Annual Report 2011
The Gibraltar
Chamber Commerce OF
Promoting trade and the interests of Gibraltar businesses
Board Members
President:
E J Nicholas Russo
Vice President:
John Isola
Hon Treasurer:
George Olivera
Hon Secretary:
Jeremy Nicholls
Directors:
Bruno Callaghan Marvin Cartwright Franco Cassar George Desoisa Ernest Felipes Andrew Haynes Christian Hernandez Jose Luis Bonavia
Registered OfďŹ ce:
Watergate House, 2/6 Casemates, PO Box 29, Gibraltar T: +350 20078376 | F: +350 20078403 E: info@gibraltarchamberofcommerce.com W: www.gibraltarchamberofcommerce.com
Honorary Auditors: Baker Tilly (Gibraltar) Limited, Regal House, Queensway, Gibraltar
The benefits of being a Chamber member include:
The Gibraltar Chamber of Commerce was founded in 1882. It was established for the “promotion of measures calculated to benefit and protect the trading interests of its members and the general trade of Gibraltar”.
• Represent your views directly to Government • Network and meet new business contacts and potential clients
More than 125 years later the Chamber’s role is as important today as it was then. Our members employ more than 7,500 people which is around half of Gibraltar’s current private sector workforce. It is the largest organisation representing the interests of private sector commerce in Gibraltar.
• Advice on local legislation and regulations • Email alert service on matters affecting the business community in Gibraltar • Reduced rates on exportation documentation
The nature of Gibraltar’s economy has been transformed, particularly over the last two decades. Today the Rock is a service economy revolving around financial services, the Port & Shipping Services, Tourism, Online Gaming and a very well developed Professional Services Sector.
• Use of Chamber meeting rooms and presentation suite facilities • Free subscription to the Chamber’s quarterly publication “B2B”
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Annual Report & Accounts 2011
Contents
Foreword
page 3
Politics
page 5
Economy
page 9
Retail & Wholesale
page 15
Banking
page 19
Insurance
page 23
Online Gaming
page 24
Port & Maritime
page 27
Property
page 29
Tourism
page 32
Report of the Auditors
page 35
Annual Accounts
page 36
Key Facts
page 44
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Annual Report & Accounts 2011
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Foreword The challenging outlook which we forecast in our Annual Report last year proved to be spot on: Gibraltar’s two principal trading partners, the UK and Spain both continued to experience anaemic growth with rises in unemployment in both economies.
Gibraltar should depend on Spain as a source of power supply. This was misconstrued. It was a genuine proposal at least to consider the possibility of sourcing much cheaper and reliable power from European suppliers whether they were German, French or Swiss whilst retaining our own indigenous supply as a back-up. One might even go further and explore a possible hook up with Moroccan power suppliers.
It was indeed a tough year for many of the Rock’s business sectors but in sharp contrast, local employment levels held up right until the year end as a series of government-funded projects were finished in the lead-up to the December election. Once the summer was over the choice of possible election dates narrowed. The various opinion polls either shocked or re-assured, depending on what one wished to believe. One thing seemed certain regardless of what the polls said: the result would be close, perhaps closer even than the 2007 election. It was, and the GSLP/Liberal Alliance formed the first new government for Gibraltar in 15 years with the narrowest of majorities by a margin just over 2%. Peter Caruana was magnanimous in accepting the vote for change and his offer to assist and brief the incoming administration on any matter was a generous one. The 15 years of GSD administration have left a lasting and impressive legacy on much of Gibraltar’s economic and social fabric. But the voters have spoken and it is they who are the final arbiters in a democracy.
With the diseconomies of scale which Gibraltar suffers from, we cannot continue to ignore the considerable cost rises of key public goods like power supply and health provision. Government revenues are not infinite – they come in the main from the private sector. Gibraltar has become economically selfsufficient in the last 25 years or so. This is a fantastic accomplishment and we must never lose this hard won success. However, we also need to be pragmatic, especially at a time when all around are being forced to tighten their economic belts. The considerable financial investment needed for large capital projects like the new power station and the recurring commitments of running a fully integrated health service closes the door to other economic choices. Gibraltar’s economy will need to remain flexible given the significant challenges which lie ahead. As a small economy we cannot afford to be complacent but nor should we be despondent because of what is happening elsewhere. Relative to our European neighbours, Gibraltar still has a very good story to tell: the 10% corporation tax is now firmly embedded and working well; we have signed Tax Information Exchange Agreements with around 20 other jurisdictions, many of which are in the G20 and our economy continues to grow, albeit at a slower pace. The visible signs of investor confidence in Gibraltar are clear to see and the new air terminal, despite criticism from some quarters, is a very clear and permanent sign of confidence in our own economic destiny. Confidence is in short supply when visiting most European capitals these days, but it is just as important a component of economic activity as capital and labour. Gibraltar’s private sector is very good at what it does: creating wealth, creating jobs and generating sustainable economic growth from an increasingly diverse range of activities. Confidence in the ability to grow and develop our economy is likely to be tested in the months and years ahead. Gibraltar has been here before and has still managed to endure, despite the hardships. We will do so again.
The new administration promises a new style of government and time will tell if it is able to deliver on its significant electoral promises. The slowdown in consumer spending is affecting Gibraltar’s tourist trade, its shops and restaurants. Local property prices appear to be holding up but deal flow has slowed remarkably in the last two years as bank lending has fallen. The economic omens indicate another difficult year of trading for Gibraltar’s businesses. Difficult, but not impossible. In March the GSD government awarded the contract for the construction of a new power station. It was the largest single contract ever awarded by a Gibraltar government. At the time the Chamber reiterated a question it had posed back in 2010: “Is the price of independence in energy terms worth paying, now and for many years to come, particularly in an era when cross border energy supply is a common occurrence?” Previously, the Chamber had mooted the idea of connecting to the European power ‘grid’. This was misinterpreted in some quarters as suggesting
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Annual Report & Accounts 2011
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Politics Changing of the Guard
2011 started slowly with the political barometer set for ‘mild’ but soon enough clouds began to gather reaching a crescendo in December with the weather positively unsettled. The build-up had been gradual and there were pointers along the way that we were heading for change.
The Chamber acknowledges the important contribution to Gibraltar’s defence and well-being made by Mr Caruana and the GSD
the important contribution to Gibraltar’s defence and well-being made by Mr Caruana and the GSD and looks to Mr Picardo to consolidate those achievements.
The distribution of ministerial portfolios, which are a radical departure from the past, are a strong indicator of the likely overhaul that the new administration will bring to government. In light of his responsibilities, Mr Licudi will be the Minister to watch for a large section of the private sector and the Chamber wishes him well in his endeavours.
Mr Caruana called the elections in early November but in reality the campaign had started months before and there was an increased sense of expectancy in the build-up period. There were significant mood swings registered by the opinion polls. The comfortable GSD lead recorded in the autumn of 2010 had vanished by the following spring and converted into a clear majority for the Opposition parties. The pendulum of public opinion had swung away from the ruling party sometime in the new year of 2011 and the GSD were unable to reverse the trend.
