2016 ANNUAL REPORT & ACCOUNTS

Gibraltar Chamber of Commerce

Facts

Figures

Past

Future

www.gibraltarchamberofcommerce.com

2016

Annual Report & Accounts

Gibtelecom provides customer service and technical support around the clock each and every day of the year

You can depend on us.

We are committed to problem resolution and offer 24/7 support so you won’t feel frustrated when you need to speak to someone on evenings, weekends or public holidays.

For details on our broadband and mobile packages visit www.gibtele.com

Contents

Contents

05

08

14

16

Foreword

Politics & Economics

Wholesale Sector

Retail Sector

19

23

26

30

Banking & Finance

Port & Shipping

Tourism Sector

Property Report

33

34

42

Annual Accounts Auditors Letter

Annual Accounts

Key information

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 03

www.pwc.gi

The value you’re looking for Assurance Advisory Tax

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.gi PricewaterhouseCoopers Limited 327 Main Street Gibraltar Tel: +350 20073520

© 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

Visitors to Gibraltar

cross border workforce

cross border tourists

40% 90%

Foreword

Working in Gibraltar

“As the year kicked off there was the sense of optimism that 2016 would bring with it the usual mix of opportunities and challenges.”

According to Google Zeitgeist, Brexit was the third most frequent search term around the world during 2016. (Brexit was itself trumped in the ranking by “US elections” and the “Olympics”). In the UK and probably Gibraltar, however, it was the most frequent search term. Of that we can be certain. What is much less certain, despite Theresa May’s frequent proclamations, is what Brexit actually means. Or more specifically what the implications of Brexit will be for Gibraltar, the UK or for Europe.

As the year kicked off there was the sense of optimism that 2016 would bring with it the usual mix of opportunities and challenges. The June referendum would be a notable date in the calendar but most of the Rock’s businesses viewed it as an occasion to re-affirm their Europhile loyalties and then carry on as normal.

The result of the referendum locally surprised no one.

The UK result, however, was not expected. In the days afterward, the UK result hung over Gibraltar like an immovable levanter cloud whilst across the way the sun continued to shine regardless.

It did not take long for the government to spring into action assembling Brexit committees, task forces and advisory groups. The Chamber played its part by conducting initial assessments of which sectors would be affected (all of them) and how. Several members contacted the Chamber with all manner of enquiries such as the effects of Brexit on tourism, regulatory changes or the continued availability of EU funds. All enquires and assessments quickly pointed to a unifying theme: the border. As you will read throughout this year’s report it does not matter what business you are in locally, at some point it will be affected by the border and its fluidity. Around 40% of Gibraltar’s workforce crosses the border in Gibraltar to come to work each day; more than 90% of the visitors coming to Gibraltar arrive through the land frontier; everything sold in Gibraltar is imported mainly via the 300+ trucks entering Gibraltar each weekday. Directly or indirectly the border impacts most aspects of life on the Rock.

Is any of this threatened by Gibraltar (and the UK) leaving the European Union? At the moment, nobody knows.

What we do know is that some things will not change.

Gibraltar is not part of the Schengen agreement and it is also outside the EU customs union. Post Brexit this will not change. The Chamber sees no justification for the 12,000+ cross frontier workers to lose their jobs just because Gibraltar has left the EU club. In fact, we see more companies looking to get established on the Rock and these will create additional jobs for locals and non-locals alike.

The initial indications from Spain’s new Foreign Minister do give some cause for hope. Perhaps the realisation that what is good for cross-border workers and businesses is also good for the Campo economy is (at last!) beginning to resonate in Madrid. The two-pronged approach employed by the Chamber – publishing the Economic Impact Study and participating in the CrossFrontier Group – can claim to have had at least some influence in bringing this about. What has also become noticeable since the June referendum is that businesses and influential organisations in the Campo have been lobbying the Madrid government to acknowledge the region’s own exposure to Brexit if border fluidity becomes impeded.

Against the backdrop of the Brexit result, your board has pressed on with a full agenda of matters: the changes to the Employment Tribunal adopted many of the proposals from the Chamber’s Agenda for Change in Employment legislation. These changes may be dry legislative amendments but the updated rules should make Gibraltar a more attractive place for businesses in the future.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 05

Foreword cont. “change may not always be welcome but with it almost invariably comes opportunity and it is this which plays to the strength and dynamism which has enabled Gibraltar to evolve and shape its own destiny�.

