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Gibraltar: a strong economy in choppy waters

The Gibraltarian Chamber of Commerce has taken stock of the Rock’s importance to the local economy – and it’s doing its bit to keep it afloat.

The Gibraltarian Chamber of Commerce has updated its study on the local economy’s effect on the Campo de Gibraltar, and it looks positive. Gib was largely insulated from the world’s economic downturn from 2008 onwards as its economy focused on areas that were not badly hit; the government’s moves to bring the territory completely in line with all of Europe’s directives (confirmed in our report on the new Gibraltar House) has helped perceptions.

Perceptions, however, are window dressing compared to the hard facts behind the economy – and they make positive reading. Gibraltar continues to be a major economic driver in the region, for example accounting for one in four new jobs in the area (compared to one in six in 2009).

Part of this effect will be due to the Spanish economy having been hampered particularly badly by the financial crisis. Prices in Spain have tumbled while unemployment has risen. The report makes use of a number of the ways in which the Spanish and Gibraltarian economies interact and takes account not only of government figures but also a survey of the Chamber of Commerce members.

Facts and figures

Gibraltar remains a strong economic player. In 2013 it imported almost £381m of goods from Spain, a figure that includes net petroleum imports. The exact figures behind the “one in four jobs” claim are that Gibraltar has 25,907 out of the 109,189 jobs recorded in the Campo region overall in that year. This doesn’t take any account of jobs supported by the Gibraltar economy but located elsewhere. Gibraltar accounts for around 11% of employment in the region overall.

Also relating to the Gib economy was the £102m earned by Spanish Frontier workers in 2013, £65m of which left the country and was spent in Andalucia. Other frontier workers earned a further £105m in Gibraltar, repatriating 20% and spending the remainder in Spain.

It’s not just the workers that spend money in the region, however; visitors also account for a lot of money. This accounted for some £207m spent in Gibraltar in 2013, £146m of which came from visitors from the Campo; residents of Gibraltar, meanwhile, visited other places in the region and spent £46m. Gibraltarians with second homes in the Campo de Gibraltar spent more than £62m in Spain, £40m of which was in the Campo region.

Overall the report concludes that Gibraltar increased the economic output of the Campo de Gibraltar by £554m in 2013, a considerable increase on the figures from the 2009 survey. Interestingly the 2009 report was based on data from 2007, meaning that the figures predated the crash; any increase between then and now has to take account of any potential dip due to the financial crisis.


Chamber President, Christian Hernandez, commenting in the study’s official launch release said: “We have worked extremely hard to obtain this study and have expended significant financial resources to produce it. However, the result has been well worth it. These updated results clearly show the impact of the Gibraltar economy on the Campo de Gibraltar and evidence the very positive influence and impact which Gibraltar’s economy has on the Campo region and also to an extent which the Campo has on Gibraltar.”

“The first study used data from before the international financial crisis and before Spain entered a prolonged recession. In contrast, since then Gibraltar’s economy has continued to grow, create jobs and attract more inward investment. All of this has had very real benefits for Gibraltar and also for the Campo as a whole.”

The Campo de Gibraltar is an area accounting not only for the Rock but its locality as well. The study first came out in 2009 but has been completely updated to include data from 2013, which at the moment is the most recent information available. A six-page extract from the report is available at Both the new version and its predecessor were researched independently by Prof. John Fletcher of Bournemouth University and a team of colleagues, commissioned by the Chamber.

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.

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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.'