Gibraltar was not alone. The third member of the Tripartite Forum – Spain - held general elections in November. The outcome of general elections among all three Tripartite members held within the last 18 months has resulted in the ousting of the Forum’s founder members and the rise of the Opposition parties. New leaders have emerged after long spells in the political wilderness. Of itself these events are sufficient to create instability for Gibraltar, but in light of the threatened euro meltdown and difficult economic forecasts, the prospects for a bumpy ride are all too clear. The new configuration of personalities in the Tripartite Forum will take time to resolve itself into policy and
The clear majorities shown in the polls narrowed in the run-up to polling day. For the second successive election Gibraltar witnessed a nail biting finish. Once again Gibraltar finds itself split almost down the middle in its choice of leader. The GSLP / Liberal margin of 2% was enough to give them victory and bring to an end 15 years of GSD government. The Chamber acknowledges 5
Annual Report & Accounts 2011
Politics Changing of the Guard - continued
For the second successive election Gibraltar witnessed a nail biting finish
‘inner’ core of EU countries centred around the Franco / German axis and based on tax harmonisation and centralised budgets. This “inner” core will likely develop ever more protectionist regulations designed to exclude the ‘outer’ EU members from access to their markets. The alternative view, promoted by the UK, with muted support from the eurosceptic countries, is one of a loose confederation of sovereign nations co-operating under the rules of a ‘single market’. Those who subscribe to this view will be asked to curb any ‘protectionist’ instincts which typically come to the fore in times of recession.
direction. This likely delay affords Mr. Picardo time to develop his own vision for the future of the Tripartite talks and the opportunity to lobby for support from among the local mayors. In these times of genuine hardship for our Campo neighbours, Gibraltar must stretch out the hand of co-operation and friendship. There may be more support than he imagines for a new leader promoting the prospects of mutual benefit for Gibraltar and the Campo. Local support can then be forged into policy given that the regional elections for Andalusia in March are an open contest. In their bid for electoral success even within the main parties, the contenders will find themselves obliged to adopt local initiatives as mainstream policy. The risk however of doing nothing and waiting for events to unfold is to allow others to seize the initiative and set the agenda.
This clash between those who subscribe to ‘more’ Europe, but indulge their instincts for protectionism, and those whose instincts are against greater union, but in favour of free trade are primarily opposed to each other on the economic principles which frame their respective visions for the future of Europe. France and Italy, with their protectionist instincts have already introduced legislation which effectively circumvents the ‘single market’ treaty. At present the exclusion applies specifically to internet gaming but the trend is clear.
As the European Union fumbles its way towards a resolution of the euro crisis it seems increasingly likely that the debate to establish a prescriptive solution will centre on the perception of what is a “good European”. The continental view, as promoted by France, is that of an integrated economy for an Annual Report & Accounts 2011
6
Politics
Gibraltar’s government and the gaming lobby would do well to renew their efforts to persuade the British government that consistent with their understanding of what it means to be a “good European” there can be no exceptions in the defence of the ‘single market’. The message to be conveyed is that the United Kingdom cannot afford to follow the continental precedent by legislating to exclude internet gaming for fear of what else might follow.
Europe look to turn increasingly ugly in 2012. There may be difficult times ahead for Gibraltar and the Chamber wishes Mr Picardo the best as he maps out a path for the next four years. Threats to Gibraltar in the coming months might be a result of the wider EU debate becoming more polarised rather than petty attacks from our neighbour but in either scenario our best hope lies in keeping our international reputation burnished and the rhetoric turned low.
The appointment of Snr. Garcia Margallo as Foreign Minister for the new Partido Popular government was a surprise. Little is known of the new minister except that he is reputed to have close connections with both the French and German governments. This would imply that, unlike Snr. Aznar, whose instincts were more Atlanticist, Snr. Rajoy is seeking closer links with the Franco / German axis. If, however, this strategy does not pay dividends soon, and there is no end in sight for Spain’s austerity measures, Mr. Rajoy may need to change tack, but for the time being Gibraltar must anticipate that Spain will be on the other side of the debate as to what constitutes a “good European”. Gibraltar’s diversified market economy depends on the ‘single market’ view holding sway. Politics across
Statistics We welcome the Manifesto commitment to make official statistics more up to date and available on the Government’s web site. Your Board has been on record on many occasions calling on Government to address the Statistics issue. In today’s electronic age, there is no reason to have to rely on data that is over a year old when published. What is already available on the internet is a welcome improvement. We see this development as a ‘work in progress’ and look forward to seeing further improvements in the availability and timeliness of financial and economic data on line.Perhaps, given the current impetus, it is now a good time to review the Statistics Ordinance, the production of data and how to bring this in line with the needs of a modern Gibraltar?
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To view the Government Statistics website, scan the QR code
Annual Report & Accounts 2011
Economy Economic Outlook The above hints at the economic uncertainty facing the global economy as we tread gingerly into 2012. What can we expect on the economic front in the coming year? The short answer is more bad news on the international front. What has occupied the headlines, and launched an unprecedented number of EU summits, is of course the continuing crisis in the Eurozone and the fallout from this. The fundamentals are really quite simple. Many countries within the Eurozone (and many outside it) have simply borrowed too much in a scenario of continuing and increasing budgetary deficits. Countries have essentially been borrowing to meet their debt commitments, which is paradoxical to say the least! The markets have had increasing difficulty in believing in the ability of many debtor countries to pay, the result being record yields on bonds. (The yields on Italian and Spanish bonds did fall in the January bond auctions but most agree that this was a direct result of the liquidity extended to the market by the European Central Bank making funds available to the banks at preferential rates, rather than any fundamental change in the risk profile of these two countries). The general responses to the sovereign debt crisis, and in some cases these have been conditions of varied support / bail out packages, have been far-reaching austerity measures put in place by central governments. These austerity measures have, of course, contributed to stunt growth in what was already a precarious post credit crunch economic scenario. What has also become evident is the ever-increasing level of concern, given the above, about countries’ ability to meet their debt commitments. France and Austria have recently joined the United States in losing the coveted AAA credit rating with Standard & Poors. It is likely that other countries, currently teetering on the edge, will follow in being downgraded. Clearly, downgrading impacts on bond yields in a negative way so this is not good news. stability fund itself appears unstable! The fear here, of course, is that it will become increasingly expensive to augment this fund as will, in all likelihood, be required in the future. (It will be remembered that this bailout fund was established in 2010 to support countries which could not otherwise meet their obligations. To date, Portugal, Ireland and Greece have been the recipients of funds from the EFSF). Out of the current ‘PIIGS’ countries (Note PIIGS is now spelt with 2 “i’s”
The most startling downgrade has been that of the European Financial Stability Facility (EFSF), also by Standard & Poors. This shows an overall concern at the backers of the EFSF itself, namely the Eurozone countries. Although markets are yet to react to this (Indeed, the last sale of 6 month money by the EFSF, which was post downgrade, went well enough with over 3 times cover), it is nevertheless indicative that the 9
Annual Report & Accounts 2011
Economy Changing of the Guard - continued
+10 +8 +6
Fears remain about the future of the Euro itself and whether it will survive the current crisis. There is a general feeling that, with so much at stake, the central governments will do whatever it takes to ensure the survival of the Euro. Germany and France have said so in the past. There appears to be no easy way out of the current difficulties. However, there is little doubt that, whatever the prescription may eventually be, it is going to be expensive and will need large amounts of cash. It remains to be seen if the wealthier Eurozone countries will have the political appetite (and resources) to go this route.
+4 +2 0 -2 -4 -6
-6
-8
-8
-10
-10
Greece
France
Spain
Italy
China China
-6
France
-4
Germany
-4
Spain
-2
Italy
-2
Eurozone
0
China
0
Greece
+2
France
+2
Germany
+4
Spain
+4
Italy
+6
Eurozone
+6
UK
+8
USA
+8
UK
+10
USA
+10
2011 2012
January % Growth
Greece
2011 2012
Germany
Predicted GDP Growth at different periods:
Eurozone
UK
-10
USA
-8
The result of all of this is a deterioration in the world economic outlook. The table below shows how the outlook has generally worsened since July 2011 as the sovereign debt crisis unfolded.