We acknowledged the government’s firmer stance in collecting arrears and its commitment to increased efficiency across government departments. We have campaigned about this for several years and we look forward to the publication of the next set of Government Estimates to show that they have been successful in achieving this.

The long running sore about the availability of the City Taxi service provoked heated debate from dozens of our members in the early autumn. Feelings on both sides of the argument were as strong as ever and meetings held with government inferred that measures would be introduced to improve the situation. These hopes were later dashed as the availability of taxis improved greatly a month or so after the outcry began. Let us hope that the availability of taxis for the City Service continues once the new cruise season begins.

06 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

Other changes such as the introduction of an integrated transport plan have now been revealed. The Chamber will be watching closely to see if this new plan will solve the many transport issues that have afflicted Gibraltar over recent years.

In summary, 2016 was a year which brought some surprises, not all of them welcome ones, as well as continued growth in the economy. The implications of the June referendum will affect Gibraltar and its economy for many years to come. But as this community has experienced on so many occasions in the past, change may not always be welcome but with it almost invariably comes opportunity and it is this which plays to the strength and dynamism which has enabled Gibraltar to evolve and shape its own destiny.

Politics and Economics 2016

Brexit referendum

Brexit referendum

Turnout

Vote Remain

84% 96%

“Gibraltar is caught up in these uncertain times and the UK ‘Brexit’ referendum has focused the attention of politicians both locally and throughout the EU as never before.”

Politics 2016 brought about unexpected results at the polls in the USA and the UK, these in turn have the potential to bring sweeping changes but what these will be and when they will come to pass is, as yet, unknown. Gibraltar is caught up in these uncertain times and the UK ‘Brexit’ referendum has focused the attention of politicians both locally and throughout the EU as never before.

The referendum itself, although it triggered widespread uncertainty among the 28 member states of the EU, was perceived in Gibraltar in even starker terms. Nevertheless, the day of the polls saw Gibraltar at its best: united and determined to express its voice. A turnout of 84% with a ‘yes’ vote of 96%. The results of the Gibraltar poll have been widely commented, the clear response of the Gibraltar electorate was admirable and stands to our credit but the threat remains.

The Chief Minister has been unflagging in his efforts to lobby on Gibraltar’s behalf. There are, however, too many ‘moving pieces’ for there to be any clarity as to the path ahead. It is hoped however that he has won new friends to our cause, particularly as the individual relationships forged by the Chief Minister are in need of renewal now that the old guard have gone and new figures have emerged.

The closest Cameron allies followed the Prime Minister through the door marked “Exit” and a new team under Teresa May were installed in Government. The political landscape in Europe and the USA changed dramatically and further changes are anticipated in those EU countries scheduled to hold general elections in 2017. The Gibraltar perspective however requires that, whilst the negotiations will likely be conducted by the EU countries with the most economic power, nevertheless our attention should be focused on our neighbours.

08 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

June 2016 saw a second general election in Spain following the indecisive result of the election in December 2015. Although again no party was able to command a parliamentary majority there was sufficient momentum behind the Partido Popular to enter into minority government. A new administration in Spain has particular relevance in the context of predicting the changes that the future may bring.

Sr Dastis the Foreign Secretary has brought changes in style, if not substance, and if the antagonism provided by his predecessor has gone, in reality Gibraltar has no expectation that Madrid’s political objectives have changed.

2016 saw an abatement, but not a cessation, of Spanish incursions into our waters and an improved flow at the frontier. It is not yet clear whether 2016 represents a highwater mark in our relations with our neighbours with a more restrained approach to diplomacy and an absence of queues at the border. The fear is that 2016 was too good to be true and it can only get worse but the hope is that the status quo will somehow endure.

Although Brexit and its aftermath have dominated politics, like few events in the past, it is reassuring that the private sector generally continues in their support of Gibraltar and commitment to the community. In these uncertain times, however, it is hoped that Gibraltar’s economy is under tight control especially with regard to current expenditure.

Unless our economy is in good health it is difficult to understand what options are available to Government if the ‘going gets tough!’

World output

Currently estimated

projected January 2016

3.1% 3.4%

Gibraltar is exposed to two uncertainties, the general uncertainty resulting from Brexit and the additional uncertainty of where it will stand in terms of the frontier with Spain.

Is the next evolution of big data, big judgment?

