

26 | Gibraltar Chamber of Commerce Annual Report 2022

would be expected in a normal tourist season: 46 calls against around 200 in a good year. Cruise passenger numbers are a small but important source of tourist income for Gibraltar, but over the years there has been a progressive decline in the number of passengers disembarking. This is for a number of reasons: many of them have visited Gibraltar before and there are no new shore excursions, the existing transport infrastructure is not able to deal with the number of passengers from the larger cruise ships. Complements of 4,000 passengers and another 1,500 crew are not uncommon. The current transport capacity in Gibraltar can accommodate less than 1,000 people. This needs to be addressed.

The outcome of the treaty discussions could have a significant impact on the number of cruise ships visiting Gibraltar. Among these will be access to Spain from Gibraltar by local tour operators along with the need for visas and the possible introduction of VAT or a similar tax. Any cost increases or additional administrative burdens for operators will make Gibraltar a less attractive port for the cruise companies.

The Chamber looks forward to meeting the new head of Gibraltar’s Tourist Board. We hope that time will be given to develop a sustainable tourism strategy that is focused on which tourism markets Gibraltar to develop and how to obtain the best value for the promotional spend. Gibraltar has a very strong story to tell but many other destinations have deeper pockets and greater resources and the competition over the pandemic has only become more intense.

ENVIRONMENT SECTOR “Air pollution dropped significantly during the first lockdown, from March to June 2020, as people had to reconsider the way they move and indeed their need to move.”

The peace and quiet which was enjoyed by so many people during the lockdown was notable. The wish harboured by many that we should never return to the pollution, noise and congestion of before was, alas, soon forgotten once the restrictions were lifted.

The sharp drop in emission levels during the pandemic was not due to shipping as ship calls to the Rock actually increased in the last two years.

At least the Department for the Environment acknowledged this fact in one of their publications by saying, “Air pollution dropped significantly during the first lockdown, from March to June 2020, as people had to reconsider the way they move and indeed their need to move.”

The fall in emissions was clearly due to the lack of road traffic with many fewer cars, lorries and

scooters driving on Gibraltar’s overcrowded road network.

If ever proof were needed, the main cause of Gibraltar’s poor air quality is road traffic. It would have been good to have the statistical evidence to prove this irrefutably but unfortunately the data on the www.gibraltarairquality.gi website is only current to December 2020 and for several months in that year, no data was collected at all. Whether this was because there were no emissions recorded or the equipment was not functioning we do not know.

The combination of greatly reduced emissions, coupled with the peace and quiet, was one of the very few positive aspects of the pandemic. These added greatly to the quality of life in Gibraltar.

A number of people have taken lessons from

Gibraltar Chamber of Commerce Annual Report 2022 | 27

ENVIRONMENT SECTOR

this and have made the switch from their car or scooter to walking or cycling. It is a small, but necessary change and these people are leading the way.

INFRASTRUCTURE STRAIN Since 2008 several thousand new residences have been built in Gibraltar, in both the public and private sectors: Nelson’s View, Cumberland Terraces, Bayview Terraces, Eastern Beach Terraces, Mons Calpe Mews, Waterport Terraces, Mid Harbours, Ocean Village Spa Plaza, Grand Ocean Plaza and Mid-Town among them. And this does not include all the new office developments: World Trade Centre, West One and Waterport Plaza and so on. On the one hand this inward investment shows signs of progress and confidence but what is not seen is the enormous burden all of these new buildings put on Gibraltar’s infrastructure: the sewers, drains and roads.

Many new developments are in still being built such as Eurocity, The Hub, E1, Joshua Hassan Terraces as well as the huge new development planned for the Eastside.

How will the existing infrastructure for supplying water and dealing with the increased volume of sewage from all of these new residences and offices cope?

The new sewage treatment plant at Europa Point which was planned has been put on hold due to difficulties with the contractor.

Gibraltar may not be part of the EU any more but it is still part of the planet and we should not continue to throw raw untreated sewage into the sea. Building a sewage treatment plant should be a priority and if this means spending less on other government projects, so be it.

In the same way as the power station was a priority in 2011, a new sewage plant should be THE priority for the government of the day. The problem (and shame) will only get worse with the output from all of these new developments.

Whilst we are at it, it would be interesting to see the current generating capacity and emissions output are with the new power station compared to previous power station’s output.

