Brexit Aftermath

Gibraltar Magazine – August 2016
Ian le Breton

September? Just National Day, back to school – and Brexit

Unbelievably, the calendar has somehow advanced to September, the month in which we celebrate National Day. For families, it also marks the end of the summer holiday season and the start of the new academic year. And what a summer it has been. Summer 2016 will, I suspect, be studied for decades to come as the seismic events that occurred over the past nine weeks are analysed and the history books are written and rewritten.

My column follows on naturally from last month. I make no apology for continuing with the “Brexit” theme although, once again, I will focus on the way forward rather than dwelling on the result itself. That, after all, cannot be changed. It is the shape of things to come that is now of interest.

I’ve spent some time in the UK since 23 June, mainly in London but also further afield. For some weeks after the result, one could be forgiven for thinking that nothing else really mattered news-wise. Shocking terrorist atrocities in Europe, an attempted coup in Turkey, as well as the ongoing circus that is the US election, may have dominated the international agenda, but in the UK, the summer of 2016 will be remembered for the referendum and its aftermath.

Politically, the implications were brutal – David Cameron resigned, the Conservative party initiated a vicious leadership contest and the Labour party descended into chaos. In the event, Theresa May was swiftly installed at Number 10, there was a wholesale clear out of those deemed responsible for the failure of the “remain” campaign, most notably Chancellor George Osborne, and the appointment to the cabinet of ministers dedicated to overseeing “Brexit” and managing the consequences.

It is a wonder that the markets carried on operating relatively normally after the initial shocks. This is a testament to the underlying strength of the British economy and the resilience of the financial sector that has, once again, demonstrated its resistance to international turmoil.

True, the pound “tanked” (to use the vernacular) and in US dollar terms at least, it fell to levels not seen for decades. Remember though that if you are exporting, foreigners will now find our prices very much more attractive in terms of their own currency while imported goods and materials will conversely be more expensive. Put another way, there is most definitely a silver lining to the pound’s devaluation.

Of course the news agenda is unlikely to calm down any time soon. The Clinton-Trump presidential race in the US will be decided in November. It promises to be a feisty one. Should Hilary Clinton prevail, imagine the summit meetings – Clinton, Merkel and May. A mere man won’t stand a chance. But there is the real possibility of a Trump victory. Brexit, after all, clearly demonstrates that the “establishment” should take nothing for granted. One way or the other, interesting times most definitely lie ahead.

Where does all this leave Gibraltar and, at least for the purposes of this column, what are the likely financial implications?

Last month I discussed the importance of seeking new markets and specifically mentioned looking south – at Africa – where market entry, despite the odds, need not be impossible. I heard from a reader who asked if I was serious about Gibraltar firms looking to set up in Morocco and other African countries “now that we can’t work in Europe”.

“Why not, madam?” I replied, at least to the first part of the question. I suggested she re-read my piece for the Africa suggestion is merely part of the suggested strategy. Europe, as I told her, continues to offer enormous possibilities for Gibraltar whatever new arrangement the UK makes with the 27 remaining EU countries.

It is important to debunk the theory that Gibraltar firms will not be able to do business in Europe any more – it simply isn’t true. We don’t yet know the terms under which Britain will operate but new Foreign Secretary Boris Johnson said recently that we are not turning our back on Europe. From a business perspective, this is quite right in my opinion and hopefully this is a view shared by our erstwhile EU partners – including those immediately across the border.

Equally, let us not stick our heads in the ground. As the new British Prime Minister said from the outset, “Brexit means Brexit”. This is no time for businesses to panic – but it is also unwise to pretend that nothing is happening. All firms, large and small, will need to consider the options as they emerge – and respond to them vigorously. In other words, it is essential to remain alert and focussed.

Back then to my somewhat confused correspondent, for whom the prospect of Africa is clearly a step too far. I have written on several previous occasions about the commercial opportunities in the UK that are available to local businesses. This is particularly true for the services sector. After all, many of them chose to set up in Gibraltar in the first place for that very reason.

I am sure my friends at Gibraltar Crystal continue to export a sizeable proportion of their production to the UK. Apart from manufacturing though, almost everything else that we do well locally can be exported to the UK. Most of us in the financial services sector are already, to a greater or lesser extent, doing so, but further opportunities abound in areas such as private client work, corporate services and retirement planning.

As regular readers will know, the days when “offshore” finance centres could get by with offering just a lack of regulation and taxation are long gone. In today’s world of transparency and international co-operation, they need much, much more. Gibraltar has been at the forefront of this transformation and benefits from a raft of talent and sector expertise that leaves us well placed to offer financial services of the highest calibre and with more than sufficient sophistication for a UK-based audience.

The absence of VAT together with a legal system based on English law means that there is no reason why we cannot compete effectively with our peers. We are more than capable of holding our own against other territories, including the Channel Islands or Isle of Man, and we must continue our efforts to become better known in the UK and beyond. We are extremely fortunate in being able to call on Jimmy Tipping’s excellent team at Gibraltar Finance. In London, Dominique Searle has taken over as our representative following Albert Poggio’s recent retirement. Coupled with the hugely impressive facilities available at Gibraltar House on Strand, the tools are in place and available for local firms to utilise. We must do so.

Before I move on from promotion, we should not underestimate the enormous benefit accruing to Gibraltar as a result of our efforts during the recent referendum. Gibraltar won the race to become the first to declare just after 11.30 pm, ensuring unbridled worldwide media attention. By voting to remain by a massive 96% we also clearly demonstrated our pro-European credentials and hopefully this will be taken account of, and reflected, in the Brexit negotiations.

And let us not forget the valiant efforts of our very own Lincoln Red Imps FC who beat the mighty Celtic in a Champions League match we will never forget. As a London-based friend said: “Wow, Gibraltar is the lead story on Sky Sports tonight”. Praise indeed. Now is the time to demonstrate that we are no mere imps when it comes to winning international business in the UK and beyond.

We have a great deal to celebrate this month. Happy National Day – and to those returning to school, learn well about these interesting times. We have to have an international outlook and if we don’t grasp these chances now, we may never see such opportunities again.