Find out how EY is helping companies transform the way decisions are made. ey.com/analytics #BetterQuestions JJ Pisharello info@gi.ey.com +350 200 13 200 ey.com/gi

Along with the need to be able to continue to provide services in the financial sectors, the issue of frontier fluidity is vital for the economy. A ‘sticky’ frontier will put much of the economy at risk, with negative consequences for the Campo de Gibraltar as well as for Gibraltar. The links and interdependencies between the two economies and the benefits in employment and expenditure terms that Gibraltar brings to the Campo are well understood both at a local regional level and further afield in London, Madrid and Brussels. The Impact studies commissioned by the Chamber have undoubtedly helped to crystallise these matters and are increasingly quoted by the media, politicians and others.

Gibraltar has shown, on many occasions in the past that it has the resilience, dynamism and the ability to adapt to change. Brexit, and the challenges that will arise because of it, will retest this ability. Gibraltar’s businesses and its people must respond appropriately.

© 2015 EYGM Limited. All Rights Reserved. ED0116

The noises coming from the EU in general and Spain in particular, are that whatever is negotiated for the UK will not apply to Gibraltar without the consent of Spain. In this context, the work being done by Government, as well as the contributions made by others (including submissions made to the House of Lords EU Select Committee) in putting forward Gibraltar’s unique circumstances and needs are to be applauded and supported. These and other appropriate actions need to be continued and intensified, as there is much at stake.

Politics and Economics 2016

World output

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 09

Building Corporate Partnerships Our Corporate Banking team of eight is completely committed not only to the development of your plans but also to becoming involved in them.

Their diverse range of both experience and perspective creates a personalised service catering for all your banking needs.

We pride ourselves on going the extra mile for you – working alongside you at every stage in the construction of your corporate future.

Welcome to a bank out of the ordinary.

JYSKE BANK (GIBRALTAR) LTD. • 76, Main Street • P.O. Box 143 • Gibraltar Tel. +350 606 33322 • Fax +350 200 76782 • info@jyskebank.gi • www.jyskebank.gi Jyske Bank (Gibraltar) Ltd. is licensed by the Financial Services Commission, Licence No. FSC 001 00B. Services and products are not available to everybody, for instance not to residents of the US.

UK imports from EU

billion

billion

220 290

“A case in point is the UK car industry, which experienced a 17-year high in production in 2016, with 1.73 million cars produced”

Politics and Economics 2016

UK exports from EU

Economics 2016 produced a lacklustre outturn for the world economy with outcomes generally lower than projected in January 2016. This is revealed in the IMF’s World Economic Outlook update published in January 2017.

World output for 2016 is now estimated at 3.1% versus a projection of 3.4% made in January 2016. Weaker than expected US growth on the first half of the year, plus the uncertainty created by the Brexit vote, were among the contributing factors.

As to the UK economy, the overall outlook remains challenging. Following the Brexit vote, Sterling crashed to a 31 year low against the US dollar. Sterling also lost 10% in value against the Euro. The FTSE 100 slumped initially but recovered shortly afterwards when the Bank of England gave heavy hints that interest rates would be cut. Sterling remains low. While this could nominally help exports, the price of imports of both production and consumer goods will rise. The first will work against any increases in competitiveness bought about by depreciation of Sterling while the second will result in inflationary pressure. The IMF has downgraded its forecast for the UK economy, the expected outcome for 2016 GDP growth reduces from 2.2% to 2.0%. For 2017 and 2018 growth is expected to reduce to 1.5% and 1.4% respectively. The latest forecast from the Bank of England is in line with the IMF’s projections.

There is, of course, a deal of uncertainty going forwards, as is reflected in the value of Sterling. The EU, the world’s biggest economic block, is the UK’s single biggest trading partner.

The economic interdependencies that exist between the UK and the EU show the trade in goods and services for 2015, just under half (44% of exports comprising £220 billion out of £510 billion total exports) went to the EU. On the import side, 53% (£290 billion) of total imports came from the EU. This latter figure includes components and other resources needed for the UK manufacturing industry.

A case in point is the UK car industry, which experienced a 17-year high in production in 2016, with 1.73 million cars produced. Exports were at record levels, with 1.35 million cars exported. Of these, half (0.76 million) went to the EU, which is by far the biggest market for the UK industry. (Second placed USA accounted for a much lower 15% of UK car exports). Europe also supplies most of the components for UK vehicle production, underlying the critical importance of tariff and barrier free trade to the future of UK automotive production.