28 | Gibraltar Chamber of Commerce Annual Report 2022

GOVERNMENT’S CLIMATE CHANGE STRATEGY The Government’s recently published Climate Change Strategy sets out the bold ambition for Gibraltar to be carbon neutral by 2050 and that by 2045 Gibraltar will be generating 100% of its power from renewable energy. Quite how this will be achieved when every new apartment and office block that is built comes with reverse cycle air conditioning and heating systems remains to be seen.

The switch to electric modes of transport has been boosted by the pandemic. Electric scooter useage is up along with electric bicycles and sales of electric or hybrid cars. What is lagging is the roll out of the local charging infrastructure.

This is made more difficult with the majority of the population living in apartments rather than in houses so it is impossible for the majority to charge their vehicle next to where they live.

One of the Strategy’s notable milestones for motorists will be in 2026 when the government will introduce a carbon emission tax for all vehicles which are either petrol or diesel powered. Whether the countdown to this date will accelerate the move by people to ditch their internal combustion engines in favour of electric remains to be seen, but the clock is ticking.

For local businesses, the current choice and availability of suitable electric vehicles remains quite narrow. Congratulations and recognition is due to those companies which have made the investment in moving to electric vans and cars. Electric versions of larger vehicles such as flatbeds and HGVs have some way to go and the investment needed is significant (up to three times a diesel equivalent). As part of its planning, government needs to provide sufficient charging infrastructure in a secure dedicated lorry park for locally-registered commercial vehicles.

One thing which is missing in the Strategy is how the government will plug the hole in lost revenue from fuel duty once the majority have switched to electric vehicles. An added surcharge on electricity may not generate the income required if it becomes cheaper to charge up in Spain. If more of Gibraltar’s electricity is going to be generated from renewable sources this may only raise additional tax revenue for a short period anyway.

PROPERTY SECTOR One would be forgiven for thinking that with all the change in the air, the world of property would have remained the stable ship it is generally perceived to be. However, this façade of calm in the sector belies quite drastic movements that may change the sector forever.

Real estate is a slow-moving ship that takes time to accelerate, slow down or change direction and thus massive impacts like COVID seemingly wash over it with little noticeable effect. Covid, coupled with Brexit, (particularly the fiscal and movement implications for cross frontier workers) has shone a spotlight on the weakness in the sector and applied pressures to change traditional models to service the demand.

RESIDENTIAL SALES MARKET Despite the shocks of Covid and Brexit, a number of large new developments have gone to market since 2020, and interestingly they are aimed primarily at the owner occupier/ family sector. It appears that the developers feel that the studio/1bed buy-to-let model is sufficiently well served for now with the Euro City and Devil’s Tower Road developments satisfying that demand.

Looking ahead to the next 2-5 years, the total mix of new properties due to come onto market is more balanced, and for the better.

There has been disappointing news from the biggest property developer on the Rock, the Government, which has announced major delays to their various residential projects, thus cooling economic throughput into other sectors.

Construction is one of the biggest stimulants to Gibraltar’s economy along with import duty on materials (when collected), stamp duty on purchases which all contribute directly. Add in too the secondary effects of the architects, engineers, bankers, lawyers, surveyors, furniture suppliers and tradespeople that all employ a highly skilled workforce in significant numbers.

As regards current price levels, there is a general consensus that property prices have increased by close to 10% in the past year alone. There is evidence that the ultra-high end of the market is booming with over a dozen properties priced at £5m or more having changed hands during 2021.

Rental prices are increasing too by perhaps an average of 5% - 6% reflecting a cooling in demand as people have returned to the Rock post-Brexit.

The greater difficulty though is the lack of supply of vacant apartments so it is expected that rental rates for two and three bed properties will continue to see upward pressure for a while yet.

COMMERCIAL SECTOR The short-term effect of the unique Covid Beat measures introduced by the government on local commercial landlords was evident for all to see. Although this was broadly welcomed by the commercial tenants who had their rents effectively halved over 9 months in order to assist them to survive the pandemic, the knock on effects will be longer lasting. These will be harder to assess, but perhaps may make an equally significant impact.

No other jurisdiction in Europe, has interfered with commercial covenants in this way and this may have a bearing on future investor/financier

Gibraltar Chamber of Commerce Annual Report 2022 | 29

PROPERTY SECTOR appetite when they assess Gibraltar in this regard. This is over and above the hardship which some landlords have had to endure by having a reduction on income on imposed on them with no alternative form of assistance from the government.

