Gibraltar Chamber of Commerce Annual Report & Accounts 2017

Gibraltar Chamber of Commerce

2017 Annual Report & Accounts

www.gibraltarchamberofcommerce.com

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FOREWORD Contents Foreword 03 Politics

06

Economics 09 Environment 12 Wholesale 14 Retail

16

Finance 19 Port & Shipping

23

Tourism

26

Property 29 Accounts 33

It is hard to believe that this time next year the UK and Gibraltar will no longer be part of the European Union. Such a prospect seemed unthinkable just two years ago and yet it has come to pass.

Once more in this year’s report you will read many references to Brexit and the concerns of Gibraltar’s business sectors in how this may affect them.

Recently the Chamber commented publicly that although Brexit was a priority for all our futures, there was a growing list of issues which the government needed to address as well.

Many of these issues affect our members as well as the wider business community.

In short, they matter.

“We have to be ready to do more, go further, work harder, be more efficient and wield greater influence than ever in building our common future in order to ensure we stay relevant, competitive and growing.”

Our comments were met with a response from the government that some less important things would need to be relegated or suffer delays due to the amount of time which the Brexit discussions were taking. This is simply not good enough.

There is no doubt that our members have been doing just that: continuing to run their companies in challenging trading conditions, planning for every conceivable post-Brexit contingency and all the while looking for new opportunities both here in Gibraltar as well as abroad. But it all seems a little one-sided.

Almost everyone in Gibraltar voted in the 2016 referendum to remain in the EU, but the final decision was taken out of our hands. In his 2016 budget speech, just a few weeks after the referendum result, the Chief Minister said,

In the last year, there appears to have been a reluctance by government to engage with the private sector, much less to address any grievances they have.

Economies work best when public and private sectors work with government

for the community as a whole. Now is not the time for government to ignore the concerns of the private sector.

Companies need the support and cooperation of the government and its various departments to address matters which have remained unresolved for too long.

The excuse may be that the Brexit discussions are taking up a disproportionate amount of the government’s time, but not everyone in the government is involved in these discussions. Perhaps decision-making powers have become too concentrated in the current administration.

One solution might be to delegate more of that power to civil servants, although in a small town this has always been difficult to achieve. Provided that decisions were based on clearly set out policy guidelines, then it would free up the politicians from being involved in what the government deems to be “less important matters”. These may not be important to the government or even to individual ministers, but they certainly matter to those companies which are being adversely affected by them. And without resolution, businesses are held

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FOREWORD back. In extreme cases this can delay investment programmes or a decision to offer new services or to employ more staff. Ultimately, everyone loses out, including the government.

It is worth remembering that Gibraltar’s economy has been transformed over the last 30 years. In 1988 three quarters of the Rock’s economic output was generated by the public sector with the private sector making up just one quarter of the economy. With the garrison having left and the economy having been completley restructured, today it is the private sector which generates three quarters of Gibraltar’s economic output.

And it is a much, much larger economy today with a GDP approaching £2 billion.

It is an impressive achievement in a relatively short period of 30 years and it is the private sector which has been largely responsible.

The Chamber, reflecting the views of its members, remains very optimistic about Gibraltar’s economic prospects, regardless of the outcome of the Brexit negotiations. That is not to ignore the possibility of significant adjustments which may be required, along with some very real short-term economic pain.

However, the dynamism and tenacity of Gibraltar’s business community should continue to propel the Rock’s economy in the years ahead. With greater engagement and cooperation from the government to deal with those issues which adversely affect local businesses, Gibraltar’s private sector would also be able to secure all of our economic futures.

“It is an impressive achievement in a relatively short period of 30 years and it is the private sector which has been largely responsible.”

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 05

POLITICS

2017 Mid Brexit

2017 was, overwhelmingly, a year of fluidity at the frontier and therefore, in our view, a positive one for commerce generally, and for crossborder workers specifically.

Once again, the importance and value of the continuing efforts of the Cross Border Group during 2017 cannot be underestimated, particularly in the context of maintaining and, where possible, increasing political awareness of the economic benefits of unimpeded commerce for both sides of the Frontier.

Although private sector interests in Gibraltar and the United Kingdom were braced for a turbulent year given the Brexit result, events unfolded in ways that were largely unexpected. The gamble taken by Theresa May of calling a snap election to drive home the advantage that the Conservatives were perceived to have over Labour after earlier Council Elections, proved costly for the Prime

Minister. Jeremy Corbyn’s campaign dominated the agenda, capturing the imagination of young voters in their hundreds of thousands. The result was the Prime Minister’s loss of her majority in Parliament and the entrenchment of Jeremy Corbyn as a worthy leader of a strengthened Parliamentary Labour Party and a Prime Minister in waiting.

Brexit negotiations between the UK and the EU remain opaque and it is not expected that there will be clarity until close to the March 2019 exit date. The Chief Minister has taken to the Brexit challenge with his usual energy and has lobbied at numerous meetings in both London and Brussels to maintain awareness of the Gibraltar dimension.

As with Brexit at all levels, in respect of Gibraltar there are few details available.

The private sector, which started the year with a high level of uncertainty, remains only marginally more persuaded that fluidity at the frontier will continue post-Brexit. It seems therefore, although without any level of certainty, that those who value the strength of the economic and financial interests that tie Spain and the United Kingdom together may yet hold sway in Spanish domestic thinking.

Again, just as with Brexit, much of this debate takes place behind closed doors.

As to where matters stand now for

06 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

Gibraltar in the Brexit context, whether as regards closer ties with the United Kingdom or better relations with Spain, seen from the outside it appears that we are, at best, merely inching towards a conclusion, when in fact the process may be more advanced than we give credit for.

In the Chamber’s view, a key development to watch for in 2018 is confirmation that Gibraltar and the United Kingdom have entered into a Double Taxation Agreement. A DTA will be a landmark event with potential for replication with a host of other EU countries. A DTA is also a sure sign of progress on the Gibraltar/ UK agreement. With Spain, we should look and hope for no news, at least no news in the sense that it impacts on the continued fluidity at the frontier. Such developments would be considered positive indicators.

One very significant development that we anticipate will prove an important component of Gibraltar’s financial services offering for some time to come, is the development of Gibraltar as a centre of excellence in the cryptocurrency and wider DLT space.

On a global scale, 2017 was a year of spectacular growth and media coverage for the global crypto industry, one which, led by the fortunes of the original

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POLITICS cryptocurrency, Bitcoin, grew to a staggering $800-900bn industry. Gibraltar has seized the opportunity and leveraged its ability to move quickly in response to developments of this kind and Gibraltar is now the first jurisdiction in the world to have created a DLT-specific set of regulations which cover relevant DLT financial services activity. The Government has rightly not moved to regulate the cryptocurrency itself, nor has it yet regulated token sales. It is expected that proposals for the regulation of this new phenomenon in corporate fundraising, referred to commonly as initial coin offerings, published earlier this year, will be law before the end of Q2 2018.

2017 proved to be a fraught time for the Opposition, although ultimately the GSD showed that it had sufficient strength-in-depth to recover from the resignation of its leader and bring back into mainstream politics a creditable future alternative, we extend our best wishes to Mr Azopardi. It is also hoped that going forward the relationship between Chief Minister and Leader of the Opposition is not marred by personal antipathies. The long Brexit road ahead would be better served with a more amicable level of understanding between the key figures.

More so now that the significant feature of 2017 is the change of message surrounding Brexit. At the outset, pre referendum, Brexit was dubbed an ‘existential threat’ for Gibraltar. The message has evolved over time and now Brexit is increasingly seen as an “opportunity”, as much as it is a threat. Chamber welcomes this positive step and recognises that the Chief Minister has shown both courage and leadership in embracing the Brexit challenge which is altogether a more difficult prospect requiring a united Gibraltar to succeed and a more risky political option than ‘sitting tight’. We are faced with uncertain outcomes but most likely all scenarios will result in an unknown level of ‘shrinkage’ for our economy and whilst it is still in ‘our hands’ we would like to see Government curb recurring expenditure. “Shrinkage” of the UK economy is increasingly seen as a likely consequence of Brexit. The same outcome is expected for Gibraltar, particularly if the UK seek to rebalance source of Gibraltar’s tax advantages in its own favour. Additionally if, despite best efforts, a UK/EU Trade Agreement does not extend to services then the way forward to secure the continued provision of services to the EU will be “equivalence”. (This follows the Bermuda Insurance industry model). It seems likely that in relations both with the EU generally and Spain specifically, “equivalence” is a prospective outcome. Gibraltar Government will need to manage industry expectations but although, it may be the least preferred positive option, nevertheless it provides a solution. The message from 2017 is one of hope but as always there are difficulties ahead and your Board is assured by the clear signal that curbing the runaway budget of the GHA is finally in scope.