In services alone, the UK exported £88.9 billion of services to the EU, or 40% of all exports to the EU. The UK also has a trade surplus in services with the EU on services which is larger than the one it enjoys with the US.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 11

Politics and Economics 2016 cont.

Public Debt Estimate

Public Debt Actual

million

million

400 446

“The other long standing concern of the Chamber is the level of public debt, and increasingly so, on what is counted as public debt.”

The Spanish economy performed better than expected with the January 2016 GDP growth projection upgraded from 2.7% to 3.2%, the highest in the Eurozone. With the Tourism sector performing strongly, manufacturing holding up and consumer spending recovering, the recovery seems, as reported last year, to be gaining traction. The employment outlook is also improving, but unemployment remains stubbornly high, dropping from 21.4% last year to the latest (end 2016) figure of 18.63%. This issue remains as Spain’s biggest, with only Greece having a worse rate in Europe. Andalucía saw a slight improvement to 28%. By contrast the Campo de Gibraltar unfortunately saw an increase in unemployment to 40% according to the latest available figures.

The entire Brexit issue is, of course, also of primordial interest to Gibraltar and its economy. Gibraltar’s current and successful economic model has been largely based on membership of the EU, and a (relatively) free flowing frontier with Spain although it is in fact the case that over 90% of the business Gibraltar has is with the UK. These basic ingredients have allowed Gibraltar to prosper and develop since 1985, successfully transitioning the move away from a Ministry of Defence based economy. GDP growth has been consistently and firmly positive over most of the last three decades.

The latest available estimates for GDP growth calculate that for the financial year 2015/2016, the economy grew by 8%, which is impressive by any standards.

(See Figure 1 below.)

700

2500.00

Gibraltar GDP Progression

600 2000.00

500 400

1500.00

300 200

1000.00

100 500.00

2 al tu Ac

11 0/ 01

2 al tu Ac

12 1/ 01

2 al tu Ac

13 2/ 01

2 al tu Ac

14 3/ 01

2 al tu Ac

15 4/ 01 tu ut tO as ec r o

16

rn

/ 15 20

e at t im Es

/1 16 20

7

0.00

20 01 /0 20 2 02 /0 20 3 03 /0 20 4 04 /0 20 5 05 /0 20 6 06 /0 20 7 07 /0 20 8 08 /0 20 9 09 /1 20 0 10 /1 20 1 11 /1 20 2 12 /1 20 3 13 /1 20 4 14 /1 20 5 15 /1 20 6 16 /1 20 7 17 /1 8

0

GDP £M

F

GoG Recurrent Revenue £M

Figure 1

GDP Progression.

12 |

Linear (GDP £M)

GoG Recurrent Expenditure £M

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

Figure 2.

Gibraltar Government Recurrent Revenue and Expenditure.

Put simply, there is no getting away from the principle that aggregation of liabilities, when applied appropriately, means that all debt, exposure (actual or potential) must be added up and held against the source of income (revenue or capital) that will be looked to when repayment is due. Money which the government has borrowed will need to be paid back.

However, provided that the investments perform as planned, the Chief Minister is still entitled to the support of our institutions.

However, the Chamber is concerned about are the overall contingent liabilities that the Government is exposed to. This was reflected in last year’s report, when the Chamber’s concerns about Gibraltar Savings Banks investments were aired. The concern was, and remains, that should these investments turn sour, the government (and hence the taxpayer) would, as the ultimate guarantor, need to meet these liabilities. Prudent banking practice suggests that all such liabilities (including public debt) need to be taken into account.

Politics and Economics 2016

The other long standing concern of the Chamber is the level of public debt, and increasingly so, on what is counted as public debt. In the 2016/17 estimates the figure for the level of gross debt was forecast to be at £446m as at end March 2016, for an increase of £46m over estimate.

The estimate for end March 2017 is broadly the same at £442m. Net debt is also increased from the estimate of £314.2m to a forecast of £345.7 as at end March 2016. The estimate for end March 2017 is for a similar level. With an economy approaching £1.6 billion of GDP, these debt levels are entirely manageable.

“The concern was, and remains, that should these investments turn sour, the government (and hence the taxpayer) would, as the ultimate guarantor, need to meet these liabilities.”