OFFICE SECTOR After a forced evacuation from workplaces in March 2020, half of all employees (according to a recent McKinsey study) now say they do not want to go back to the office on a full time basis. Having tasted the freedom from commutes (sometimes of upto 3 hours a day), freedom from mandated “face time” at the office and too much air travel for work, these staffers now seek or in some cases demand the keep hold of their more flexible work patterns.

Few would have imagined that businesses would be able to adapt so quickly to such a new way of working or indeed that the employees would take to it so enthusiastically. However, with time, it is becoming clearer that businesses are seeking to get their staff back to the office, despite the obvious savings they could achieve by lowering their footprint.

One can imagine that the new status quo will lie with some form of hybrid working where certain departments or ranks within a business will be offered greater flexibility.

Given the geographical constraints and expensive housing market in Gibraltar, the push by staff to work from home will be reduced. The benefits of less commuting and the compact nature of most houses, mixed with the Latin affinity to socialise will no doubt mean that office demand is here for the foreseeable future.

FINANCING Developers and home buyers have been facing a serious problem with the limited local offering of finance despite the historically low interest rates. A consequence of the reduction in the number of local banks and building societies is that financing any new property development is likely to become increasingly difficult in the future due

30 | Gibraltar Chamber of Commerce Annual Report 2022

PROPERTY SECTOR to ongoing concentration risk for the lenders.

This is equally so for home buyers as they seek mortgages or loans to refurbish their properties.

Given the constraints of Brexit it is increasing difficult to source financing from overseas, although the arrival of a new high street bank filling the void left by Jyske Bank is a welcome development. With the owners of Trusted Novus also tendering for government developments one could expect the bank to be receptive to development finance arrangements from private developers.

However, we feel that the current offering of financial institutions is not enough and unless more lenders enter the market these pressures will restrain further development.

WAREHOUSING One sector of the property market which is often overlooked in Gibraltar is that of warehousing, storage, and light industrial space. The scarce availability and high cost of such space is a serious impediment to growth for small and medium businesses that require storage or workshop facilities here rather than across the frontier.

This shortage has resulted in sale and rental prices reaching over and beyond the budgets of many local companies. In turn this delays investment and results in missed opportunities for local businesses to develop. There appear to be no plans from the government to earmark any new areas for further development which would alleviate the pressures on this market segment.

Indeed, the opposite seems true as the North district, traditionally a light industrial area, is rapidly turning into the new residential zone for high rise housing.

A related issue is that there are no facilities for a trailer park or holding area where road haulage can be transhipped to smaller distribution vehicles.

With the new treaty talks whispering ideas of a totally free flowing frontier, perhaps Gibraltar’s light industrial future lies within the hinterland with all the vulnerabilities that that would induce on our own self-sustaining economic model.

Gibraltar Chamber of Commerce Annual Report 2022 | 31

ANNUAL ACCOUNTS

THE GIBRALTAR CHAMBER OF COMMERCE

DIRECTORS, OFFICERS AND OTHER INFORMATION

DIRECTORS

OFFICE BEARERS

AUDITORS

C Hernandez J Isola M Azopardi T Howard A Bassadone G Desoisa G Dyke J Morgan-Kent J Risso K Grant D Rowbottom N Russo T Stagnetto

C Hernandez J Isola M Azopardi T Howard

President Vice President Hon Treasurer Hon Secretary

BDO Limited 5.20 World Trade Center 6 Bayside Road Gibraltar

REGISTERED OFFICE 2/6 Casemates Square Gibraltar

Gibraltar Chamber of Commerce Annual Report 2022 | 33

ANNUAL ACCOUNTS

STATEMENT OF INCOME AND RETAINED EARNINGS for the year ended 31 December 2021

2021 £

2020 £

TURNOVER

85,618

82,740

Administrative expenses

(93,475)

(118,409)

OPERATING DEFICIT FOR THE YEAR

(7,857)

(35,669)

Loss on disposal of fixed assets

(1,290)

-

DEFICIT FOR THE YEAR

(9,147)

(35,669)

Retained surplus at 1 January

83,948

119,617

Retained surplus at 31 December

74,801

83,948

The operating results for the year arise from the Company’s continuing operations.

No separate Statement of Comprehensive Income has been presented as there are no items in these financial statements that require recognition in Other Comprehensive Income.