July % Growth
2011 2012
October % Growth
to allow for new member Italy!) it is interesting to note that only Ireland has a stable outlook, with the other four posting negative. This leads some to think that the EFSF fund is insufficient and would need to be significantly bolstered to fend off potential sovereign defaults.
(Source: The Economist)
Annual Report & Accounts 2011
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Economy
Apart from the USA, which remains much as per the October predictions, the downturn is clear to see, with the Eurozone set for a recession in 2012. Even mighty Germany, the European powerhouse, is forecast to enter a period of stagnation. The UK, given its own debt problems, the coalition government’s austerity measures and the impact of a downturn in the Eurozone, with which it conducts 60% of its trade, faces a period of anaemic growth. Even China has suffered setbacks, with the last quarter of 2011 being the slowest growth of the last few years, as demand for its products slows down in the beleaguered western economies.
the 2008 crisis, with GDP showing a positive and strong trend. Gibraltar, however, does not live in a cocoon and, as a small, open economy, it is sensitive to what happens in the rest of the world, even though recessionary impacts have traditionally lagged behind the rest of the world. Despite this, there are signs of a slowdown, with an increasing number of vacant retail properties on Main Street, the seeming adjournment ‘sine die’ of the East Side Reclamation, flattish retail sales, signs of decreased activity in the Finance Centre and a less buoyant employment market. The recent redundancies in the construction sector are a case in point. These developments are comparatively minor and Gibraltar continues to do relatively well, especially in comparison to our neighbours in Andalusia, with unemployment there at around 35%. Many of Spain’s Ayuntamientos (Town Halls) are bankrupt, La Linea being a case in point, as witnessed by the continual demonstrations by Council workers who are owed salaries from several months previously.
All in all, 2012 does not look at all good on the global economic front. Indeed the World Bank said on 18 January “Developed and developing -country growth rates could fall by as much or more than in 2008 / 09” as part of a message that warns countries to be prepared for economic ‘shocks’ as “there is a danger that the (current) downturn could be longer lasting than the one which followed the collapse of Lehman Brothers in 2008”. This is particularly worrying The question, as always, is what as “the high income countries are is going to happen going forward? not going to be able to offer the The world economic outlook looks All in all, 2012 same type of fiscal gloomy and the impact on Gibraltar countermeasures and the same cannot be positive, with investor does not look at all type of support to the financial confidence relatively low. Of late, system as they did in 2008 / 09”. there have been no major good on the global The silver lining in this generally announcements of significant cloudy outlook is reduced general players being attracted to set economic front inflationary pressures, with up shop in Gibraltar. The 10% commodities and food items down; corporate tax has not, to date the pressure on oil prices is also attracted many takers in terms reducing in the wake of the economic outlook. of new business. There are, however, a couple of hotel All of these indicators will offer some solace to less projects in the pipeline which will hopefully materialise developed countries in the months ahead. As for the and add to Gibraltar’s infrastructure. Eurozone, there is a realisation that it is inevitable that the European Central Bank must play a larger role in The other issue is of course the new government. solving the problems of the Euro. It is early days yet to see any effects of new economic policies but there are issues in the manifesto that need comment on. For the past few years, the How does Gibraltars economy fit into this Chamber has been concerned at the level of debt scenario? which the Gibraltar government has allowed to As reported variously over the last 2-3 years, Gibraltar accrue. While currently, the level of debt appears has, so far, showed resilience and its economy appears to be sustainable given the government’s robust surpluses, there is no guarantee that this situation to have suffered a lot less than the rest of the world, will continue indefinitely in the future. We therefore with employment and Government income holding up welcome the manifesto commitment to reduce fairly well. Indeed, compared to main trading partners UK and Spain, Gibraltar has been positively flying since gross debt by 50% in the current term. 11
Annual Report & Accounts 2011
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Economy Changing of the Guard - continued As we go to press, the issue of Public Debt, and Government finances in general, are the subject of a political spat between the Chief Minister and the Leader of the Opposition. This is an issue that remains to be played out and which will be closely monitored by many in Gibraltar. The manifesto also predicts 60% GDP growth, a reduction of income tax to 15%, 50% increase in government revenue, £52 million in our reserves and Community Care funded to the tune of £75 million. This is the new government’s summary of how our economy and finances will be at the end of the current 4 year term. It is an ambitious programme that will not be helped by the global economic outlook, although a success would be fantastic for Gibraltar. It remains to be seen how this evolves over the next four years.
more important than the usual political brickbats about whether the economic glass is half empty or half full. It goes to the heart of whether or not Gibraltar can be taken seriously in its economic pronouncements. Gibraltar’s business community as well as outside investors need certainty about the stability of the government’s finances. There is now an urgent need for Government and Opposition to agree the parameters going forward for the preparation of accounts.
The early public pronouncements by the new administration on the parlous state of Gibraltar’s finances and the rebuttals by the old administration create much heat but shed little light. This is far
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Annual Report & Accounts 2011
Retail & Wholesale Huge challenges...
The economic uncertainty in Spain and the rest of the Eurozone has not noticeably affected visitor numbers
The challenges facing the sector are huge. As with any other city centre competition from out of town shopping centres and the internet is all the more evident. But unlike other cities in Europe, Gibraltar’s shopping centre faces other challenges too and the benefits of being a frontier town with a different currency which in the past helped the sector are now much less important and in fact may even be a cause for long term contraction of the business, which is currently responsible for the employment of over 15% of Gibraltar’s workforce.
The sector has experienced another difficult year with most businesses reporting sales below or on a par with last year but with much reduced margins. The economic uncertainty in Spain and the rest of the Eurozone has not noticeably affected visitor numbers but it is clear that shoppers have less money to spend. Towards the end of the year the strengthening of sterling versus the Euro only served to make things
more difficult making Gibraltar less competitive for the visitor and shopping centres across the border more attractive for the Gibraltarian. If sterling continues to strengthen the long term effect will be negative and traders will be forced to cut their margins to remain competitive although for goods purchased and imported in Euros the effect should be neutral if traders pass on the benefit of the exchange gain to the consumer which is essential to remain competitive. A number of retailers have continued to invest in upgrading or refurbishing their premises and this is very welcome as it adds to the general shopping experience. Unfortunately though it is also a fact that traders find it increasingly difficult to compete with large shopping centres and hypermarkets whose purchasing power is far stronger and which even lower levels of duty and zero VAT here cannot match. The Chamber urges operators in the Retail sector to become more specialised creating
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Annual Report & Accounts 2011
Retail & Wholesale Huge challenges... - continued smart, focused and competitive shops providing unparalleled levels of service if it is to be able to compete with the large shopping centres in Spain and with the ever increasing internet offering.