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 13

Wholesale Sector “frontier fluidity is the number one issue which will affect most businesses after the UK and Gibraltar leave the EU.�

Before the June referendum, the Chamber had been made aware of a change in the operating procedures by Spanish officials for freight entering Gibraltar. The sharp increase in random checks began in March of 2016 and are continuing.

No reason has been given for these but the delays and additional handling costs are an unwelcome burden for local businesses. This is particularly the case for those businesses which have rarely undergone physical checks on goods which are leaving the EU Customs Union.

Having been alerted, the Chamber duly informed the government which was understandably concerned that the new inspection regime might be a portent of things to come. The government acted quickly and wrote to the European Commission to flag that Spanish authorities looked to be exceeding their powers of reasonable and proportionate checks. Unfortunately, the checks continue to this day. More details of the length of delays and the nature of the checks is being sought and when collated this too will be relayed to the government.

The concern is that post-Brexit, or even after Article 50 of the Lisbon Treaty is invoked, the checks may cause longer delays. As discussed elsewhere in this report, frontier fluidity is the number one issue which will affect most businesses after the UK and Gibraltar leave the EU. Nobody believes that the Spanish government will shut the frontier entirely, but those with longer memories remain fearful of Spanish intentions.

14 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

The logistics in supplying Gibraltar are complex and potentially vulnerable. Each weekday around 300 trucks and vans are processed through the Entry Processing Unit at the frontier.. Refrigeration, computerisation and palleted loads have enabled Gibraltar to rely on much shorter delivery cycles. On the odd occasions in the past such as with cross channel ferry strikes, bad weather or fuel shortages have shown how the logistics cycle supplying Gibraltar from across Europe can be interrupted, albeit temporarily. Any permanent change to frontier fluidity needs to be met by alternatives ready to step in. Sea freight is the obvious alternative, but Gibraltar does not currently have the requisite port infrastructure to be able to handle such a sharp increase in volumes. An initial needs assessment should be conducted forthwith and the necessary capital expenditure should at least be budgeted for, now. Then if frontier fluidity becomes an ongoing problem post-Brexit, the necessary works to improve the port’s freight handling facilities can commence without delay.

The result of the June referendum had another impact on local traders: the fall in sterling against the euro cut into the margins of local businesses importing goods from the Eurozone. This impact, coupled with an uptick in oil prices, will add to inflationary pressures in the year ahead. Whether the knock-on effects of price increases in the months ahead will cause a slowdown in consumer spending remains to be seen, but it is likely to come at a time when uncertainty in the negotiations about the Brexit settlement will be most intense.

Wholesale Sector Photo: Harry Mitchell

Loading Bays

Business Licences

After a prolonged period of inaction there has been a noticeable campaign against vehicles parked illegally in loading bays. This has been a welcome improvement and has helped local wholesalers to make timely deliveries around town. Nevertheless, with tighter restrictions on access times to Main Street there is a need for more loading bays in locations nearby.

Chamber directors have worked tirelessly with their counterparts from the GFSB to ensure that the new business licence regime has bedded in properly. The initial surge of applications has stabilised, but inevitably as happens with new legislation, further amendments have been necessary. The government has been understanding to our petitions and looks forward to working with the relevant government departments in the year ahead.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 15

Retail Sector

“The success of these individual businesses also highlights that even with the growing dominance of online shopping there are some parts of the retail sector, particularly in food and drink, where Gibraltar can remain competitive” Despite the June referendum result, there was continued investment in retail premises by a number of traders on Main Street and this shows the enormous resilience of Gibraltar’s retail sector. One of the largest investments was in the old premises of Barclays Bank which after considerable work was turned into a flagship clothing store. The quality of the refit matches that of stores in London’s West End. The other major change was the welcome introduction of Debenhams in both the ICC and opposite the Piazza. Over and above the investment in the refurbishment, these businesses have safeguarded existing jobs and in many cases created new ones to boot.

Investments like these continue to bring additional vibrancy to Gibraltar’s retail scene and also highlight the confidence in our economy.

Other notable additions during the year were some new but familiar franchise names arriving in Gibraltar: Costa Coffee, Hotel Chocolat and Bejer Jamon. All of these have been attracted by the thriving economy and also by the high number of tourists coming to Gibraltar each year.

Tourists coming from elsewhere are reassured by seeing these familiar retail brands on Main Street and elsewhere.