08 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

ECONOMICS Table 1. Percentage change inGDP growth 2016-2019 (Shown as % change over previous year)

2016 Country

2017 Jan. 17 Forecast

2017 Apr. 18 Forecast

2018 Jan. 17 Forecast

2018 Apr. 18 Forecast

2019 Apr. 18 Forecast

World

3.2

3.4

3.8

3.6

3.9

3.9

Advanced Economies

1.7

1.9

2.3

2.0

2.5

2.2

USA

1.5

2.3

2.3

2.5

2.9

2.7

Euro Area

1.8

1.6

2.3

1.6

2.4

2.0

Germany

1.9

1.5

2.5

1.5

2.5

2.0

Spain

3.3

2.3

3.1

2.1

2.8

2.2

Japan

0.9

0.8

1.7

0.5

1.2

0.9

UK

1.9

1.5

1.8

1.4

1.6

1.5

China

6.7

6.5

6.9

6.0

6.6

6.4

India

7.1

7.2

6.7

7.7

7.4

7.8

Brazil

-3.5

0.2

1.0

1.5

2.3

2.5

Russia

-0.2

1.1

1.5

1.2

1.7

1.5

Emerging & Developing Economies

4.4

4.5

4.8

4.8

4.9

5.1

Source: IMF WEO April 2016. Also Jan 2017 and Jan 2018 Editions The global economic upswing that began in the latter half of 2016 has continued and resulted in a better than expected outcome for the world economy in 2017.

Output exceeded expectations in the Euro area, Japan, the United States and China, as did improvements for commodity exporters. Emerging and Developing economies also did better than expected.

At 3.8%, global growth in 2017 was at the highest level since 2011. This is expected to increase slightly in 2018 and 2019 to 3.9%. (see Table 1 below for some comparative data). This positive outlook is due in part to expansionary monetary policies in most major economies and low interest rates continuing to fuel consumption and investment.

Beyond 2019, the growth rate is expected to slow down at some stage.

The interest rate cycle has bottomed out and, as capacity utilisation and inflation increase, central banks will gradually normalise monetary conditions over the coming years. For most central banks this will imply both a reduction in quantitative easing programmes and a hike in interest rates. Other threats include the possibility of trade wars given the escalation of tensions between the US and other countries including China. The consequences and extent of President Trump’s ‘America First’ policy are yet to be played out. Also, any unforeseen significant tightening of monetary and financial conditions could potentially derail the economic upturn and heighten the risk of a new crisis due to recent years’ rising debt in several countries including China. Another factor that is expected to affect income

growth in advanced economies is aging population and lower projected advances in productivity. These issues will naturally inhibit economic growth.

As ever, there are challenges and risks going forward. It is vital that in the current and near future ‘good times’, adequate policies are put in place to foster sustainable growth in the years ahead.

Looking now at the UK economy, the picture is not so encouraging. The figures in the above table show a lacklustre growth outlook for the UK, with projected growth well below the world rate, as well as that of the Euro Area and that of Spain.

In 2016, the UK and Germany were the fastest growing economies in the G7. In 2017, the UK dropped to the bottom of this list, as growth in other countries has picked up, while growth in the UK has slowed.

Over the last 12 months, manufacturing has grown, boosted by the drop in the value of Sterling after the Brexit referendum results.

Services output remained steady but the construction sector has slowed. The combined effect was the growth reduction seen in 2017.

The one success story was the labour market, with unemployment at a low 4.2%. However, Q4 2017 showed a slowdown in employment growth, which is a negative marker for the job market going forward. Additionally, real wages began falling again as the depreciation of Sterling has fed through to consumer prices but nominal wage growth has not picked up. This has squeezed consumer spending, which has been the main driver of the economy in recent years.

The latest figures for Q1 2018 show a ‘growth’ of just 0.1%, what some are calling, perhaps unfairly, a ‘grinding to a halt’ or ‘a stall’. This represents the lowest quarterly growth figures since 2012. These figures reflect the issues raised in the preceding paragraph. They also, of course, reflect the whole Brexit situation. The reality is that, coming up to two years since the 2016 referendum, uncertainty about what shape the UK economy will take after Brexit remains the key determinant. The impact of this uncertainty is being felt throughout the UK. The City is facing a scenario where major players in the financial world are making moves to headquarter elsewhere in the EU or are contemplating such moves. They may not have a choice.

Similarly, major investment decisions in manufacturing are held up pending more certainty but there are few signs of things becoming clearer anytime soon.

Property prices in London and elsewhere have weakened, with potential buyers putting their plans on hold because of the economic uncertainty. The commercial property market has slumped. Companies are still in the dark about Britain’s future relationship with the European Union, its biggest trading partner, and many have delayed investments as a result. A fear is that this uncertainty will stay for the year to come and even after the UK’s formal exit from the European Union.

The Spanish economy has continued to do well with a growth rate of 3.1% for 2017, which is above that of the Euro Area, as shown in Table 1.

Unemployment, while decreasing steadily, remains too high. At end 2016

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 09

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ECONOMICS

billion

Figure 1. Gibraltar GDP Progression 2500.00 2000.00 1500.00 1000.00 500.00 0.00 20 01 /0 2 20 02 /0 3 20 03 /0 4 20 04 /0 5 20 05 /0 6 20 06 /0 7 20 07 /0 8 20 08 /0 9 20 09 /1 0 20 10 /1 1 20 11 /1 2 20 12 /1 3 20 13 /1 4 20 14 /1 5 20 15 /1 6 20 16 /1 7 20 17 /1 8

it stood at 18.6% while in Q1 2018 this improved to 16.4%. The recovery is broad based and the growth is more balanced than in the years before the crisis, with both domestic and external demand contributing to growth. Tourism and manufacturing are doing well and Spain is enjoying a surplus on current account. The gains in employment have underpinned consumer spending and business investment has continued to increase supported by growing confidence and improved profit margins. The accommodative Euro Area monetary policy continues to support growth generally.

Companies and households have made significant inroads into reducing indebtedness but much remains to be done, particularly in the construction sector and for lower income households.

The banking system is stronger but there is a continued need to bolster balance sheets to lower risks of mediumterm credit supply constraints. Nonperforming loans have declined markedly but remain relatively high in a few financial institutions and the overhang of unsold properties built before the financial crisis remain on the books of the banks and cajas.

The growth for 2018 and 2019 is expected to continue but at a lower level than 2017. The relative slowdown stems from reduced growth of spending by firms and households as the economy settles and pent up demand from the crisis recedes. Risks include the possible wider effects of continued political instability in Catalonia which could lower consumer and business demand. Also, international trade could slow down if there is an increase in global protectionism. Finally, there is a downside risk if the effects of Brexit are worse than assumed In summary, quite a moderate picture for Spain as a whole provided that there are no external or internal shocks In the years ahead.

Looking at the Campo de Gibraltar, while there are some signs that the positives from the Spanish national economy are beginning to filter down, the perennial problem of high unemployment in the Campo remains. As at Q1 2018 the Province of Cadiz shows the highest unemployment rate of all the Spanish provinces with 31.25%. Within Cadiz province it is La Linea that is showing the highest unemployment rate at 33.3% for municipalities with a population greater than 40,000 inhabitants. Table 2. shows the unemployment situation in all seven Campo municipalities.

GDP £M

There has been some improvement since the end of 2016, but unemployment has barely budged in the Campo. Looking at La Linea, the figures are an improvement from the 2012 post crisis high of 41.7% but still remain well above the 2006 pre-crisis level of 23.2%, which was not exactly a great position to begin with. These numbers illustrate starkly our immediate neighbour’s deep rooted economic imbalances. And Spain is at or near the peak of the economic cycle.

Table 2. Unemployment Rate in Campo Municipalities Q1 2018 Municipality La Linea Algeciras San Roque Castellar Tarifa Los Barrios Jimena

Q1 2018 % 2016 % 33.3 34.7 29.5 30.9 28.1 31.1 25.9 30.9 25.9 30.3 25.2 28.3 25.1 28.5

Clearly, this situation is of even greater concern to the La Linea authorities now with the threats that could result from Brexit. The Chamber’s Impact Studies of 2009 and 2015 quantified the positive and significant impact of Gibraltar’s economy on the hinterland and this is now better understood in Madrid and London, as well as Brussels. In the current climate of Brexit talks, both at a local level and at Brussels/Madrid/ London level, the Chamber’s Impact studies have never been more relevant.

The GDP figures shown in Figure 1 above continue to show a picture of robust performance. The latest estimate for 2016/2017 points to a GDP of just over £1.9 billion, or an increase 8.9%. This is despite the Brexit ‘cloud’. Employment figures and other relevant indicators underpin what the GDP projections illustrate, although there is a caveat in that, as usual, the statistical data that are available continue to be well out of date. The latest Employment Survey available, for example, is from October 2016. Is this tardiness in providing data acceptable in a modern progressive economy? Perhaps not!

Linear (GDP £M)

Investment in Main Street continues to be robust, with a number of shop fronts having been renovated and modernised during the year. One new hotel is about to be completed with others in the pipeline. Major private sector investments in real estate are underway. All this shows confidence in the economy.. Government is also in the throes of a major building program with housing and education at the forefront.

All in all, a very positive picture indeed provided that demand holds up.