Matters are not helped locally with ever increasing municipal costs and unsustainable rents pushed ever higher by demand from the burgeoning finance centre. We welcome the reinstatement of the prompt payment rates discount. We look forward to engaging the new government in discussion to reduce business costs and on the true effect on the community of changes to the minimum wage. Additionally there is a considerable uneven playing field with bona fide businesses having to compete with local rogue traders as well as unregistered operators which would not be in business if they paid all their dues and registered all their labour. This is not only unfair but also distorts the market by giving the impression of a healthy situation which in turn serves to encourage new players to enter an already saturated market. There is also a prevalence of counterfeit and substandard goods which tarnish the reputation of the shopping centre. The Chamber welcomes the commitments made during the election campaign to establish an Office of Fair Trading and would urge the new Government to carry out a wholesale review of the Trade Licensing Ordinance and other legislation affecting trade generally. The recently introduced Insolvency Act incorporating legislation which prohibits phoenix companies is very welcome. Members in several sectors have suffered unreasonably from a few unscrupulous business owners who fold their company deliberately and walk away from their creditors without sanction and start anew unencumbered by their prior obligations. This legislative change is welcome. A bone of contention for our members has been the lack of loading and unloading bays, the lack of policing thereof as well as traffic fluidity generally. Progress has been made in this regard but fluidity remains a huge problem in the north district area. The Chamber hopes that now that the airport works are nearing completion that improvements of the infrastructure at the Entry Processing Unit (EPU) at the frontier are accelerated. The Chamber acknowledges the efforts made by the Customs department to prepare for the upgrading of the Asycuda system and members look forward to its swift introduction which in turn will hopefully bring about efficiencies for all parties concerned.
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Annual Report & Accounts 2011
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Banking Gibraltar in a separate dimension One cannot help but feel that Gibraltar is quite often in a separate dimension to the rest of the world when it comes to things financial. Certainly the Economy departed 2010 ostensibly in much better shape than that of our neighbour Spain and of course the UK. The relevance of these two economies to Gibraltar is plain to see and, if anything, the expectation for 2011 was that we may start to see some of the malaise coming our way. The other significant issues for 2011 were the implementation of the new tax regime, including the 10% company rate of tax and, of course, the then forthcoming general election. So, did the malaise catch up with us? It depends who you speak to: not all Main Street traders prospered quite as much, construction firms had it hard and almost everybody else, including households have felt a slightly chillier wind and have reined in their spending accordingly. All this of course is relative and standards of living in Gibraltar are still high compared to our near neighbours whose issues are protested increasingly stridently just outside our borders. The 10% company tax came in with not so much of a bang as a whimper. The bang was in the form of the new tough collection regime. The whimper was the perhaps coincidental faltering global economy; to date there has been little evidence of the expected influx of companies seeking to use the low tax structures we can now facilitate. This is counterintuitive to some as it could be argued that our tax product should be even more attractive during times of austerity and seeking Standards of living greater efficiencies. Of course in such times all governments in Gibraltar are still are more protective of their income and will do all they can high compared to our to stop companies avoiding tax.
near neighbours
Accountants continued to recruit, but lawyers less so. Both of these professional services sectors tend to be kept busy both on the way up and on the way down, although it seems that accountants are the marathon runners of the field. Banks on the other hand more closely reflect the temperature of the economy. Those with significant debt exposure in Spain continued to suffer as balance sheets were cleaned out by their Anglo Saxon parents. We always seem so much more
prepared to bite the bullet and consequently we suffer first but the pain is shorter but hard nonetheless.
Gibraltar-based debt generally remains sound although there have been some notable failures with the pain being spread across sectors particularly in wholesale distribution and construction supplies. It only takes one significant player to be left with a bad debt for the trickledown effect to impact adversely 19
Annual Report & Accounts 2011
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Helpful Banking The Royal Bank of Scotland International Limited trading as NatWest (NatWest). Registered Office: P.O. Box 64, Royal Bank House, 71 Bath Street, St. Helier, Jersey JE4 8PJ. Regulated by the Jersey Financial Services Commission. Business address: PO Box 11, 16 Library Place, St Helier, Jersey, JE4 8NH. NatWest is the registered business name of The Royal Bank of Scotland International Limited under the Business Names Registration Act. Gibraltar business address: National Westminster House, PO Box 707, 57 Line Wall Road, Gibraltar. Regulated and authorised by the Financial Services Commission, Gibraltar to undertake Banking and Investment Business from 57 and 55 Line Wall Road and 1 Corral Road, Gibraltar. Our services are not offered to any person in any jurisdiction where their advertisement, offer or sale is restricted or prohibited by law or regulation or where we are not appropriately licensed. Calls may be recorded. Internet e-mails are not necessarily secure as information might be intercepted, lost or destroyed. Please do not e-mail any account or other confidential information.
Banking Gibraltar in a separate dimension - continued on a growing number of smaller local players. At best this knocks confidence, at worst it wipes out a number of local employers who have all played by the rules. A much needed Consumer Credit and Debt Recovery Agency is still awaited although some lenders have been looking to establish just such a service. Retailers, among others, complain about rising costs and lower footfall in parts of Gibraltar. In contrast, some retail franchisees have benefitted from the strength of well-known brands to retain custom. That, coupled with ongoing staff training and a sharp focus on customer service, has given retailers a competitive edge.
bemoaning the performance of existing asset portfolios or cash products. This all adds up to a diminished ability to charge the rates of commissions that most managers had become accustomed to and now returns are very tight indeed. All entities are looking to control costs and this has and will continue to manifest itself in less recruitment or, even worse, redundancies of positions (with greater centralisation of support functions to cheaper jurisdictions) and locally based headcount. Much awaited and still to see the light of day are a Financial Services Ombudsman and a coherent financial industry marketing plan with appropriate resources. Meanwhile the burden of increased regulation is felt as greater political will from the European Union governments materialises in the form of more stringent rules on capital adequacy and its deployment to try to ensure we do not end up with another mess in a few years time. All this has yet to be digested and we have seen some tasters but not the real deal yet. This trend is being replicated across all parts of the finance sector (see Insurance below) and not just in banking.
The Banking population has changed little during the year. We have not seen any losses to the brand portfolio but the smaller lenders are increasingly absent from the fray. Even the large lenders have been notably tighter with their capital, insisting on justifying every application for increased lending and sometimes imposing stricter criteria on borrowers who wish just to stand still and roll over existing facilities. This merely demonstrates the challenge of global banking rather than any particular Gibraltar-specific issues, but it shows starkly how Gibraltar is not immune to the effects of the downturn in other economies. Global decisions taken elsewhere More competition are having a very real impact on decisions taken locally.
in local retail and corporate banking would be welcome
All of the banks in Gibraltar bar one are subsidiaries or branches of larger parent groups and policy is increasingly driven from the parent centre and often is not specific enough to Gibraltar’s needs. Again this appears to be a function of the ever-increasing globalisation of the banks and regulators. The main corporate lenders continue to support the local economy but cannot easily make exceptions to centrally driven policy. It is important that an unfavourable decision taken by a lending institution should not be interpreted as being anti-Gibraltar. The world has changed since 2008.
Gibraltar’s private banks have not had it easy either; underperformance in the wealth management markets as well as falling asset values and increased volatility will continue to frighten clients from investing whilst
Locally we have seen the welcome enforcement of licensing regulations around the hitherto uncontrolled proliferation of unofficial exchange bureaux which in themselves can prove to be a real money laundering risk to the whole jurisdiction. We are only as strong as our weakest link.
Finally, there is no question that more competition in local retail and corporate banking would be welcomed. The commercial reality is that scale will probably exclude such a development in the near to medium term future. All the political parties going into the general election promised a local ‘National’ bank to be established with Government support. This may appear to have been an attractive pledge in the excitement of a closely-fought election battle, but in the cold light of day it comes with many problems which must be solved. The providers of the capital to establish such an institution would need to be certain that such hurdles can be overcome if they are to decide to back a local player with the risks that this entails.