When taking together with locally owned and operated shops it is fair to say that Gibraltar offers a truly eclectic and unique mix for shoppers. We have avoided becoming another clone town, like so many high streets in the UK which look increasingly alike. Although rents continue to outpace inflation (and rates rising in tandem), the demand is evident in that few premises remain vacant for long. All of this makes Main Street the pre-eminent retail thoroughfare in Gibraltar.

Several new bars and restaurants have also opened during the year in Casemates and Ocean Village. The neighbouring areas of Chatham Counterguard and Irish Town have been completely transformed in recent years and what used to be pedestrian cut through areas have become some of Gibraltar’s most popular entertainment areas for locals and visitors alike.

The success of these individual businesses also highlights that with the growing dominance of online shopping there are some parts of the retail sector, particularly in food and drink, where Gibraltar can remain competitive and keep the customers coming back for more. With more choice comes increased competition and this has helped to improve the quality of service and of what these establishments offer.

60 wines by the glass 40 small dishes of Mediterranean cuisine 30 John Mackintosh Square GX11 1AA Gibraltar Tel:200 70201 info@vinopolisgastrobar.gi www.vinopolisgastrobar.gi

16 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

Retail Sector

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 17

Retail Sector That said, the relentless growth of online shopping, like elsewhere, continues to affect the entire retail sector in Gibraltar. This is particularly the case in the final three months of the year when huge volumes of parcels arrive in Gibraltar for the Christmas season. The variety of goods purchased online is expanding all the time, although many e-tailers will not despatch certain product categories, such as electronics, to Gibraltar. This provides a degree of protection for local businesses, but this is likely to be temporary.

them. Purchases made online are sent to customers all over Europe. These businesses are unlikely to grow to the level of local online gaming operators but the experience and knowledge which they generate may be the start of another strand of Gibraltar’s business offering.

There are some dark clouds ahead for Gibraltar’s retail sector and in the context of Brexit context, the entire economy. Nevertheless, the pragmatic approach of the Rock’s traders show that many local businesses are up for whatever challenges lie ahead.

Some enterprising companies have embraced the opportunity of the internet to set up and fulfilment houses from Gibraltar. These operations are not large but for niche product ranges Gibraltar is an ideal base to run

Chocolates that mean business...

Make an impression with an unforgettable gift from Hotel Chocolat. Client Gifts or Team Awards.

We can even personalise them to your own brand with ribbon, logos and stickers. Arrange a meeting with us to discuss and we will bring the chocolate!

Hotel Chocolat Gibraltar

10% Discount when you spend £250 in store

154 Main Street, Gibraltar Monday - Friday 10am - 7pm Saturday 10am - 5pm Tel: 20045859

hotelchocolatgibraltar@sandpiperci.com

18 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

It is perhaps a sign of the times that the ultimate barometer of the economy, the finance sector, is the first to react to challenges and that, year on year, these challenges seem more significant and extraordinary.

The threat of Brexit was, arguably, felt more keenly here in Gibraltar due to the correlation between the 96% vote to Remain (unique) and the existential threat to life as we know it from an altogether different quarter (Spain).

Attempting to second guess Spain’s possible reaction to the Brexit vote as far as Gibraltar is concerned could well present an additional and unwanted challenge the economy (access to the market).

The finance sector saw some significant slowdown early on in the year, as the referendum loomed large. A number of initiatives slowed or stopped altogether, the mantra being ‘wait and see’. It is entirely reasonable for investors not to want to splash out in times of uncertainty.

However, they must continue to make money too. Some comfort was gained from early talk of access to the UK market post-Brexit and from alternative jurisdiction

arbitrage; some competitor jurisdictions have been more helpful than others!

Confidence started to flow back after a summer spent digesting the result, implications and possible alternatives.

Ultimately it is incontrovertible that the vast majority of our finance sector business stems from the UK. Continued access to that market and its ongoing spectacular growth has quickly brought confidence back with projects restarting and life as we know it carrying on. Everyone seems to be as busy as ever!

Banking and Finance

“Confidence started to flow back after a summer spent digesting the result, implications and possible alternatives. Ultimately it is incontrovertible that the vast majority of our finance sector business stems from the UK.”

The finance sector is all about confidence (reputation and market stability) and ease of doing business and also what could be termed ‘irritation’ factors. There is little we can do about the former, given our size and our dependence on the UK. However, there is something we can do about the latter.

Last year we reported about regulations and general service factors which should come together to ensure that doing business in Gibraltar is as easy as possible.