Since 1985, Gibraltar’s economy has grown at an impressive rate. This successful model is based on a free flowing frontier and access to EU markets. These two king pins have enabled the growth in financial services, including insurance, and also of tourism. The Port, with bunkering and cruise liner calls, continues to make a significant contribution, as does the online gaming sector. The latter is a particular success for Gibraltar, with a high regulatory standard attracting leading industry players. A hard Brexit would put much of this at risk.

The current climate of uncertainty is of concern to most sectors. Tourist operators will be concerned with frontier flow and the wholesale and retail sectors will be looking at how logistics will be affected at the commercial frontier.

Gaming companies are waiting to see how the future flow at the border will affect their employees who commute from Spain each day and if they will be able to continue serving EU customers from Gibraltar. The financial services sector will need to see if they will be able to continue serving the UK market beyond 2020, the British Government having recently guaranteed such access during the transition period. Other EU citizens, not just Spaniards, who work in Gibraltar but live in Spain are also worried about their jobs.

The Government’s continuous efforts to put Gibraltar’s case across at all levels is to be applauded and these efforts must continue. The work of the Cross Frontier Group has also very useful at a

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 11

ECONOMICS Figure 2. Gibraltar Government Recurrent Revenue and Expenditure 700 600 500 400 300 200 100 0

11

2 al tu Ac

0/ 01

12

2 al tu Ac

1/ 01

2 al tu Ac

2/ 01

GoG Recurrent Revenue £M

2 al tu Ac

3/ 01

16

15

14

13

2 al tu Ac

4/ 01

2 al tu Ac

5/ 01

GoG Recurrent Expenditure £M

Fo

O st ca re

r tu ut

n2

6 01

7 /1 e at t im Es

/1 17 20

8

Table 3. Government Recurrent Revenue and Expenditure Actual 2110/11

Actual 2111/12

Actual 2112/13

Actual 2013/14

Actual 2114/15

Actual 2115/16

Forecast Outrun

2116/17

Estimate 2117/18

GoG Recurrent Revenue £M

388

455

490

554

573

528

653

615

GoG Recurrent Expenditure £M

352

420

452

493

518

539

578

589

% Cover Revenue over expenditure £M

10.23%

8.33%

8.41%

12.37%

10.62%

7.96%

12.96%

4.41%

local level particularly and must carry on.

It is encouraging to see Gibraltar leading the pack in the brave new world of Distributed Ledger Technology (DLT) and Blockchain, with legislation for a regulated environment already in place. This sector remains very much in the nascent stage of its development and is thus high risk.

Nevertheless, provided the government can work with regulators and market operators to create a reliable operating environment this should generate confidence among industry players and help Gibraltar to become a lead jurisdiction.

Closer to more domestic issues, this Chamber has long been concerned with Government’s recurrent expenditure. In this era of uncertainty, the need to control expenditure is ever more pressing. Sir Joe Bossano has raised the need for financial prudence in Parliament. This is to be applauded, as is Minister Neil Costa’s aim to control GHA expenditure. Hopefully, these good intentions will translate into actual savings going forward.

Figure 2 and Table 3 above summarise the recurrent revenue and recurrent expenditure position over the last few years, updated by the 2017/18 Estimates of Revenue and Expenditure, which are the latest available. The estimate for 2017/18 show both a reduction in recurrent revenue and an increase in expenditure in comparison to the forecast outturn for 2016/17. The cover of revenue over expenditure for 2017/18, at 4.41%, is the lowest over the period in question. The eventual outcome will not be known until the 2018 budget session but the numbers underline the need for caution going forward.

Were the UK (and Gibraltar) to suffer a ‘hard’ Brexit, the prospect of an economic downturn and economic shrinkage, with its negative consequence on Government revenue, cannot and should not be discarded.

Finally, there is the issue of Government debt, which has also concerned the Chamber for many years. The overriding issue is what really constitutes debt. If we solely consider what is called Public Debt in the estimates, then the estimated figure for end of March 2018, at £440 million is entirely acceptable for an economy of £1.9 billion. The Chamber has no concerns about this. The concern remains as per last year’s Report (and others previous), in that it is the total contingent liabilities that Government is potentially exposed to, including “Public Debt”, that need to be taken into account. These include the investments made by the Gibraltar Savings Bank. Should these go wrong, the ultimate liability is the Government’s and, therefore, the taxpayer’s. Also, the debt liabilities of Government owned companies raise similar concerns. The £300 million mortgage taken out on the majority of Government’s post war rental housing stock additionally needs to be factored in. The use of these funds is not in the public domain. The PFI funding for the Hospital raised by the previous administration also would need to be included. There may well be other liabilities that have been assumed. How, for example, is the £52 million for the new comprehensive schools being funded?

Whatever the total level of actual and potential financial liability is, and it is certainly higher than “Public Debt”, prudent banking practice would dictate that the total of these liabilities would need to be factored in and held up against the sources of income that will be looked to when repayment is due. In these uncertain times, certainty about our public finances will stand us in good stead in the years ahead.

This Administration, like the one before, has evolved a system of legal, off-balance sheet loans that have resulted in government’s accounts becoming somewhat opaque.

12 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

This is in stark contrast to the repeated pledges by the GSLP/Liberal administration to bring improved transparency. Policy and pledges are two sides of the same coin and must remain connected if the currency of political credibility is to retain its value.

The Chamber would support an independent assessment from outside Government on the state of government indebtedness. This could be calculated by reference to the following metrics • Direct debt as included on the balance sheet or in other words, directly attributable to the government by virtue of title where it is their name on the debt contract; • Indirect debt Debt which is held ‘off balance sheet’ (typically leasing or PFI-related projects or any other debt where title is not vested directly in the name of the government or where the government indirectly benefits from the debt exposure); • Contingent liability debt that may happen subject to certain events such as where a third party (such as a government controlledcompany) defaults on a debt and the government is ultimately liable; • Collateralised debt raising debt through the use of assets by a connected entity, where default would entail repayment from the owner of the assets and therefore affect the strength of the title holder’s balance sheet; • Connected party liabilities where the wider liabilities of directors of companies are included. The repayment responsibility emanates from the same income.

Conclusion The outlook for the Gibraltar economy is shrouded in uncertainty about what Brexit will bring about once it actually happens. All will depend on what the UK, together with Gibraltar’s contribution, will be able to negotiate in a difficult environment with the EU, with Spain holding some trump cards. Some would say Brexit opens up a whole new set of possibilities while others fear it will lead to some sort of economic disaster.

The likely answer will be somewhere in between, depending on how ‘hard’ Brexit will actually be. If Britain walks away without a deal, as Theresa May has threatened to do, it is difficult to see many positives to this, especially in the short to medium term. In previous economic shocks, Gibraltar has always shown it has the entrepreneurial skill set to come back up and prosper. This skill set is likely to be tested once more in the next few years.

ENVIRONMENT

The big change during the year was the increased momentum for phasing out the ubiquitous single use plastic bags. A small but significant step for many of Gibraltar’s retailers

A number of Gibraltar’s larger retailers had been planning this move for many months and had introduced paper or biodegradable alternatives. These are a more expensive alternative but are better for the environment in the long run. The difficulty for others though is that they are contractually bound by their franchise agreements to use the bags, many of which are plastic, sent by their principals in the UK. Nevertheless, the movement is in the right direction.

As we have commented in previous reports, environmental initiatives which make progress tended to be led by small groups of committed individuals. The Nautilus Project is one such champion and the founders have been both creative and engaging in equal measure by visiting local schools and educating future generations about the importance

of looking after the environment in which we live. This is particularly impressive when one considers that they give their time, energy and advice for free. They have even greater plans for the future to reduce all plastic, not just bags but other recepticles as well. The Project is a great example of what can be achieved in a relatively short period Nevertheless, protecting the environment is not just about reducing plastic use and recycling. Two other threats which remain considerable are noise and air pollution.

Noise levels in Gibraltar have increased enormously in recent years.

Most data collected and published by the government’s Environmental Agency relates to traffic noise along the main thoroughfares. But significant noise is caused by all the construction sites

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 13

ENVIRONMENT

It seems as though every concession possible is made to the developers but little considerationis given to the citizens, businesses and residents who are all forced to put up with this incessant noise in the name of progress.. Perhaps if the members who make up the Planning Committee had to endure this non-stop noise for months or sometimes years on end on their own doorstep or next to their own offices, they would impose rather harsher conditions on the contractors and ensure that these conditions were upheld. Similarly, there does not appear to be an easily accessible complaints procedure to notify or complain to the authorities about breaches of noise limits, vibrations or dust pollution.

The Environmental Agency has an informative website but no clear method of dealing with complaints for the public.

This should be relatively easy to address.

In 2015 there were 97.2 licensed road vehicles per 100 persons up from 80.1 vehicles/100 persons in 2012. Gibraltar has one of the highest levels of car ownership per capita in the world. In all likelihood air pollution has increased over the same period, particularly if one includes the growth in vehicles entering Gibraltar during the year. And this increase in pollution from exhaust fumes has become very noticeable. What is not so noticeable is any government attempt to reduce it, particularly to discourage car use. The reduction in carbon emissions from power generation are commendable in so far as they go but real progress is still needed to reduce exhaust emissions.