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Annual Report & Accounts 2011
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Insurance Gibraltar’s insurance holding its own
Gibraltar’s insurance sector continues to hold its own despite the uncertainties that exist elsewhere. At the year end there were a total of 63 licensed insurance companies, virtually unchanged from the previous year. The critical mass which the insurance sector has attained in the last ten years or so will help to ensure that Gibraltar remains a jurisdiction of choice for companies, whether they are looking to move from elsewhere in the EU, or to establish a new operation from scratch. Nevertheless, Gibraltar cannot afford to rest on its laurels as market uncertainties remain and the certain prospect of increased regulatory pressures will bring with them additional cost burdens and the need for greater disclosure. Taking these in turn, the continued rise in claims from certain sectors, such as UK Motor and actively encouraged by a number of UK legal firms, erodes margins for some local operators. Due to their lower costs base Gibraltar operators are more profitable than their UK counterparts in this line of business but margin erosion nevertheless gives cause for concern. This, coupled with weak investment returns, will continue to have an impact on the steady growth of existing players on the Rock. The bigger issue facing local operators is the impact of Solvency II or Omnibus II Directive. The final legislation is expected to be issued by December 2012 for enactment by 2014. In preparation though, Gibraltar’s regulator requires local companies to be able to demonstrate that they will be in a position to comply fully with the change by the middle of next year. For some this will be an onerous task and a number of smaller operators are positioning themselves so that they can meet the increased capital requirements of
the new legislation. The impact of the financial crisis elsewhere has led to the regulators requiring insurers to boost the amount of capital they have even when the risk levels they assume remain static. The choice is either reduce the risk, and hence income suffers, or increase capital to meet the regulatory requirements. The business is there to be written and if Gibraltar firms do not take on the business it will merely go elsewhere. Solvency II will also introduce stricter requirements for delivering and demonstrating the standards of risk management and governance. For some this might be an onerous undertaking but it is a necessary one nonetheless. The advent of co-insurance structures is a new development for Gibraltar and the entrance of a small number of US-linked players looking for a home for some of their surplus capital has seen them form relationships with local operators. This deepens the pool of insurers locally and it will also help to meet the increased capital requirements. Another logical extension of this might be that Gibraltar starts to attract some notable reinsurers. This has long been an objective of some of the industry’s leading lights. Perhaps now the time is right for another string to be added to Gibraltar’s insurance bow and the 10% corporation tax should be an additional incentive for US reinsurers looking to set up shop in a well-regulated EU jurisdiction. The double taxation agreement with Spain mentioned in last year’s report remains an unfulfilled wish still and with a new centre-right administration in Spain perhaps a more remote prospect.
23
Annual Report & Accounts 2011
Online Gaming Gibraltar: e-gaming jurisdiction of choice
2011 has been a difficult year for those operators based in Gibraltar given the economic meltdown experienced in Europe and beyond. Certainly the effect of the downturn has been felt as most Gibraltar-based operators have Europe as their main market. It was no surprise to see consolidation in the industry, the most notable one being the merger of BWIN and Party Gaming last year resulting in the creation of the world’s largest gambling company under the name “bwin.party Digital Entertainment plc”. The merger was approved by the Gibraltar Supreme Court in March 2011 which demonstrates the prominence of Gibraltar as the e-gaming jurisdiction of choice.
to obtain a British gambling licence. This has heralded a switch to licensing and regulation at the point-ofconsumption rather than at the point-of-origin (as it now stands) and represents a significant change for Gibraltar operators.
On the international regulatory front it has also been a challenging year with individual countries such as Spain stating they are opening their markets requiring operators to rush applications for a Spanish operational licence before the end of 2011. It has now transpired that the Spanish regulator has extended the period by when licences must be obtained to June 2012 seemingly due to the incoming PP government wishing to review the legislation and licensing regime in more detail.
It is suggested that the present system leaves British residents in a position where it is not always clear to them who is regulating their gambling and on what basis. Clearly there are excellent regulators within the white list and EEA jurisdictions including Gibraltar, and many outstanding online operators, all of whose interests would be compromised by the imposition of a local licensing regime. It will certainly be interesting to see whether and by whom any legal challenge is undertaken.
The other major development marked by 2011 was the announcement by the UK’s Department for Culture Media and Sport that it intends to revise the UK Gambling Act 2005 to require all online gambling operators who wish to transact with British residents
A striking feature of this proposal is that the UK government would be imposing restrictions onto a British remote gambling market which was designed to be compliant with the original principles of the single market. On the other hand, Italy, France, Denmark and
Annual Report & Accounts 2011
Some have said that these changes are either protectionist or revenue-driven though the UK government has been careful to frame its announcement in consumer protection terms and, indeed, that was the general theme of the initial consultation document published last year. It is expected that whatever the motives, the parameters remain firmly set and are limited to consumer protection issues only.
24
Online Gaming
Spain have persuaded the European Commission to allow them to open their markets in a controlled fashion, although this removes the worst of the monopolistic regimes that existed before, the legislation is effectively avoiding full compliance with the principles of the single market. The legislation requires licensing at the point of consumption and disregards the existence of licensing at the point of origin, specifically if the point of origin is also within the EU. The UK Treasury announcement a few days later that it will review the taxation of online gambling was of course predictable. It is quite understandable for the UK government to seek to bring its regime into line with the developing practice across the EU, but to do so it has limited itself to consumer protection issues. The Gaming Lobby should seek to keep the UK government “honest” so that there can be little or no room for any “protectionist” measures to emerge.
position as an attractive jurisdiction from an operational cost point of view. The lead in this report ‘Politics and Economics’, also makes reference to the threatened changes to the UK Gambling Act and sets this in context of the anticipated EU debate on what makes a ‘‘good European’’. The advice from the Chamber to the Gaming fraternity is to continue lobbying the British government and to make the case that the prospective changes contradict their position on the wider EU debate about the importance of adhering to the single market. If Westminster continues to develop its defense of Free Trade then the mood is likely to be more receptive to the Gaming Lobby. The Addington Club could prove to be a useful forum for sounding out opinion in this regard.
Gibraltar has also seen a change of government with the GSLP/ Liberal alliance winning a very closely fought general election. It remains to be seen how The suspicion remains, however, that consumer the Gibraltar based operations cope with the high protection ‘safeguards’ will amount to a new costs of bandwidth and lack of suitable free office licensing regime. space as well as with the unknowns of the European regulatory landscape with more possible developments It now remains to be seen whether the effect of the to come. The year ahead will be developments in the UK will have challenging, but if the sector has a prejudicial effect on those The challenge is proven one thing since coming to operators who have made Gibraltar well over a decade ago, it Gibraltar their home and principal for Gibraltar to retain is that it is ready to meet and deal base of operations. The challenge with those challenges head on. is for Gibraltar to retain its leading
its leading position as an attractive jurisdiction
25
Annual Report & Accounts 2011
Annual Report & Accounts 2011
26
Port & Maritime New Government and New Year bring new priorities GIBRALTAR ALGECIRAS CEUTA TANGER MED
What an eventful year Gibraltar’s maritime sector has had. All things appeared to be going so well despite the aggressive stance taken by neighbouring Algeciras which has reduced its port calling costs to compete in the critical bunker market and is now cheaper than Gibraltar for port dues. At the end of May, Gibraltar as a whole suffered the significant shock and considerable environment and political fallout from the fire at the sullage tanks on the North Mole. Two Spaniards were injured in the explosion and one worker sadly died later from his injuries. The accident put the focus firmly on port safety and Gibraltar’s ability to cope with an incident of such scale. We understand that government is currently looking at whether all fuel installations are to be moved from the North Mole completely in order to appease the cruise liner business. Nevertheless, for Gibraltar to operate as a modern port it will need to provide modern sullage facilities. This is one of many decisions the incoming government will need to address with some urgency. Another urgent issue has been to find a replacement for Peter Hall, the Captain of the port who resigned unexpectedly in September. During his relatively short tenure he brought a significant degree of expertise and professionalism to the port and was instrumental in getting the Port Authority up and running. An important part of this was to ensure that revenues generated by port activities increased. Significantly, he saw the introduction of the Vessel Tracking System (VTS) which gives the Port Office a real-time view of all vessels in Gibraltar waters, whether they are inside the port, the Bay or on the Eastside. The system allows for better planning and utilisation of anchorages and importantly the levying of port dues. Only through increased revenues could the necessary capital investments be made. Those dues are being collected, but to the best of our knowledge, these monies have not been ring-fenced but have been paid into the government’s general account. The port should have a rolling investment budget for the next 3-5 years. The formation of the Port Operators Association (www.gibpoa.com) should be instrumental in identifying investment priorities for the port. It is very reassuring that Neil Costa, the new Minister for the Port has moved swiftly to appoint Captain Roy Stanbrook, who brings many years of valuable experience to the post.
