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Brexit concerns cause businesses to pause
Overwhelmingly, Gibraltar’s 23,300 residents eligible to vote, will almost certainly opt to stay in the European Union when on 23 June they become the only people outside of the UK that will have an automatic right to vote in the referendum on whether Britain should remain in the EU
Castiel, who regularly advises major US, Canadian and European multi-nationals on structures and cross-border transactions, revealed: “We are getting a lot of comments from people unsure if Gibraltar is the place to be in the event of Brexit. Business leaders and directors are questioning the effect and many are doing nothing at this stage, because of the uncertainty prior to the vote.”
Even for existing Gibraltar businesses– in insurance, finance and gaming - Castiel suggested: “It may not be that they would leave immediately in the event of Brexit, but, there would be a gradual decrease in the business done here and, as an economy, we would be at risk.
“Even with a benign government in Spain, businesses and external investment would have cause to reconsider whether Gibraltar is a place they want to be,” he asserted.
Stephen Reyes, chairman of Gibraltar’s Finance Centre Council (GFCC) and chief executive of accountants, Deloitte, emphasised: “In the event of Brexit, companies will not have to react immediately, given that it will take up to two years for the UK to negotiate new terms with the EU, but they will need to plan in the intervening period up to the referendum on how Brexit will affect them and whether they can continue to carry out their business whilst the UK negotiates access to the EU.”
Mitigating factor
He doubts that Brexit would happen, “but if it does it will have a very significant impact on our finance centre. There is a mitigating factor in that about 80% of our business is UK-facing and so long as we can continue with access to the UK market the immediate impact may not be catastrophic.
“However, our future growth will then depend on whether the UK includes Gibraltar financial services in any system they manage to negotiate outside of the EU”.
The GFCC, which represents all of the jurisdiction’s professional bodies, met in April to formulate a view on Brexit and any action to take, but Reyes felt: “On our own, for a small economy like Gibraltar, it will be difficult if not impossible to negotiate our own access agreements separate to the UK. The record on UK support for our inclusion in key agreements in the past has not been good, but this time we see the relationship between the UK and Gibraltar being excellent and the UK being more supportive of our situation, at least according to government.
Chief Minister Fabian Picardo at the May 2015 launch of the Brussels office with his deputy, Dr Joseph Garcia, who is Minister for European Affairs
Contingency plans are already being made by businesses in the event of a ‘No’ vote (Brexit), while other firms
are holding back on decisions to invest in the territory given the uncertainty surrounding the UK government’s ability to negotiate continued access to the single market.
The lodestar is to secure EU ‘passporting’ rights for the financial services and gaming sectors that make up nearly half of Gibraltar’s £1.7bn economy.
However, the most worrying aspect of Brexit for the British Overseas Territory, is the “very real” potential for Spain to disrupt the free flow of people and goods on which Gibraltar depends at the shared border, if the European Commission was not monitoring the situation; that would be “a disaster”, Chief Minister Fabian Picardo, wrote in a Times newspaper article.
“Fluidity at the border with Spain is a lifeline for people and commerce, not just for Gibraltarians, but also for 7,000 Spanish workers and many businessmen on both sides of the fence,” he said in the March article after the caretaker Spanish Foreign Minister, José
Manuel García-Margallo, told a national radio programme that if there was Brexit “we’ll be talking about Gibraltar the very next day.”
In a briefing document, the British government warned that there was “no certainty” the border would remain open post any vote for Brexit.
Snr García-Margallo, a member of the Partido Popular party that ruled until Spain’s inconclusive general election in December (and which still has to be resolved this summer), has previously threatened to use the border as a lever to force discussions with the UK on joint sovereignty of Gibraltar.
Don’t think about it
A ‘No’ vote in the UK referendum would mean Gibraltar also leaving the EU, because The Rock’s ‘membership’ is by virtue of UK membership, as the sponsoring State since 1973.
A UK exit from the EU “doesn’t bear thinking about” and would hit La Linea, the Spanish town immediately over the border, hard, the town’s mayor Juan Franco, said during a recent official visit to Gibraltar.
“When Gibraltar sneezes, La Linea catches a cold,” Sr Franco said. “So if Gibraltar catches pneumonia, things could get quite complicated. In that sense, I don’t even want to dwell on the prospect of Brexit.”
Gibraltar’s four largest legal firms – Hassans, Triay & Triay, ISOLAS and TSN, have all joined a legal group formed by the Britain Better in Europe campaign.
Is this the place to be?
Michael Castiel, a senior partner at Hassans specialising in international tax, corporate and business law, remarked: “All partners feel that if push comes to shove, we would be better staying in the EU – despite the issues and difficulties of being in the EU. There is no doubt that for us to be excluded from the Single Market would be devastating for the economy.”
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