In stark contrast, governments around the world are setting out bold plans to reduce car use: Norway and the Netherlands both plan to ban petrol cars completely by 2025, just seven years away; France has a less onerous but still ambitious target to ban sales of petrol and diesel cars by 2040. We are a tiny

economy by comparison, but there is no plan at all, or even the hint of a target to reduce car use. Why is this so when we all know that drastically cutting car use would improve the level of air quality significantly?

but as the Chamber has said before if we are serious about achieving the twin goals of reducing traffic congestion and improving air quality around town this is the only option.

If ever there was an issue which affects every member of the population and where Gibraltar could be a showcase to the world, reducing car use significantly would be it. Granted, it would take a lot more than political will. Everyone would need to get behind such a campaign,

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14 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

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around Gibraltar. When building permits are granted for a new development, certain conditions are usually imposed by the Town Planner. Nevertheless, on any day of the week, including weekends and public holidays, the noise of jack hammers, grinders, breakers, masonry saws and drills echoes across Gibraltar, often far exceeding the 75 decibel guideline limit set by the government.

But nothing is done.

WHOLESALE

Brexit, the topic which has predominantly been the matter of conversation during 2017 has brought an element of uncertainty and additional pressure to the business community as a whole. The wholesale sector being no exception. With logistical concerns like the importation of goods through the land frontier to access into the jurisdiction for the workforce who live in Spain, the route of the problem boils down to the fluidity at the border post Brexit.

To date, Gibraltar has flourished as an economy in many other sectors regardless of Brexit. In contrast to other sectors, the wholesale sector has reported flat growth year on year. Under the current circumstances one should be content with these results. Yet when we consider the continuous increases in costs and additional pressure on margins compounded by the pressure of the exchange rates, 2017 has been a challenging year. Fluctuations in the exchange rate with the Euro (upto 15%) has put an extra burden on margins.

Wholesalers have not been able to increase their pricing at the same rate on purchases carried out in the Eurozone.

This lack of stability in the exchange rate makes it very difficult to forecast pricing for the year ahead.

Day to day complexities whilst carrying out deliveries throughout Gibraltar continue to be ongoing problems. Traffic circulation, loading bay issues and Main Street permits are constant problems highlighted to us by wholesalers. The completion of the new airport tunnel will be an essential piece to the improvement of traffic circulation in Gibraltar. The Chamber looks forward to seeing this being completed and opened as soon as possible. The policing of loading bays is an area which still needs improvement.

Unauthorised vehicles continue to make use of these bays for their own personal use to the detriment of legitimate users.

The sector has faced additional difficulties throughout the year,many of

which are familiar to Chamber members but have yet to be properly addressed.

Local traders who go to Spain on a daily basis to purchase their provisions and then bypass all standards and regulations when coming into Gibraltar appears to be on the increase. As these imports are not declared no statistics are available. The policing of this contraband is essential not least for public health: It is not unknown for perishable or frozen items to be imported in the boot of a car and not adhering to health standards.

As you will read in other parts of this report, with Brexit looming local businesses have been busy with their own individual contingency plans. As we commented last year, the big unknown remains the Frontier and this continues to be a source of concern for local importers and distributors. The Chamber would like to have a better indication of the Government’s contingency plans along with an indicative timescale of any adjustments which may need to be made.

Unregistered Spanish traders who come to ply their wares in Gibraltar continue to be a cause of concern. These businesses arrange for their vans to come into Gibraltar to carry out multiple deliveries in town to the detriment of local wholesalers.

New logistical routes might mean higher costs and these need to be budgeted for with sufficient lead times. If these routes need to be changed, our current Port infrastructure is not currently capable of handling the volumes that come through the Land frontier. This is a matter of concern for many of our members and it would be useful for them to know that workable alternatives are in place should the need arise.

A related matter is the increase in virtual businesses which undergo the local licensing process but in reality are just token setups as their main structures remain in Spain. Competing with these ventures on price is virtually impossible for local companies and in the medium to long run awarding contracts to the lowest bid or cheapest price weakens the local commercial infrastructure. It is local companies which create the sustainable wealth for the economy as their employees pay the taxes and social insurance to the government. It is local businesses which pay local rents, rates and utilities and this is then circulated within the economy, not siphoned off elsewhere.

The wholesale sector has seen and lived through numerous challenges in the past. The sector has risen to those challenges when needed and adapted accordingly to overcome such hurdles.

The challenges ahead are unlikely to be any different and as it has done previously, the sector will work together to meet them. Whilst businesses in other sectors could potentially pack their bags and leave, the wholesale sector is here to stay and deal with the uncertain times ahead.

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 15

RETAIL

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RETAIL Looking back at previous Chamber annual reports the usual sores remain: high rents and rates, fluctuating exchange rates, the relentless rise in online shopping, unfair competition as well as locals going to Spain for their shopping. And yet the majority of local retailers continue to hang in there year after year.

Gibraltar’s retail sector has weathered all of the above challenges for years largely unaided.

They manage to deal with these challenges using a combination of instant availability, price and service. A concern for local traders though it that whilst they invest in refurbishing their premises or bring in new product lines the appearance of the general street scene is tired and in need of an upgrade.

The areas of Main Street and Casemates require urgent attention to address the lack of cleanliness and rather shabby appearance. Casemates used to be Gibraltar’s retail centrepiece for all visitors where locals and tourists alike could meet, eat or share a drink.

Unfortunately, in the last few years it has taken on a dishevelled appearance and looks distinctly down at heel.

Various establishments on the Square look little better than a breakers yard with broken chairs, rusting shopping trolleys, cracked flower pots and torn awnings all stacked up against their premises. Cigarette butts litter the ground and then get swept into the drains which overflow during the winter rains. None of this creates a

positve image nor does it make people want to stay or shop. Many prefer to go to Spain instead.

In 2016 the Government gave the green light to the opening of a Duty Free Shop at the Cruise terminal. This was originally mooted when the Cruise Terminal was built in the 1990s, but following representations made by the Chamber at the time the idea was dropped. Following on from a petition signed by many of Gibraltar’s retailers in 2016, the Chamber has been pressing the Government to close down the Duty Free Shop at the Cruise terminal as this competes unfairly with many traders in town and, more importantly, acts as a disincentive for cruise passengers to visit the town centre. The Government accepted the Chamber’s arguments by promising to close down the shop by the beginning of the next cruise season in April 2017. However the Government has now reneged on that promise.

The delay in awarding the new cleaning contract for public areas has not helped either and the oil stains and chewing gum are an all too frequent blemish on the pavements around town.

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RETAIL Restaurants with terraces should be compelled to stack their tables and chairs so that terraces can be properly cleaned at least once a month.

Collection of refuse from shops and restaurants continues to be unsatisfactory and the Chamber has met with the Department of the Environment to try and resolve this, but as yet without success. Additional covered bin storage is needed in or near parts of Main Street but these have not yet been commissioned. Apart from this, retailers and their staff will need reminding of when and where they can deposit rubbish. The current free-forall is not working.

The introduction of restricted delivery times to premises on Main Street was hastily introduced on the back of terror attacks in the UK. However, even now it is not unusual to see a commercial vehicle travelling unchallenged along Main Street outside these hours. As with cars parked illegally in loading bays, greater enforcement is needed to address this.

Soon after the new delivery times were introduced, concrete blocks were placed at regular intervals along Main Street. The Chamber understands the rationale behind these, although many members regard the blocks as an eyesore. Surely more appealing but equally effective alternatives must be available at a reasonable cost.

On the subject of security, during the year the Chamber lobbied successfully for increased Police visibility in the town centre. Their presence reassures the public on the one hand and acts as a deterrent on the other. It also means that officers are on hand to deal with any incident in the middle of town should they occur. One other point which should not be overlooked is that the sight of a British Bobby walking along Main Street is one of Gibraltar’s many unique attractions for tourists, often providing a selfie opportunity.

The sense of welcome and friendliness which these interactions provide for visitors is of immense value to the overall tourist experience. The Chamber welcomes the more visible Police presence and hopes it continues.

With the support of a number of retail members, matched by the government, the Chamber ran a short advertising campaign in the lead up to Christmas in an attempt to attract more shoppers from along the coast to come and do their shopping in Gibraltar. The extent of the campaign was limited by the budget and time, but it was considered by those who participated to have been a worthwhile exercise. The social media element of the campaign generated considerable interest.

The Chamber will consider repeating the campaign again this year but with a longer lead time and hopefully a greater budget. The pre-Christmas

18 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

season is a critical sales period for retailers and we need to maximise every opportunity to bring customers into Gibraltar. The events which are laid on by the government to support the shopping season are welcome in helping to create a more fulfilling shopping experience. Collectively by holding co-ordinated events in the main selling seasons Gibraltar’s retail sector will be able to hold its own against twin challenges of rising fixed costs and the internet.