When it comes to legal advice Hassans stands out from the crowd With a global reach, Hassans provides legal solutions, both locally and cross-border, to individuals and major multinationals. We deliver a service consistent with old world values of customer care whilst combining professionalism with pragmatism. Our clients get what they need, when they need it.

Personal or business solutions. Efficiently delivered.

TAX PLANNING • CORPORATE & COMMERCIAL • FINANCIAL SERVICES • FUNDS • LITIGATION • PROPERTY • TRUSTS

57/63 Line Wall Road, PO Box 199, Gibraltar.

T: +350 200 79000 F: +350 200 71966 business@hassans.gi www.gibraltarlaw.com

“Hassans is widely considered to be the market’s leading firm, both in terms of size and depth of experience…”

Legal 500 EMEA

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 19

127 Years on the Rock

We only remain attractive if we can show that we can get things done.

The government has been woefully disengaged from the leadership role it needs to take to ensure this happens.

Problems with taxis, lack of e-government, a civil service which suffers from leadership fatigue and a number of areas which continue to underperform. This in turn leads to bad process and poor service becoming the norm. Take it or leave it. On the odd occasion when a committed individual tries his or her best they are let down by their disinterested colleagues. Following the Chief Minister’s budget speech, we welcomed his appeal to civil servants “to be ready to do more, go further, work harder, be more efficient and wield greater influence than ever in building our common future”. Now the mantra needs to turn into action.

It is sometimes painful to do business in Gibraltar and it will not get easier unless there is a root and branch change of attitude. This has to start with and be led by government.

The government need to set an example and it must act in areas where a minority of service providers hold the economy to ransom.

In the 21st century we should be able to conduct business with government over the internet/by email.

“The government need to set an example and it must act in areas where a minority of service providers hold the economy to ransom.”

Multiple trips to various and widely strung out offices is simply no longer acceptable. This is particularly the case where certain departments already hold the information but do not, or care not, to share it.

Banking and Finance

Barclays Bank

Last year we also spoke about regulation. The FSC change of leadership is now in its third year. The culture is set but we continue to receive feedback regarding lack of approachability, slow decision making, regulation by numbers, lack of effective engagement with licensees and all of this coupled with significant increase in fees and other costs.

There is certainly more to come on compliance with international standards; Common Reporting Standards, MIFID II, Basle III…etc etc…all continue to take up more time and cost that is sometimes difficult to justify to the end clients.

Banking representation continues to be difficult and many, in particular in the corporate services sector, seek solutions outside of what is currently offered (or not) in Gibraltar.

Barclays finally announced what we all knew..that their earlier claim to want to stay, albeit in a much reduced form, was no longer the case and they finally closed their doors completely at the end of the year. Gibraltar International

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 21

Banking and Finance

“The funds sector continues to bubble away; the FSC has embarked on a process of weeding out certain EIFs and their directors.”

Bank continues to manfully step up to the plate and deliver products and services to the local community; a greater pace in some areas and change of priority in others would be most welcome. An example would be enabling businesses to pay by debit card; smaller personal investors need to be able to buy appropriate products and have a credit card.

The funds sector continues to bubble away; the FSC has embarked on a process of weeding out certain EIFs and their directors. The approach to raise standards is welcomed albeit if the sometimes ham-fisted process is not, coupled with the extreme escalation in costs.

It needs to be careful: if the goose is killed it cannot continue to lay the golden eggs.

Overall, the retail banking ‘noise’ has reduced and most local business and personal banking needs are met by the banks we now have. NatWest continues to carry more than its fair share and one wonders how long that can last.

Insurance continues to perform and shock in equal amounts; much unwelcome UK press is seen linked to some of our licensees and one wonders why some of the zeal seen in regulating EIFs is not evident in this sector as well. Or maybe it is: Enterprise Insurance and the unwelcome public exchanges that followed the FSC’s announcement of its cessation, does not bode well, whichever way you look at it.

As we have seen before on a number of occasions Gibraltar suffers the consequences of problems or decisions made elsewhere. Credit Suisse, another long term global brand which has been resident on the Rock for decades decided to pull out. However, its withdrawal provided an opportunity for Banque Jacob Safra Sarasin to expand its local operation further and that is most welcome particularly as it safeguarded not just local jobs but retained banking knowledge locally too.