56.81% 35.27% 5.03% 2.90% (Source: Port of Gibraltar)
Pressure continued to grow from bunker operators during the year for the government to open up the Eastside for limited bunker operations. The operators promoted this as a way of adding valuable bunkering anchorages seemingly without any downside. The government had previously taken the cautious path of commissioning an environmental impact study in order to assess the effect of such operations. In one of the more candid and surreal moments of the general election campaign it was revealed that the GSD government had never had any intention of permitting bunkering on the Eastside but had embarked on an elaborate charade. The prospect of Eastside bunkering was merely to be used as a bargaining chip to negotiate with Spain, they said. Nonetheless, Algeciras continues to make significant capital investment in building onshore fuel storage tanks and this might make Gibraltar vulnerable to any EU regulatory changes. Similarly, Ceuta and TangiersMed are also well advanced with similar developments. The options for the port are limited primarily due to lack of space, but Gibraltar does need to look at the possibilities of land storage in case of regulatory changes. Onshore storage would also free up some bayside anchorages and go some way into alleviating an increasingly congested port.
Cruise Sector Against a deteriorating economic backdrop elsewhere, Gibraltar’s cruise business performed admirably. The number of cruise calls has not returned to the heady days of 2009 but visits were up by around 10 per cent. More significant for local traders is the number of cruise passengers visiting Gibraltar: 2011 was the third busiest on record and reflects the increase in the average size of vessels which are visiting Gibraltar. Year Number of cruise calls Number of passengers Year 2005 2006 2007 2008 2009 2010
Bunkers Overall the volume of bunkers supplied during the year remained stable (see table) and reflected a subdued international shipping sector. In total, the Straits region accounts for around one fifth of bunker demand for the whole of the Mediterranean region which includes the Black Sea and Suez.
4,312,297.00 2,677,259.00 381,723.00 219,871.27 7,591,150.27
N° of cruise calls 166 202 226 224 238 174
N° of passengers 189,000 211,000 288,000 319,000 363,000 304,000
The positive effects of higher tourist numbers which these larger ships bring shows that Gibraltar still retains enormous pulling power as a short visit tourist destination.
27
Annual Report & Accounts 2011
Property
We present our report on property, focussing on the sectors which most impact our members: office, retail and open residential market.
Office As at 31 December 2011, there was some 5,500sq m (59,000 sq. ft) of office space in Gibraltar to let. This excludes some older buildings available that may be purchased and refurbished as office space. However, much of the supply is generally of older, very averagely presented and inefficient office space, whilst the demand is for more modern and betterequipped, open plan floor plates.
of new office space is in the pipeline yet there is no certainty that any of the proposed schemes will start construction in 2012. Gibraltar does not need 40,000 sq metres of new modern office space right now, but it does need an immediate 10,000 sq metres. We would encourage the government to work with developers to ensure that at least one appropriate scheme starts construction in 2012. Building new offices will send a strong message to the international business community that Gibraltar is very much open for more business, whilst slowing rent rises on the existing stock which could otherwise start inhibiting business growth.
The local market, defined as those companies not selling their services outside of Gibraltar, is well supplied by landlords who are steadily converting older unused space around town into nicely presented smaller offices. This new supply seems to be meeting the increased demand which should keep rents of these offices at a steady level for the immediate future.
Retail
The minimal supply of more modern, open plan, larger footplates tenanted by the international market, is of concern and rents are rising in this sector as a result of demand exceeding supply. It is not uncommon for tenants to pay above £300 per sq metre per annum rent and in 2012 rents of above £350 per sq metre will be achieved.
Gibraltar retail rents continued to edge upwards despite these challenging times. It seems that the upward pressure on office and residential rents also impacted the retail sector. With government rates having increased significantly in recent times, much of the retail sector has had to absorb rising costs despite sales revenues remaining flat.
The provision of new office space is now urgent in order to keep rents affordable and also to allow some of our larger companies to occupy just one space as opposed to being spread over two or three locations. New space would help to ensure we continue to attract new business into Gibraltar. Collectively, and anecdotally, some 40,000 sq metres
The retail sector is important for ‘Gibraltar PLC’. Main Street is a very visible indicator of how well the local community and economy is performing. It is recognised as an important hub of social interaction and provider of employment and local commerce. If increases in property costs continue their current trend, the existence of some of our shops will be called
It was a challenging year for Gibraltar’s retail sector generally. Consumer spending is under pressure and where there is growth in retail sales, it seems to stem from online sales imported into Gibraltar, from the UK, direct to the consumer, thus not benefiting our shops.
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Annual Report & Accounts 2011
Property Property - continued into question. If our retail offering is reduced, the wider economy would suffer in terms of tourism generally and from fewer day trippers across the border.
which is predominantly used in the UK. The rationale being that the rental value of a retail premises should be assessed in every 20 foot blocks of the space away from the street front facade and that basements and ďŹ rst ďŹ&#x201A;oors used as retail should be at signiďŹ cantly lower rents than shop front space. This would ensure a more equitable way of measuring retail space. Others have suggested that the government consider a reduction in rates for the retail sector recognising the fact that the sector pays signiďŹ cant sums in import duty as part of its trade.
In the UK, the government was sufďŹ ciently concerned with the demise of the High Street that in May 2011 it commissioned a review to identify what the government, local authorities, businesses and others could do together to promote the development of new models of prosperous and diverse high streets. The report was issued in December 2011. The Chamber has a copy of this report and if any member wishes to view it they should contact the Chamber. Although the reasons for commissioning such a report would be different in Gibraltar than the UK, the Chamber would welcome a similar review locally to ensure the buoyant future of the Gibraltar retail sector.
Residential
Some members have suggested the application of a more sophisticated (RICS approved) methodology of measuring retail rents by using the â&#x20AC;&#x2DC;zoningâ&#x20AC;&#x2122; method
Demand for rental properties up to ÂŁ1,800 pcm (say ÂŁ425,000 in capital value) remained strong throughout the year. The tenant pool increased
We call for an open debate to address the issue. If free market forces remain unchecked, some of our key retailers could be priced out.