During the year the Chamber submitted a proposal to government to establish an independent rent tribunal for commercial tenants. One of the recurring challenges for retail tenants over the years has been the upwards-only increase in rents based on either arbitrary or rather opaque criteria. This has largely benefitted commercial landlords at the expense of tenants who have had to absorb regular rent increases, often above the rate of inflation. This has a direct effect on the increase in rates as well so traders have invariably have had to deal with rising costs whilst sales growth has remained stagnant and margins get squeezed. Having an independent tribunal would help to ensure greater balance between the interests of landlord and tenant alike and the Chamber hopes that this initiative makes progress during the coming months.

FINANCE Last year we said that ‘post-Brexit blues are dissipating and opportunities are opening up as we start to understand what continued access to the UK market place will deliver’. Twelve months on we have a degree of certainty on the way ahead, but not much. Nevertheless, the pioneers in the sector have been very active in going out to attract new business to the Rock.

Brexit will affect this sector arguably more than any other, albeit in ways that may at times be counter-intuitive. The challenge will be to identify and exploit the opportunities which exist among the many risks ahead.

With government at the forefront there has been a greater focus on the strategic intent to allow access to the UK financial services market, but precious little detail. This will come after a period of settlement. Doubtless we should look forward to (and insist) on absolute equivalence in regulation and standards.

This will deliver greater reputational kudos and added opportunity to exploit.

We believe that, generally, the momentum in financial services will continue in areas such as Insurance, but Funds and Retail Banking will continue to tighten at the local level. Fintech has become the new mantra and there has been considerable interest internationally in Gibraltar’s new Distributed Ledger Technology (DLT) or Blockchain legislation which was introduced towards the end of the year. The hope is that this will become a sigificant source of new business for

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FINANCE

Gibraltar just as online gaming did 20 years ago.

As with any new and fast growing market there are risks and many uncertainties. The introduction of the new DLT legislation will remove some of that uncertainty and also show that Gibraltar once again can move at speed whilst maintaining a robust regulatory environment which quality operators want to be part of. The government’s leadership in this new technological revolution has been effective in both raising international awareness for the jurisdiction as well as attracting a substantial number of start ups.

Government has also woken up to the need for the Civil Service product to be 21st century with a project established to review and re-engineer the structure which is currently failing in so many ways to provide even a modicum of acceptable service to the client.

During the year we saw further movement in the local banking sector: a couple of UK deposit takers have gone as their head offices sought to retrench.

Banque Jacob Safra Sarasin fledged completely after having absorbed most of the local operations of Credit Suisse.

Moneycorp Bank, a relative newcomer has its own fintech DNA and is blossoming. Gibraltar International Bank continues to take up the slack left by the departing institutions whilst NatWest consolidates its position. Jyske Bank continues to grow having incorporated its Swiss operations. Gibraltar is now the bank’s only branch outside its home market.

Other fintech entities are still embryonic and have yet to be formally launched, but the fact that they have chosen Gibraltar as a base is indicative of how highly Gibraltar’s financial services sector is regarded. Other larger, more expensive finance centres cannot move as quickly.

“Fintech has become the new mantra and there has been considerable interest internationally in Gibraltar’s new Distributed Ledger Technology (DLT) or Blockchain legislation which was introduced towards the end of the year”

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 21

FINANCE

Happily, other parts of the infrastructure are more than following the curve with ample office space having been created and even more due to come on stream in the next 2 years (see Property Section of this report). Similarly, there has been continued investment in telecoms, a new power station with considerable additional generating capacity and at least three new hotels in the pipeline.

This together with a good increase in legal expertise in this nascent area of the economy, bode well for the creation of the right formula for start-ups of this nature to prosper and grow.

As usual, there has been the increased weight of regulation which the sector has had to contend with and MIFID is at the forefront, although GDPR runs a close second. Preparations for the new MoneyVal assessment have been ongoing in the background for much of 2017. This is the organisation that will review the Jurisdiction and apply the FATF standards in AML, with the final assessment in early 2018 being something we must successfully negotiate. A positive outcome will add to Gibraltar’s reputation and hopefully attract more business as the Brexit deadline looms.

However, not all local service providers have been keen to welcome this new line of business. Some players refuse to play their part which is reminiscent of what we saw in the early days of the online gaming sector: the retail bank and card provider behemoths refused to even follow the curve at a safe distance behind. Their lack of support constricts the flow of new business and causes unwelcome delays. These delays usually end up being exploited by those that are prepared to take calculated risks..thus the West was won!

Turicum Bank, historically a low profile niche player on the local scene, is now playing a leading role in DLT businesses but others have adopted a more cautious approach and have taken the decision that they will not operate or accept business from companies in this sector.

As with all business, without modern banking facilities, companies cannot get established and develop. In time, the traditional operators will come to understand this business more and offer a full range of services to its members.

22 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

Brexit will nonetheless be awaited with bated breath. The border is the be all and end all of this discussion. We will doubtless survive most that Brexit will throw at us and hope in particular for the continued growth in the UK/ City of London economy on which so much of Gibraltar’s financial services sector depends. However, there will be very little we can do if the daily flow of personnel across the frontier is restricted, in particular for those employers in the online gaming sector. Meanwhile, we must keep an eye out for the competition that would be happy to pick us off, just as Paris and Frankfurt are doing against the City of London. We should also consider the benefits of alliances with some of the smaller jurisdictions where a combined approach could prove to be a winning formula.

PORT & SHIPPING

Volume versus profitable business across the board with the advent of Brexit Year

Cruise

Cargo

Bunkers

Repairs

Vessels

Off

Other

Limits

Vessels on

Total

East side

No Calls

Gross Tonnage

2008

222

253

5965

154

2006

301

9749

288,409,608

2009

238

193

6712

132

1460

543

10042

276,370,000

2010

175

178

6724

128

1365

505

11134

258,148,181

2011

187

164

6181

117

1492

597

10350

275,168,505

2012

173

161

6362

127

1259

444

9581

277,483,060

2013

180

164

5988

115

1175

248

9140

253,843,589

2014

180

20

5475

48

1181

1414

194

8512

238,409,636

2015

204

7

5571

55

1136

1593

188

8754

243,440,385

2016

224

3

5720

63

1202

1563

226

9001

247,329,293

2017

235

4

6298

57

1071

1668

131

9464

275,347,179

A minor observation on the above chart, cargo vessels show a substantial decline in the last couple of years, however on investigating with involved parties we have found out that numbers are in fact at least ten times greater, however they are for some reason been classified under the “Other� column. Authorities have been duly informed and shall be looking into the matter.

The general figures for the year, as can be observed per the above statistics, seemingly augur well, but are they a true reflection of profitability for local businesses and even the Port Authority itself? A lot of hard work goes in by the Port Authority and Tourist Board personnel, supported by private enterprise, to place Gibraltar on the map and attract business to our port, but who really reaps the benefits?

Cruise ships The expected increase of callers to the port materialised as per our forecast last year. We are all aware that this sector of the shipping business is the one experiencing continuous growth at a global level, with cruise companies building new and larger ships. They seek new destinations that will generate good returns not just on the sale of the cruise and onboard revenue, but also looking for higher yields on sales of shore excursions.

Gibraltar has been a good transit port for cruise operators for many years, providing them with VAT free incentives by merely having their ships calling at Gibraltar for a few hours. Additional revenue is generated by them on sales of shore excursions.

However, with so many cruise passengers now becoming repeat visitors to Gibraltar, most having previously taken a Rock Tour, we find ourselves with a need to revitalise our shore excursions product and perhaps even look into programmes further afield. Indeed the cruise operators are asking for this. We have to take into account that there

are other ports in the region preparing themselves to compete for this business, who could provide operators with a compelling offer as our own, but with the additional incentives. Additional competition from other destinations will force Gibraltar to raise its game.

Cruise calls for 2018 seem to be very much in line with what we have seen in 2017. Hopefully during the course of the year we might learn about future plans for our Cruise Liner Terminal, the muchawaited implementation of the Transport Plan and the closure of the Duty-Free shop at the current Terminal. The traders in town would all welcome this.

Bunkering and storage tanks Bunker volumes delivered increased by 10% over the previous year and we have maintained the half a million-ton margin over our direct competitors.

Last year there were plans to construct sizeable land-based bunker storage facilities but these have now been revised. World Fuels (through their local arm, Gib Oil) has increased the size of its proposed expansion project at the Western Arm, North Mole.

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 23

PORT & SHIPPING

Some in the industry are eager for Gibraltar to become self-sufficient in the land-based bunker storage. With the added uncertainties which Brexit might bring, many were hopeful that the project of the sizeable tanks might have gone ahead.

The reason is that put simply, bunkering is what really brings in the bulk of ship calls to our port and provides substantial additional business to many companies, as explained in previous Annual Reports.

Whilst we are aware that the direct revenue which bunkering raises for government is not proportional to the volumes managed, we believe there could be room to introduce a small levy over the quantities delivered and retain the port’s competitiveness. Such a levy could be offset by the physical suppliers through savings on barging costs from not having to bring fuel from other ports further away.