34 | Gibraltar Chamber of Commerce Annual Report 2022

ANNUAL ACCOUNTS

STATEMENT OF FINANCIAL POSITION as at 31 December 2021

2021 £

2020 £

5

862

2,382

Debtors

2

10,025

7,603

Cash at bank and in hand

3

103,611

97,643

113,636

105,246

(39,697)

(23,680)

NET CURRENT ASSETS

73,939

81,566

TOTAL ASSETS LESS CURRENT LIABILITIES

74,801

83,948

RESERVES

74,801

83,948

Notes TANGIBLE FIXED ASSETS CURRENT ASSETS

CREDITORS: amounts falling due within one year

4

Approved by the board on: 30 March 2022 C Hernandez President M Azopardi Honorary Treasurer

Gibraltar Chamber of Commerce Annual Report 2022 | 35

ANNUAL ACCOUNTS STATEMENT OF CASH FLOWS for the year ended 31 December 2021

Notes

2021 £

2020 £

(9,147)

(32,669)

CASH FLOWS FROM OPERATING ACTIVITIES Deficit for the year Depreciation

5

230

537

Increase in debtors

2

(2,422)

(388)

Increase in creditors

3

16,017

1,903

4,678

(33,617)

NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of tangible fixed assets

5

-

(678)

Loss on disposal of tangible fixed assets

5

1,290

-

1,290

(678)

5,968

(34,295)

97,643

131,938

103,611

97,643

NET CASH OUTFLOWS FROM INVESTING ACTIVITIES NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

36 | Gibraltar Chamber of Commerce Annual Report 2022

3

ANNUAL ACCOUNTS NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2021

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

FINANCIAL STATEMENT PRESENTATION The Statement of Income and Retained Earnings, Statement of Financial Position and Statement of Cash Flows have been presented. A single statement of Income and Retained Earnings has been presented as the only changes to equity during the year arise from profit or loss. No Statement of Comprehensive Income has been presented as there are no items that require recognition in Other Comprehensive Income in accordance with Gibraltar Financial Reporting Standard 102.

TURNOVER Turnover represents subscriptions income and other income generated from ad-hoc services or events such as fees for certificates of origin, members’ dinners, office hire and ATA Carnets. Turnover is accounted for on an accruals basis.

TANGIBLE FIXED ASSETS Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises purchase price and attributable costs.

IMPAIRMENT OF ASSETS At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss.

If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

SHORT-TERM DEBTORS AND CREDITORS Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the statement of income and retained earnings.

TAXATION As a non-profit making organisation, the Gibraltar Chamber of Commerce does not accrue money for profit or personal gain. Accordingly, the entity is exempt from paying corporation tax in Gibraltar.

Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets 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

Gibraltar Chamber of Commerce Annual Report 2022 | 37

ANNUAL ACCOUNTS NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2021

1. BASIS OF PREPARATION These financial statements have been prepared in accordance with Gibraltar Accounting Standards, including Gibraltar Financial Reporting Standard 102 (“GFRS 102”).

In addition, Section 1A of GFRS 102 has been adopted as the company falls within the threshold of a small entity and is permitted certain presentation and disclosure exemptions.

2. DEBTORS

2021 £

2020 £

Trade debtors - subscriptions

2,090

1,150

Trade debtors – other services

5,179

4,068

Prepayments and accrued income

2,652

2,385

104

-

10,025

7,603

Other debtors

The Directors are confident that amounts included within trade debtors will be received in full in subsequent years.

3. CASH AT BANK AND IN HAND

2021 £

2020 £

97,643

131,938

5,968

(34,295)

103,611

97,643

2021 £

2020 £

34,237

16,683

Deferred income

4,345

4,765

PAYE and social security

1,115

2,232

39,697

23,680

At 1 January Net cash inflow / (outflow) At 31 December 4. CREDITORS: amounts falling due within one year

Trade creditors and accruals

Amounts included in trade creditors and accruals are repayable on demand and expected to be settled shortly after the statement of financial position date.

Trade creditors and accruals include £28,366 (2020: £6,455) in relation to security deposits for ATA Carnets. The ATA Carnets are issued for a 12-month period. Accordingly, the funds are withheld until the Gibraltar Chamber of Commerce validates the satisfactory return of the ATA Carnet including that there are no known or suspected claims against the ATA Carnet holder.