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Annual Report & Accounts 2011
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Property
in line with the growth in the number of employed persons. Furthermore, mortgage availability has been restricted to those with a greater deposit than that what was needed historically, thus many would-be first time buyers have become rental tenants. There are no further residential developments of any size in the planning process aimed at the lower end of the open market, hence rents and capital values will edge higher if Gibraltar continues to expand its employment pool. Longer term, this could impact a company’s decision to relocate to Gibraltar if residential property costs inhibit their ability to attract and retain staff in Gibraltar.
Conclusion Property costs generally are rising and there will be no new supply of large property developments at least for the next two years. The Chamber would like to work with the new government and all other interested parties, to ensure that its members, current and new, can continue trading profitably in the face of the rising property costs.
The property sector within the £500k and £1.5m bracket remains well-supplied. At the top end, higher net worth individuals bemoan the quality and available choice of quality properties, albeit this factor has minimal direct impact on our members.
Pure Focus Enabling growth in business and society Deloitte provides a full range of services which include auditing, tax and financial advisory services. As a member of Deloitte Touche Tohmatsu our services are guided by global common principles that influence the way we perform our daily work and ensure all our services are consistently of the highest quality. Our service philosophy centers around strong partner involvement and understanding of your business needs. We listen to you and work with you. We understand the environment you operate in. We communicate regularly and provide information in a form you can use to make effective business decisions.
For more information, call Joseph L Caruana or Stephen J Reyes on: Tel: +350 200 41200, Fax: +350 200 41201 info@deloitte.gi
www.deloitte.gi Merchant House, 22/24 John Mackintosh Square, P.O. Box 758, Gibraltar © 2011 Deloitte Limited. A member of Deloitte Touche Tohmatsu Limited.
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Annual Report & Accounts 2011
Tourism Embracing Tourism efficient, customer friendly and, crucially, operate with a new transport system. We believe the current providers can be stakeholders in any new structure Neil Costa, as the Minister, now has the opportunity to lead the debate. The relocation of the prison now gives the Government an opportunity to embrace one of the PDP’s suggestions and re-assess World Heritage Status. We believe Government’s vision for the Rock is to make it the most visited tourist attraction in all Andalusia – let’s make a statement of intent!
Investment and innovation Gibraltar needs a “holistic” tourism plan for the 21st century, (as mentioned by the outgoing Chief Minister at the top of the Rock in July 2010), to become a reality. It is only when Government shows its true commitment to this sector that we can encourage private investment. This in turn will promote diversification in Main Street and also in side street shops. The Government can offer rates relief to business start ups that have a tourist product – let’s have more businesses like Gibraltar Crystal which has been developed so successfully.
The Board of Directors was delighted to note that all three parties contesting the General Election placed Tourism at the forefront of their economic growth plans. We look forward to working with our new Government in developing the new ideas and opportunities it seems we now all believe in. After all, where would we be economically today if there was no tourism? Just imagine: No visiting shoppers in Main Street, no cruise ships calls, no coach passengers or day trippers etc.
Unlocking the entrepreneurial skills (and capital) of some of the High Net Worth Individuals resident on the Rock may also help stimulate investment at times where borrowing from traditional sources has become more constrained.
The reality is that tourism is absolutely vital to our economic well being. As we commented in our last Annual Report some of the problem seems to be the lack of quality data that tells us the real impact of this sector. Again we encourage the Government to understand better what the direct and indirect income benefits for tourism are so as to allow us them to make proportionate investment alongside the other priorities of the day. Our best guess remains that tourism not only is the lost “pillar” of the economy but possibly the one with the greatest potential to grow whilst we wade through tough times for financial services and uncertainty in e-Gaming.
We are also encouraged to see reference to event-led tourism in the GSLP/Liberal manifesto. In our last report we made specific reference to this and we firmly believe that Gibraltar has the necessary natural ingredients to make this an even more prominent income generator.
The Upper Rock remains Gibraltar’s greatest natural asset yet again does not receive the appropriate level of investment. The Chamber maintains that investment in the Upper Rock would be self-funding given the opportunity to raise the entry fees. To do so, however, the product has to be exciting, modern, Annual Report & Accounts 2011
32
We also hope the new Government will put their full weight behind the development of the airport. Whether too big, too expensive or not, the fact of the matter is that we now have a wonderful asset which we must leverage and promote as best we can to ensure that it generates income for its upkeep.
Chamber’s vision for the Future The backbone of tourism is transport, the ability to move people from A to B. This will necessarily need
Tourism
the reform of the taxis. Gibraltar has for too long suffered from a poor City Service. We know that the number of visitors to Gibraltar has increased hugely over the past 15 years, without any similar proportional increase in the number of taxi licences. Equally, the cruise liner business has grown providing a lucrative alternative source of income and we understand that. It is not the Chamber’s intention or desire to see taxi drivers done out of earning a fair day’s work. However, we do have responsibility to our members who complain to us regularly, to highlight the serious reputational impact the current poor service has on financial services, eGaming and commerce in general. For the Association to suggest that this service is not poor is not honest and we hope the new Government’s style of collaboration will lead to a considerable improvement with the proposed introduction of London style black cabs – just please make sure they are readily available!
Equally we hope that ALL operators see the need for a new traffic plan for the Upper Rock and work with Government to deliver a solution once and for all. It is noteworthy that since last year’s Annual Report the first phase of the refurbishment of the Great Siege Tunnels has been completed to a high standard. This is a most welcome if long overdue development and we hope that it is a portent of things to come in the general upgrade of facilities on the Upper Rock. The Chamber as well as our counterparts at the GFSB have been advocating for greater investment, innovation and focus in tourism for several years. The Board is therefore delighted that consensus seems to have finally been achieved. We look forward to supporting the new Government on their plans to develop tourism on the Rock and will shortly be inviting the new Minister responsible to the Chamber to share our views in open and constructive dialogue.
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Annual Report & Accounts 2011
Report of the Auditors To the members of the Gibraltar Chamber Of Commerce. We have audited the financial statements on pages 36 to 43, which have been prepared under the historical cost convention and on the basis of the accounting policies set out on page 39.
Respective responsibilities of the honorary treasurer, directors and auditors It is the responsibility of the honorary treasurer to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Chamber and of the surplus or deficit of the Chamber for that year. In preparing those financial statements the honorary treasurer is required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • stated whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the accounts on the going concern basis unless it is inappropriate to presume that the Chamber will continue in operation. The honorary treasurer is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Chamber. The directors are also responsible for controlling the funds of the Chamber and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Basis of opinion We conducted our audit in accordance with International Auditing Standards. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Chamber’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Chamber at 31 December 2011 and of its surplus for the year then ended, according to the best of our information and the explanations given to us and as shown by the books of the Chamber.
Ian Collinson Statutory auditor for and on behalf of BAKER TILLY (GIBRALTAR) LIMITED Chartered Accountants Honorary Auditors Date: 6 th March 2012
35
Annual Report & Accounts 2011
The Gibraltar Chamber of Commerce INCOME & EXPENDITURE ACCOUNT for the year ended 31 December 2011
2011 £
2010 £
48,620
49,735
216
96
36,366
36,854
85,202
86,685
39,909
39,753
Office rent
9,064
7,056
Electricity and water
1,084
1,181
22,635
31,732
801
(1,066)
1,230
–
2,359
2,155
77,082
80,811
8,120
5,874
INCOME
Notes
Subscriptions Deposit interest Other income
1
Total income
EXPENDITURE
Staff remuneration and social insurance
General administration
2
Bad debt written off / (amounts written back) Prevision for bad debt Depreciation
3
Total expenditure
SURPLUS FOR THE YEAR
8
There are no recognised gains or losses other than those shown above.