Crew changes

Ship Agents suffering most

The demise of Monarch Airlines had a very adverse and immediate impact on the attractiveness of Gibraltar as a port to embark and disembark crews. A study carried out shows that there was a 37% decrease in Visa requiring crewmembers arriving/departing via Gibraltar airport during the months of October, November and December when compared with the same months during 2015 and 2016.

The role of the ship agent, as described by the Federation of National Associations of Ship Brokers and Agents or FONASBA for short, is to act as the local representative of the principal.

They provide local knowledge and expertise as enshrined by international maritime conventions and are primarily act as the servant of the master and owners of the vessel, the “principal”.

In practice however, the agent can act for any of the parties involved (e.g. ship owner, charterer, cargo owner etc.. ) in the voyage and in any capacity as agreed between the agent and his principal. In order to operate effectively, the port agent is required to be fully conversant with the safety, commercial and statutory requirements and regulations applicable to the port and ensure that the vessel complies fully in this regard.

Under normal circumstances these crew members would not travel via Monarch airlines (as given visa/transit requirements they would need to travel via Heathrow airport, which route is serviced by British Airways), due to the reduced availability of seats available on the Heathrow route, it has become very difficult and excessively expensive for their onward travel to/from Gibraltar.

This, coupled with the lack of availability of budget hotels, is having a very adverse effect on business which Gibraltar’s port has traditionally offered.

24 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

The ship agent is usually central to the ship’s activities at every port, yet for a number of reasons the role of the ship agent in Gibraltar seems to be diminishing at an alarming rate. This is for a number of reasons: bunker suppliers doubling up as agents, non-agents undertaking services that should be coordinated solely by agents, hub agency networks

PORT & SHIPPING

dictating unfair terms. There has been an increase in the number of licences (23 at the last count) with several applications in the offing all vying for a reduced level of business. There have also been numerous cases of ship operators playing agents against each other to achieve reduced rates. With squeezed margins income has fallen and this only serves those companies trying to cut overheads e.g. staff numbers, investment in equipment and training.

Over the long term this will lead to the continued deterioration and decline of Gibraltar as a port.

Viable businesses in level playing field It is obvious that the well-established bunker suppliers in Gibraltar continue to enjoy a profitable business. However, are other members of the shipping community including the Port Authority fairing as well. Over and above the trials of the Ship Agents, it appears that price wars are affecting other services in the Port: underwater cleaning, launch service providers, shipchandlers and surveyors are all being squeezed as local firms undercut each other to win business.

A greater problem though is where a local entity is unable to compete with unlicensed companies coming across

the frontier. These traders operate with lower overheads and provide services or supplies to vessels calling at Gibraltar without the need to have any local infrastructure in place. Gibraltar provides the means, but they take the money.

These are matters which need to be addressed if we do not want to become totally dependent on outsiders for the provision of certain services to shipping.

All this is happening at a time with added uncertainty of Brexit.

In the next few years Gibraltar will need the energy and vigour of all of its entrepreneurs to deal with what lies ahead.

In recent months there have been meetings, as well as rumours, about possible contingency planning if frontier fluidity becomes problematic postBrexit, but nothing clear has been proposed. Logistics take time to get right and although Gibraltar has shown its flexibility and dynamism in the past, local businesses will need time to adjust to any new arrangements which need to be put in place.

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 25

TOURISM

A progressive sector in part, yet stagnant in others The two ingredients central to significantly improving the Gibraltar tourist product – taxis and the evergreen hop-on, hop-off system so popular in every city in the world are still missing from Gibraltar’s tourist offering.

It was way back in 2011 that the incoming new government declared in their manifesto the transformation of the taxi city service with the introduction of dedicated London style black cabs to solve the problem. Yet nearly 7 years on, the taxi service and the critical airport route in particular, remains the focus of complaints from visitors and locals alike.

As for the hop-on, hop-off system, this would be a transformational solution to the way tourists can experience all that Gibraltar has to offer in an informed, educational, multi-lingual and convenient manner.

It would also, in the Chamber’s view, break the backbone of the transport problem in the context of visitors with the added bonus of an increase in per capita tourist spending. Of course, such a solution requires imagination, forward thinking and embracing by all stakeholders currently involved in the tourism sector but the lack of progress in delivering such a solution means Gibraltar remains backward on this issue whilst the rest of the world moves on.

With the inability for foreign private vehicles to enter the nature reserve as well as the limited parking available and very poor signage in directing tourists around the Rock, transport therefore stands out as a major issue which simply has not been addressed.

Product Average stays in Gibraltar appear to remain around the 3-4 day mark and the reality is that this is what should be expected for a destination of our type.

The flurry of announcements of hotels scheduled to open is a real positive for the industry. For a number of years the Chamber has advocated that branded hotels would enhance the product and marketing capability of the Rock to new visitors so it is very positive that the Holiday Inn and IHG Indigo have demonstrated their commitment to Gibraltar. The Chamber is confident they will be successful as has the Sunborn in bringing a new dynamic to visitor accommodation and which now is probably the most popular hotel on the rock. Perhaps a more family oriented hotel remains the missing piece to this particular jigsaw. Nevertheless these new entrants will add a further 500 beds to the local hotel stock.

The Nature Reserve, the jewel in the crown, has continued to receive investment and improvement. Much more needs to be done and this is not the fault of the present administration but a case of catch up from decades of neglect. That said, so much more could be done both in signage, enhanced visitor facilities and a hop on hop off extended to the Upper Rock. Again

26 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

the government needs to be bold and committed to developing a world class experience. The road access via Lathbury is Third World and staff need to be trained to become ambassadors.

Areas such as Princess Caroline’s Battery appear to be cordoned off indefinitely and poor signage means a lot is missed.

Perhaps partial or complete privatisation with a commitment to investment is part of the answer. Until very recently visitor numbers to the Nature Reserve have stagnated around 750,000 which is a damning statistic given the boast that visitor numbers to Gibraltar are in the several millions even after stripping out the daily commuters from Spain.

The cruise liner industry seems stable albeit not developing as well as it might when put in to context with competing ports in Andalucia/Cadiz. Medcruise.com states that Malaga port is due to receive 177,000 passengers in spring alone whilst Cadiz receives more passengers annually than Gibraltar. We also need to assess how many passengers are actually disembarking and opting for an onshore experience.

Many improvements have been made to our beaches over the last few years in particular the magnificent rejuvenation of Sandy Bay. But are our beaches tourist friendly? Can we do more to encourage private enterprise to set up businesses

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TOURISM on our beaches – traditional chiringuitostyle eateries, amenities and rental of loungers and aquatic sports. To provide such opportunities, a long term chance of survival perhaps incentives, grants or tax breaks would be necessary.

Despite a lot of noise, our old town remains a mystery even though visitors are attracted to the charm and beauty of historic places and give a sense of the true character of the city and its people.

We all travel and in any city you visit in Europe one of the highlights is always discovering the “casco antiguo” or historic parts. Yet, whilst new builds are taking place, little of this is renovation, but demolition and replacing old with new. We need to encourage more restoration to reveal the charm of the old city and bring it back to life.

Three years ago the Chamber submitted a paper to government offering its ideas for tourism and a specific section for the old town. The paper called for a pilot project to beautify and enhance a section of Governors Street, working with landlords and tenants. This project would create a footprint for all development and renovation within the old town including signage, colour coding for buildings and soforth. In addition, incentives can then also be offered for innovative businesses to branch in to the side streets thereby attracting visitors.

Not rocket science – a successful model all over Europe.

Hotel sector The loss of the Monarch airlink for Gibraltar hit many local hotels hard as well as other related businesses.

Despite this the corporate segment of hotel accommodation has held up well

although the more price sensitive leisure segment has suffered accordingly. The 38 per cent reduction in available flights provided by Monarch also led to a hike in prices on certain routes to and from the UK. The Chamber is sure that the government is doing everything possible to replace these lost routes and indeed to increase connectivity to other regional hubs in the UK. Shrinkage of the leisure segment of the hotel sector is of some concern as it directly affects weekend occupancy levels. There remains considerable unsold capacity among the existing hotels and in the short to medium term this is likely to deteriorate further with the opening of the Holiday Inn Express which will add a further 120 rooms to the jurisdiction. There are at least two additional hotels in the pipeline which together with the Holiday Inn will add a total of 500 beds to the existing stock.

Just as the sector saw with the launch of the Sunborn, it is likely to take time for the market to adjust to this increase in supply.

Marketing and Brand missed opportunities The revamped visitgibraltar.gi website is much improved, professional, and interesting. However, it lacks one key element – you can’t book anything!

Surely you want to grab your prospective client at the first opportunity.

Another example was on Good Friday this year. The tiny tourist information kiosk at the frontier was closed as hundreds of visitors were coming in to explore Gibraltar on a public holiday. This is not taking tourism seriously. There isn’t even a tourism information centre or kiosk on

the length and breadth of Main Street but relegated to a side street having given up a much more suitable location in Casemates. What sort of message does this send to visitors?

The Chamber has suggested the creation of a pupose-built visitor centre immediately after crossing the border.