38 | Gibraltar Chamber of Commerce Annual Report 2022

ANNUAL ACCOUNTS NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2021

5. TANGIBLE FIXED ASSETS

Leasehold improvements £

Furniture & fittings £

Office equipment £

Air Conditioning £

Computer equipment £

Total £

35,755

11,856

26,652

7,355

12.689

94,307

Additions during year

-

-

(18,521)

-

(4,728)

(23,249)

At 31 December 2021

35,755

11,856

8,131

7,355

7,961

71,058

35,755

11,856

25,014

7,355

11,945

91,925

Charge for year

-

-

64

-

166

230

Disposals

-

-

(17,309)

(4,650)

(21,959)

35,755

11,856

7,769

7,355

7,461

70,196

-

-

362

-

500

862

-

-

1,638

-

744

2,382

COST: At 1 January 2021

DEPRECIATION: At 1 January 2021

At 31 December 2021

NET BOOK VALUE: At 31 December 2021 NET BOOK VALUE: At 31 December 2020

Gibraltar Chamber of Commerce Annual Report 2022 | 39

ANNUAL ACCOUNTS NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2021

6. BASIS OF PREPARATION At 31 December 2021, the Chamber had annual commitments under non-cancellable operating leases as set out below: Operating leases on land and buildings which expire:

Within one year

31 December 2021

31 December 2020

£

£ 8,836

8,472

The operating lease agreement was renewed on 1 October 2021. The yearly rate of £8,472 has been increased to £8,836 effective as from January 2022 Further to the Government of Gibraltar’s Covid-19 relief measures, the Chamber was waived rental costs for a total of £3,177 (2020: £2,824) during the year ended 31 December 2021.

7. CONTINGENT ASSET The Chamber has submitted a rates relief application that is yet to be processed at the date of sign-off of these financial statements in 2022. The part or waiver in full of the balance oustanding of £16,468 is dependent upon the outcome of this process.

The directors are confident that the historical rates relief applications, totalling £16,023 and pertaining to financial years 2017 to date will be processed in due course. This assessment is based on an informal agreement and the satisfactory outcome of any and all rates relief applications performed up to the date of sign-off of these financial statements.

Accordingly, the remainder balance of £445 is included within “Trade creditors and accruals” and reflects the difference between the balance outstanding and the cumulative value of rates relief applications yet to be processed.

40 | Gibraltar Chamber of Commerce Annual Report 2022

ANNUAL ACCOUNTS NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2021

2021 £

2020 £

52,750

55,110

ATA Carnets

5,050

1,375

Fees for certificates of origin and invoices

4,349

10,190

23,399

13,540

70

675

-

1,850

85,618

82,740

46,434

45,675

Office rent and rates

172

6,276

Electricity and water

823

844

Bad debt written off

1,073

7,325

Depreciation

230

537

Advertising

577

10,174

Telephone

3,272

2,646

Printing, postage and stationery

3,081

4,887

17,960

17,843

4,940

4,448

765

1,658

2,695

2,768

722

327

IT Maintenance and website costs

2,575

4,208

Subscriptions

4,390

4,444

Accountancy fees

3,218

3,018

-

873

548

458

(93,475)

(118,409)

(7,857)

(35,669)

TURNOVER

Subscriptions

Other publications Other certificates Office hire

ADMINISTRATIVE EXPENSES

Staff remuneration and social insurance

Publications costs Insurance Travel and entertainment Office cleaning Repairs and maintenance

Professional fees Bank charges

DEFICIT FOR THE YEAR

Gibraltar Chamber of Commerce Annual Report 2022 | 41

GIBRALTAR: KEY INFORMATION (All figures relate to 2021 unless otherwise stated) Population:

32,194 (2018)

Natural resources:

None

Total land area:

USEFUL WEBLINKS: www.gibraltar.gov.gi www.fsc.gi www.gibraltarport.com www.companieshouse.gi www.gibraltarlaws.gov.gi

6.5 sq km

Head of State:

Her Majesty Queen Elizabeth II

Chief Minister:

Hon Fabian Picardo, MP, QC

Legislature:

Parliament (no upper house)

Languages:

www.gibyellow.gi

English & Spanish

Business hours:

9 am – 5 pm Monday to Friday

Inflation rate: Minimum wage: Average earnings: Registered employed: GDP Imports

AIRLINES & HOTELS www.ba.com www.easyjet.com www.holidayinnexpress.com www.rockhotelgibraltar.com www.eliotthotel.com www.sunborngibraltar.com

4.3% per annum (Jan-Dec 2021) £7.50 per hour (£292.50 per week) £32,625 (2020) 29,516 (Oct 2020) £2.4bn (2020/21) UK: 60%, Spain: 30%, Other EU:10%