Annual Report & Accounts 2011
36
The Gibraltar Chamber of Commerce BALANCE SHEET for the year ended 31 December 2011
Notes
2011 £
2010 £
3
9,221
8,998
Stocks
4
552
552
Debtors
5
11,876
16,969
Cash at bank and in hand
6
73,105
54,698
85,533
72,219
(15,901)
(10,484)
NET CURRENT ASSETS
69,632
61,735
TOTAL ASSETS LESS CURRENT LIABILITIES
78,853
70,733
78,853
70,733
TANGIBLE FIXED ASSETS
CURRENT ASSETS
CREDITORS: amounts falling due within one year
7
ACCUMULATED FUND
8
Approved by the board on 6 th March 2012
G A Olivera Honorary Treasurer
37
Annual Report & Accounts 2011
The Gibraltar Chamber of Commerce CASH FLOW STATEMENT for the year ended 31 December 2011
NET CASH INFLOW FROM OPERATING ACTIVITIES
Notes
2011 £
2010 £
9
20,773
3,614
216
96
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest on deposit account
CAPITAL EXPENDITURE Payment to acquire tangible fixed assets
3
(2,582)
(580)
INCREASE IN CASH
6
18,407
3,130
Annual Report & Accounts 2011
38
The Gibraltar Chamber of Commerce PRINCIPAL ACCOUNTING POLICIES
BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention and in accordance with Gibraltar Accounting Standards.
DEPRECIATION Fixed assets are depreciated over their expected useful lives as follows:
Furniture and fittings
15% on cost
Office equipment
15% reducing balance
Computer equipment
25% reducing balance
Air conditioning units
20% on cost
Leasehold improvements
Over 9 years
STOCKS Stocks are valued at the lower of cost or net realisable value.
FOREIGN CURRENCIES Transactions denominated in foreign currencies are recorded at the rates of exchange ruling at the dates of the transactions.
39
Annual Report & Accounts 2011
The Gibraltar Chamber of Commerce NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2011
1. OTHER INCOME
2011 £
2010 £
ATA Carnets
1,125
1,650
18,838
23,923
2,852 2,048 5,286 4,838 997 382
4,325 65 6,891 – – –
36,366
36,854
Advertising
2,690
3,810
Telephone
2,624
3,184
Printing, postage and stationery
3,004
4,484
Miscellaneous expenses
138
1,416
Insurance
413
388
Entertaining
3,567
5,610
Office cleaning
2,121
2,123
Repairs and maintenance
4,084
1,837
–
1,575
Subscriptions
1,192
605
Accountancy fees
1,650
1,200
Professional fees
1,152
5,500
22,635
31,732
Fees for certificates of origin and invoices Surplus on: – Business centre – Chamber dinners – Publications – Other certificate – Training – Other
2. GENERAL ADMINISTRATION EXPENSES
Training
Annual Report & Accounts 2011
40
The Gibraltar Chamber of Commerce NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2011
3. FIXED ASSETS Leasehold improvements
Furniture and fittings
Office equipment
Air conditioning
Computer equipment
Total
£
£
£
£
£
£
35,755
11,772
23,708
8,647
10,096
89,978
–
84
830
–
1,668
2,582
35,755
11,856
24,538
8,647
11,764
92,560
35,568
9,682
20,079
7,375
8,276
80,980
27
471
565
424
872
2,359
35,595
10,153
20,644
7,799
9,148
83,339
160
1,703
3,894
848
2,616
9,221
187
2,090
3,629
1,272
1,820
8,998
Cost
At 1 January 2011 Additions during the year
At 31 December 2011
Depreciation
At 1 January 2011 Charge for year
At 31 December 2011
Net book value
At 31 December 2011
Net book value
At 31 December 2010
41
Annual Report & Accounts 2011
The Gibraltar Chamber of Commerce NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2011
2011 £
2010 £
Commemorative books, booklets & First Day Covers
252
252
Ties and shields
300
300
552
552
730
4,595
10,415
12,116
731
258
11,876
16,969
At 1 January
54,698
51,568
Net cash inflow
18,407
3,130
At 31 December
73,105
54,698
15,901
10,080
–
404
15,901
10,484
4. STOCKS Stocks at the year end comprised of the following:
5. DEBTORS
Subscriptions Other debtors Prepayments and accrued income
6. CASH AT BANK AND IN HAND
7. CREDITORS: amounts falling due within one year
Creditors and accruals PAYE and Social Security
Annual Report & Accounts 2011
42
The Gibraltar Chamber of Commerce BALANCE SHEET for the year ended 31 December 2011
2011 £
2010 £
Balance at 1 January
70,733
64,859
Surplus for the year
8,120
5,874
78,853
70,733
Surplus for the year
8,120
5,874
Interest on deposit account
(216)
(96)
7,904
5,778
Depreciation
2,359
2,155
Decrease/(increase) in debtors
5,093
(3,329)
Increase/(decrease) in creditors
5,417
(990)
20,773
3,614
31 Dec. 2011 £
31 Dec. 2010 £
6,927
6,927
8. ACCUMULATED FUND
Balance at 31 December
9. NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of results for the year to net cash flow from operating activities
Net cash inflow from operating activities
10. OTHER FINANCIAL COMMITMENTS At 31 December 2011 the Chamber had annual commitments under non-cancellable operating leases as set out below:
Operating leases on land and buildings which expire: Over five years
43
Annual Report & Accounts 2011
Gibraltar: Key Information All figures relate to 2011 unless otherwise stated
Population: 28,779 Total land area: 6.5 sq km Natural resources: None Head of State: Her Majesty Queen Elizabeth II Chief Minister: Hon Fabian Picardo, MP Legislature: Parliament (no upper house) Languages: English & Spanish
Business hours: 9am – 5pm (Mon. to Fri.) Inflation rate: 3.8% per annum Minimum wage: £5.40 per hour (£210.60 per week) Average earnings: £23,576 (2010) Registered employed: 20,975 Registered unemployed: 3.0% lmports UK: 60%, Spain: 30%, Other EU:10%
Useful weblinks:
Airlines & hotels
www.gibraltar.gov.gi www.fsc.gi www.gibraltarport.com www.companieshouse.gi www.gibraltarlaws.gov.gi www.gibyellow.gi
www.ba.com www.flymonarch.com www.easyjet.com www.caletahotel.com www.rockhotelgibraltar.com www.ocallaghanhotels.com/eliott
Employment Growth 1996 – 2010
GDP Growth 1996 – 2011 (£m)
Corporation Tax Resident Companies Utilities Companies
Tax payable 10% 20%
Personal Income Tax £0 – £10,000 of annual gross income £10,001 – £17,000 Annual gross income Balance
6% 20% 28%
No capital gains taxes No Inheritance tax / death duties or estate duty
No tax on dividends No wealth, gift or capital taxes
Special Status personal tax rates Qualifying individuals who are non-resident and derive no income from Gibraltar can apply for Category II resident status. Applications should be made to the Finance Centre Director, info@financecentre.gov.gi.
Tax payable Minimum tax payable of £22,000 per annum up to a maximum tax payable of £30,000 per annum.
Annual Report & Accounts 2011
44
Associated with
www.fiduciarygroup.com
www.gibraltarlawyers.com
Trusted since 1892 An EU Finance Centre regulated to EU Standards, Banking, Insurance, Funds, Company and Trust Law Please contact: info@isolas.gi Portland House, Glacis Road, PO Box 204, Gibraltar Tel: +350 2000 1892 Fax: +350 200 78990