A hub where you can book tours, even cinema tickets, obtain information, discuss options with information officers, start your hop-on, hop-off experience, get a refreshment or buy a souvenir. This would be the start of Gibraltar’s visitor experience and by creating something user-friendly and welcoming would lead to higher sales revenues.

Signage throughout Gibraltar still requires a major overhaul. Directional posts for pedestrians, like those in London, would be a significant improvement. Also, the addition of clearly visible parking signs at main junctions which are updated with available spaces in real time would greatly assist visitors coming into Gibraltar by car.

Event-led tourism, embraced by this government, has proven that with vision and commitment significant success can be achieved. The new sporting facilities will create further opportunities and are an example of how developing the infrastructure can be beneficial to the local population whilst enhancing opportunities to grow our tourist offering.

The future The Chamber has long advocated that the two tenets to success for the tourism sector are to have a long term strategy and ambition. Whilst changes and improvements are being made, it is unclear what the long term plan is. The Tourism Advisory Council is all but redundant and the Chamber, as other representative bodies, supported government’s request to submit ideas for a long term strategy some three years ago. To date, nothing has come of that exercise. The Chamber remains of the belief that, particularly in light of Brexit and other challenges, tourism remains an important opportunity worthy of greater focus and commitment – a sector promising employment growth and significant revenue upside.

With world heritage status, a unique nature reserve, spectacular views and a charming dynamic town, surely all of the natural ingredients are there to build a product to be proud of.

28 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

PROPERTY

When Nothing is Sure…

Everything is Possible!

It is now close to two years since the Brexit referendum, and at first sight, nothing much seems to have changed on the political landscape since that historic day: our ties with Britain are as robust as ever, whilst the UK and EU struggle to agree on most things.

A year after Theresa May triggered Article 50, which triggered Britain’s two year withdrawal period from the EU, we have learnt that the politicians themselves around Europe do not know where the process will lead.

So with a year to go before Britain leaves the EU the road map ahead is still no clearer than it was prior to June 2016, yet Gibraltar’s property market has continued to grow significantly, partly because of Britain’s decision to leave the EU. Residential Sales Market The number of construction cranes dotted around Gibraltar’s sky-line in 2017 and 2018 demonstrates the continued confidence in the market and follows the pattern of previous years with nearly all new off-plan developments being sold within days of their official launch.

Whilst 2018 will see a number of these high-end developments being completed, they, in themselves will be insufficient to satisfy demand for the large part and the residential sales market is expected to continue showing strong rates of capital growth in the coming year in the region of 5%.

The announcement by the Government of Gibraltar towards the end of 2017 that 116 former MOD properties in the South District would be released for sale this year was also welcome news.

Purchasers for these properties need to have been resident on the Rock for 10 years, and Gibraltar is already seeing a slow trickle of fresh housing stock come onto the market as current home-owners seek to move up the property ladder.

The government also announced the tender process for a significant number of development plots towards the latter part of 2017 and the next 24 months will see a number of mixed-use projects coming online.

One prevalent theme amongst many new developments in recent years and especially in 2017/18 has been the construction and conversion to a high number of studios aimed at crossfrontier workers and those classified as “key workers”.

The argument put forward to support the construction of studio apartments en-masse is that Gibraltar is and will be in need of affordable housing for cross-frontier workers (who number circa 13,000). There is no doubt that

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PROPERTY

a substantial number of these workers would opt to live in Gibraltar rather than cross from Spain each day if they could afford to, but one must wonder how many of those 13,000 workers would choose or be able to accommodate their families into these studios?

That question has been answered in part by the fact that many of the studios sold off-plan have been bought by buy-to let investors and speculators seeking to sell-on the properties for a profit prior to completion, and not to the cross-frontier workers themselves.

Whilst confidence from speculators and investors in the local market is a good signal, the fact that most studios were purchased by investors calls into question whether the forecast demand for studio accommodation from crossfrontier workers was correct – only time will tell. Nevertheless, it is clear that buyto-let investors of studio properties will be in a more competitive marketplace (with corresponding market pressures) than buy-to-let investors of 1, 2 and 3 bedroom units in the forthcoming years.

Residential Lettings Market The historic demand for rental properties continued unabated during the year and was further fuelled by the Brexit vote – which has continued to drive international clients to Gibraltar’s shores.

This was evidenced by the on-going scarcity of available rental properties and resulted in some areas of the rental market within the entry-level to mid sectors achieving growth rates in excess of 20% year on year.

More moderate growth rates of between 5-10% were evident for rental properties at the upper-end of the spectrum.

On the back of such a high growth in rental yields it is understandable why investors have opted to purchase studio apartments, and likewise, why property developers have built them, but there is a real potential for the studio sector to see a slow-down in yields due to oversupply in the short to mid-term, and factors such as the size of the habitable area, specification and amenities will be prime considerations for many prospective tenants.

The average growth rate within the residential lettings sector is expected to

be between 5-10% in the next twelve months. Beyond that, with the added complexities of the Brexit discussions, the outlook is more uncertain.

Commercial Market The retail and office sectors are a good yardstick by which to judge business confidence in the local economy.

The World Trade Center was completed towards the end of 2016 and its 15,000m2 of office accommodation is fully occupied.

The success of the World Trade Center, coupled with the shortage of prime retail units within Gibraltar’s commercial areas are testament to the bullish state of the local economy and supported by the fact that GDP has grown year on year – from £507m in 2002 to £1.9bn in 2017 (up 8.7% from 2016 alone), with a corresponding rise in the population and local employment.

During 2018 an additional 11,000m2 of prime office accommodation are due to be completed in Midtown, and, as was the case with the World Trade Center, it may stall commercial rental prices of older office stock in the town area until the extra capacity is absorbed. The upside is that it will offer some businesses more affordable office premises from which to operate.

The scarce availability of warehousing and storage space in Gibraltar continues to be a growing issue which threatens to curtail the growth of small to medium enterprises that rely on having storage facilities/workshops on the Rock as part of their business operations. This shortage has resulted in prices reaching above and beyond the budgets of many local companies which in turn delays investment and leads to missed opportunities.

The Chamber would welcome initiatives from the government that focus on increasing the availability of warehousing and workshops to redress the imbalance between supply and demand. Similarly, we continue to call on the government and local landlords to adopt the UK methodology of zoning by which retail space is valued, together with the establishment of an alternative dispute resolution service for commercial leases. The Chamber’s proposal to the government to set up an independent rent tribunal is still under consideration by the Minister. It is our hope that this initiative will become more fully formed during the year.

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 31

Independent Auditor’s Report

TO THE MEMBERS OF THE GIBRALTAR CHAMBER OF COMMERCE

DIRECTORS

C Hernandez J Isola M Azopardi F Cassar J Bray G Desoisa G Dyke J Morgan-Kent N Quigley J Risso N Russo M Nicholls M Cartwright J Nicholls A Haynes E Felipes

OFFICE BEARERS Elected 31st May 2017 Elected 31st May 2017 Elected 31st May 2017 Elected 31st May 2017 Resigned 29th November 2017 Resigned 31st May 2017 Resigned 31st May 2017 Resigned 31st May 2017 Resigned 31st May 2017

Report on the Audit of the Financial Statements Opinion We have audited the financial statements of The Gibraltar Chamber of Commerce, which comprise the statement of financial position as at 31 December 2017, and the statement of income and retained earnings and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements: • Give a true and fair view of the state of the Company’s affairs as at 31 December 2017 and of its profit for the year then ended; • Have been properly prepared in accordance with Gibraltar Financial Reporting Standards.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the directors for the financial statements The directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with applicable law in Gibraltar and Gibraltar Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opnion.

Reasonable assurance is a ligh level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

C Hernandez J Isola M Azopardi M Nicholls F Cassar M Cartwright

President Vice President Hon Treasurer Hon Treasurer Hon Secretary Hon Secretary

Elected 30th January 2018 Resigned 29th November 2017 Elected 6th June 2017 Resigned 31st May 2017

HONORARY AUDITORS Baker Tilly Gibraltar Regal House Queensway Gibraltar

REGISTERED OFFICE 2/6 Casemates Square Gibraltar

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.

If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in the internal control that we identify during our audit.

BAKER TILLY GIBRALTAR Registered auditors Regal House Queensway Gibraltar

Date: 8th May 2018

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 33

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of income and retained earnings for the year ended 31 December 2017

2017 2016

£ £

TURNOVER 116,715 112,833 Administrative Expenses

SURPLUS FOR THE YEAR Retained surplus at 1 January

(107,822)

(106,823)

8,893

(6,010)

79,752

73,742

Retained surplus at 31 December 88,645 79,752

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 & Accounts 2017

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of Financial Position at 31 December 2017

2017 2016

Notes £ £

TANGIBLE FIXED ASSETS 5 4,620 6,354

CURRENT ASSETS Debtors 2 11,684 15,401 Cash at bank and in hand 3 84,723 67,484

96,407 82,885

CREDITORS: amounts falling due within one year 4

(12,382)

(9,487)

NET CURRENT ASSETS 84,025 73,398

TOTAL ASSETS LESS CURRENT LIABILITIES 88,645 79,752

RESERVES 88,645 79,752

Approved by the board on 24th April 2018 M Azopardi Honorary Treasurer

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 35

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of cash flows

for the year ended 31 December 2017

Notes 2017 2016 £ £

CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year 8,893 6,010

Depreciation 1,734 1,889 Decrease in debtors 2 3,717 8,205 Increase in creditors 4 2,895 2,777 NET CASH GENERATED FROM OPERATING ACTIVITIES 17,239 18,881

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of tangible fixed assets 5 - (538) NET CASH OULFLOWS FROM INVESTING ACTIVITIES - (538)

NET INCREASE IN CASH AND CASH EQUIVALENTS 3 17,239 18,343 Cash and cash equivalents at the beginning of the year 67,484 49,141

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 84,723 67,484

36 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

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.