EMPLOYMENT GROWTH 2010 - 2020

GIBRALTAR GDP 2010 - 2020 (£m) 35,000

3000 30,000

2500

25,000

2000

20,000

1500

15,000

/2 0 19

/1 9

OCT 10

OCT 11

OCT 12

20

18 20

/1 8

/1 7

17

16

20

20

15 20

14 20

13 20

12 20

11 20

10 20

/1 6

0

/1 5

0 /1 4

5,000

/1 3

500

/1 2

10,000

/1 1

1000

CORPORATION TAX TAX PAYABLE Resident Companies 12.5% Utilities Companies 20% PERSONAL INCOME TAX TAX PAYABLE (Allowance based system)

The first £10,000 of taxable income 6% £10,001 - £17,000 20% Balance 28%

A series of allowances are available to individuals who choose to be taxed under this system. Further information can obtained from incometax@gibraltar.gov.gi

42 | Gibraltar Chamber of Commerce Annual Report 2022

OCT OCT 13 14 Revenue

OCT 15

OCT 16

OCT 17

Expenditure

OCT 18

OCT 19

OCT 20

GIBRALTAR: KEY INFORMATION

(All figures relate to 2021 unless otherwise stated)

GROSS INCOME BASED SYSTEM (GIBS) The first £17,000 of taxable income £17,001 - £25,000 £25,001 - £40,000 £40,001 - £105,000 £105,001 - £500,000 £500,001 - £700,000 Balance

TAX PAYABLE 16% 19% 25% 28% 25% 18% 5%

SOCIAL INSURANCE Employer contributions Employee contributions Self-Employed contributions

NO CAPITAL GAINS TAXES NO INHERITANCE TAX/DEATH DUTIES OR ESTATE DUTY SPECIAL STATUS PERSONAL TAX RATES

Qualifying individuals who are non-resident and derive no income from Gibraltar can apply for Category II resident status.

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

PROPERTY Commercial Office Rental Rates

(annual rates for indicative purposes only)

Levied at 20% of gross earnings subject to a minimum of £28/week or £121.33/month and a maximum of £50/week or £216.66/month.

Levied at 10% of gross earnings subject to a minimum of £12.10/week or £52.43/month and a maximum of £36.30/week or £157.30/month.

Levied at 20% of gross earnings subject to a minimum of £25/week or £108.33/month and a maximum of £50/week or £216.66/month.

No tax on dividends No wealth, gift or capital taxes Tax payable An individual who has been issued with a Category 2 Individual certificate is taxed under the Allowance Based System but only on the first £105,000 of their assessable income and the amount of tax due and payable in any year of assessment shall be capped at £37,310.

COMMERCIAL RATES Rates on commercial offices are levied at 67p in the £ based on the annual rentable value of the premises.

Rates are payable quarterly in advance. After the first quarterly payment has been made, businesses qualify for a 15% discount on subsequent rates bills for prompt payment.

Europort

£340 - £390/ sqm

Eurotowers

£240 - £275/ sqm

Leanse Place

£240 - £275/ sqm

Leisure Island Ocean Village

£350 - £400/ sqm

Mid Town

£400 - £430/ sqm

4 bed apartment

Regal House

£250 - £300/ sqm

World Trade Center

£400 - £500/ sqm

Note: The above rates are for indicative purposes only.

Actual rates may vary depending on the size and condition of individual properties, location and other amenities.

RESIDENTIAL PROPERTY RENTAL RATES Studio/1-bed apartment 2/3 bed apartment

£900 - £1,500/PCM £1,300 - £4,000/PCM £3,500 - £7,000/PCM

Gibraltar Chamber of Commerce Annual Report 2022 | 43

GIBRALTAR’S PREMIER LAW FIRM.

TURNING IDEAS INTO REALITY

INFO@ISOLAS.GI GIBRALTARLAWYERS.cOM +350 20001892

• Admiralty and Shipping • Asset Managers Gibraltar • Trusts • Banking & Regulatory Services • Commercial and Civil Litigation • Company Law • Corporate Finance • Litigation • Data Protection & Privacy • Employment Law • Fintech • Financial Services • Funds & Investment Services • Gaming and e-Commerce • Insurance • Human Rights • Insurance Linked Securities • Insolvency & Bankruptcy • Mergers & Acquisitions (M&A) • Partnerships & LLPs • Pensions • Property Development • Sports & Entertainment Law • Trademark Registration • Tax

44 | Gibraltar Chamber of Commerce Annual Report 2022