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 in 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 subscription income and other income which 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.

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 & Accounts 2017 | 37

THE GIBRALTAR CHAMBER OF COMMERCE

Notes to the Financial Statements for the year ended 31 December 2017 1.

BASIS OF PREPARATION These financial statements have been prepared in accordance with Gibraltar Accounting Standards including Gibraltar Financial Reporting Standard 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

2017 2016

£ £

Subscriptions

Other debtors

Prepayments and accrued income

3,675 5,761 2,248

5,563 9,322 516

11,684

15,401

3.

CASH AT BANK AND IN HAND

2017 2016

£ £

At 1 January

Net cash inflow

At 31 December

4.

CREDITORS: amounts falling due within one year

Creditors and accruals

PAYE and Social Security

38 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

67,484 17,005

49,141 18,343

84,489

67,484

2017 £

2016 £

11,310 1,072

7,935 1,552

12,382

9,487

THE GIBRALTAR CHAMBER OF COMMERCE

Notes to the Financial Statements for the year ended 31 December 2017 5.

FIXED ASSETS

Leasehold improvements

Furniture and fittings

Office equipment

Air Conditioning

Computer equipment

Total

£ £ £ £ £ £

Cost: At 1 January 2017 Additions during year

35,755 -

11,856 -

26,652 -

7,355 -

12,011 -

93,629 -

At 31 December 2017

35,755

11,856

26,652

7,355

12,011

93,629

Depreciation: At 1 January 2017 Charge for year

35,729 26

11,850 6

23,515 470

4,912 1,047

11,269 185

87,275 1,734

At 31 December 2017

35,755

11,856

23,985

5,959

11,454

89,009

Net book value: At 31 December 2017

-

-

2,667

1,396

557

4,620

Net book value: At 31 December 2016

6.

26

6

3,137

2,443

742

6,354

OTHER FINANCIAL COMMITMENTS At 31 December 2017, the Chamber had annual commitments under non-cancellable operating leases as set out below:

Operating leases on land and buildings which expire: 31 December 2017 31 December 2016 £ £

Within one year

5,906

7,874

The operating lease agreement, which expires on 30th September 2018 will be renewed on maturity.

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 39

THE GIBRALTAR CHAMBER OF COMMERCE

Detailed Profit and Loss Account for the year ended 31 December 2017

TURNOVER

Subscriptions Annual report income ATA Carnets Fees for certificates of origin and invoices Chamber dinners Other publications income Other certificates Office hire Training income

2017 £

2016 £

58,220 7,375 1,750 25,910 9,410 9,050 1,395 2,520 1,085

116,715

58,430 7,900 2,050 21,031 5,785 12,072 1,595 2,950 1,020

112,833

ADMINISTRATION EXPENSES

2017 2016

£ £

Staff remuneration and social insurance 45,204 44,929 Office rent and rates 12,067 12,369 Electricity and water 1,084 792 Bad debt written off 5,342 1,485 Depreciation 1,734 1,889 Advertising 9,699 1,634 Telephone 1,904 2,198 Printing, postage and stationery 6,276 5,047 Miscellaneous expenses - 450 Insurance 435 435 Travel and Entertainment 11,121 12,356 Office cleaning 2,460 2,496 Repairs and maintenance 5,517 9,892 Subscriptions 2,002 571 Accountancy fees 2,900 3,400 Professional fees - 3,510 Training expenses - 600 Bank charges 77 71 Sponsorship - 1,000 Presentations and meetings - 1,467 Equipment hire 232

(107,822) (106,823)

SURPLUS FOR THE YEAR

40 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

8,893

6,010

(All figures relate to 2017 unless otherwise stated) Population:

33,140 (2017)

Total land area:

6.5 sq km

Natural resources:

None

Head of State:

Her Majesty Queen Elizabeth II

Chief Minister:

Hon Fabian Picardo, MP, QC

Legislature:

Parliament (no upper house)

Languages:

English & Spanish

Business hours:

9 am – 5 pm Monday to Friday

Inflation rate:

2.6% per annum (Jan-Dec 2017)

Minimum wage:

£6.45 per hour (£251.55 per week)

Average earnings:

£28,752 (2016)

Registered employed:

27,073 (Oct 2016)

GDP per capita:

£56,612 (2016/17)

lmports:

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

GIBRALTAR: KEY INFORMATION USEFUL WEBLINKS: www.gibraltar.gov.gi www.fsc.gi www.gibraltarport.com www.companieshouse.gi www.gibraltarlaws.gov.gi www.gibyellow.gi

AIRLINES & HOTELS www.ba.com www.easyjet.com www.caletahotel.com www.rockhotelgibraltar.com www.ocallaghanhotels.com/eliott www.sunborngibraltar.com

2000

30000

1500

20000

1000

Employment Growth 2000 - 2015

Corporation Tax

Tax payable

Resident Companies

10%

Utilities Companies

20%

Personal Income Tax (Allowance based system)

Tax payable

The first £4,000 of taxable income

14%

The next £12,000 of taxable income

17%

The remainder of taxable income

39&

Male

0116

0115

0114

0113

0112

0111

Female

0110

Male

2015/16

0109

Gibraltar GDP 2000 - 2016 (£m)

2010/11

0108

2005/06

0107

0

2000/01

0105

0

0106

10000

500

Female

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 Gross Income based system

Tax payable

The first £17,000 of taxable income

16%

The next £8,000 of taxable income

19%

The next £15,000 of taxable income

25%

The next £65,000 of taxable income

28%

The next £395,000 of taxable income

25%

The next £200,000 of taxable income

18%

The remainder of taxable income

5%

Further information can obtained from incometax@gibraltar.gov.gi Social Insurance Employer contributions

Levied at 20% of gross earnings subject to a minimum of £16.50/week or £71.50/month and a maximum of £36.50/week or £158.17/month.

Employee contributions

Levied at 10% of gross earnings subject to a minimum of £5.50/week or £23.83/month and a maximum of £27.50/week or £119.17/month.

Self-Employed contributions

Levied at 20% of gross earnings subject to a minimum of £11.00/week or £47.67/month and a maximum of £33.50/week or £145.17/month.

No capital gains taxes

No Inheritance tax/death duties or estate duty

No tax on dividends

No wealth, gift or capital taxes

Gibraltar Chamber of Commerce Annual Report & Accounts 2017 | 41

GIBRALTAR: KEY INFORMATION

(All figures relate to 2017 unless otherwise stated)

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.

Property Commercial Office Rental Rates (annual rates for indicative purposes only)

Residential Property Rental Rates

Europort

£320 - £385/ square metre

Studio/1-bed apartment

£850-£1300/PCM

Eurotowers

£240 - £275/ square metre

2/3 bed apartment

£1300-£3,500/PCM

Leanse Place

£240 - £275/ square metre

4 bed apartment

£3,500 - £7,000/PCM

Leisure Island Ocean Village

£330 - £415/ square metre

Mid Town

£395/ square metre

Regal House

£250 - £300/ square metre

World Trade Centre

£375/ square metre

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.

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 paid, businesses qualify for a 15% discount on subsequent rates bills for prompt payment.

Government Revenue £615m

Source: Gibraltar Budget 2017

Taxes

Duties, taxes & other receipts

Gambling charges, fees & Lottery

Rates & Rents

Dept fees & receipts

Government Earnings

£

£

£

£

£

£

275

171.57

Million

Income Tax

155m

14.79

Million

Million

29

121.14

Million

3.42

Million

Million

Corporation Tax

120m

Government Expenditure £597m Health & Care £

Work & Pensions £

Finance

£

Utilities

£

Education

£

Law enforcment, Judiciary & Civil Protection

£

Admin

£

Contribution to Gov. owned companies

£

149.58

64.21

64.07

55.13

49.84

49.20

34.25 Million

Million

Business

Environment & Climate Change

Culture, Media, Sport & Community Services

Port & Aviation

Supplementary Provision

Regualtion & oversight

Tourism & Heritage

Transport & Infrastructure

£

£

£

£

£

£

£

£

Million

21.65 Million

Million

20.32 Million

Million

18.92 Million

Million

13.49 Million

42 | Gibraltar Chamber of Commerce Annual Report & Accounts 2017

Million

9

Million

Million

8.48 Million

7.85 Million

25

5.62 Million

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