There is talk of other possible newcomers; a ‘fintech’ operation or two are known to be sniffing. As we said last year, this is certainly an area we would want to see expand, in particular given the UK’s encouragement of this model.

The ultra cutting edge technology must be matched by local service providers upping their game. It is incongruous that one can do all one’s banking on a mobile phone but one cannot book a taxi service unless the cruise terminal has no visitors.

22 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

Despite all of these troubles it is both surprising and gratifying that the finance sector continues to outperform expectations; we maintain a solid reputation in the way lawyers, accountants and other professionals continue to support the effort to attract more business to our shores. We need the wider service sector to ‘step up’ and this requires leadership from government. PostBrexit blues are dissipating and opportunities are opening up as we start to understand what continued access to the UK market place (and where that is going) will deliver. But this is a long journey and there are bound to be pitfalls and further disappointments along the road. Future border issues aside, we should continue to ride the wave in particular if we really focus on those areas we can influence.

Cruise terminal

increase in 2015

expected calls 2017

9.8% 258

Port & Shipping

Cruise ship calls

“Signs of maintained recovery in terms of port calls in a year of mixed views regarding business acumen” Year Cruise Cargo Bunkers Repairs Off Other Vessels on Total No Gross vessels Limits Eastern side calls Tonnage

2008 222 253 5965 154 2006 301

9749 288,409,608

2009 238 193 6712 132 1460 543

10042 276,370,000

2010 175 178 6724 128 1365 505

11134 258,148,181

2011 187 164 6181 117 1492 597

10350 275,168,505

2012 173 161 6362 127 1259 444

9581 277,483,060

2013 180 164 5988 115 1175 248

9140 253,843,589

2014 180 20

5475 48

1181 1414 194

8512 238,409,636

2015 204 7

5571 55

1136 1593 188

8754 243,440,385

2016 224 3

5720 63

1202 1563 226

9001 247,329,293

For a second year running the Port saw an increase in number of port calls. The overall increase was very much in line with the previous years’ growth (2.82% against 2.85% in 2015). Whilst small in percentage terms, due to the volume of port traffic this is a noticeable increase and brings valuable revenue for the port operators.

One observation on the above chart is that Cargo vessels have seen a substantial decline in the last couple of years.

However, on investigating with involved parties we have found out that numbers are in fact at least ten times greater. For some reason they have been (re?) classified under the “Other” column. Authorities have been duly informed and shall be looking into the matter.

Cruise ships Although not the main business provider to the local shipping industry, cruise liner calls are a most welcome input to our economy generating business not just for port operators, but also for tour operators, Main Street traders and the wider economy. In 2015 the increase in cruise liner calls was expected to have been of 14%, but the final figure amounted to 9.8%.

An issue of great importance to the Cruise sector and which needs resolving is to implement an efficient transportation plan. Cruise passengers need to be transported smoothly, with minimal queueing time at sites and free of hassles or hurrying them through established tourist sites. This has to go in tandem with a quality touristic product that meets (and hopefully surpasses) passengers’ expectations. This

is especially the case when this sector is anticipating an 11.5% growth, amounting to an expected 258 calls for 2017. With the onset of Brexit looming (see below as well as numerous mentions elsewhere in this Report) the cruise business is one which we should be championing and seeking to develop much further in the years ahead.

This can only be done if the appropriate infrastructure is put in place.

Bunkering and storage tanks For some reason the publication of bunker figures delivered at Gibraltar has not been updated for a number of years. Our understanding is that the increase in number of calls for this purpose is disproportionate to the increase in fuel delivered, which according to informed sources stands around a 300,000 M/T increase from the 2015 figures, maintaining approximately the same half a million ton difference with Gibraltar’s neighbouring competitor in Algeciras.

There is still no news on the construction of sizeable land-based tank storage for bunker fuels which were being considered by government. This aside, World Fuels (through their local arm, Gib Oil) acquired the old slop tanks on the North Mole that belonged to Nature Group, and it has the intention of converting them to be used as storage for bunker fuel. Even though this is a less ambitious project in scale to the one being considered by government, it comes as a very welcome development.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 23

Port & Shipping

“Not widely known outside specialist shipping circles, Gibraltar is almost unique in Europe as a port for undertaking crew changes”

Some in the industry firmly believe that Gibraltar should be able to stand on its own and not depend on third parties, especially competitor ports for providing storage. This makes the Port potentially vulnerable. Gibraltar has fought hard to become the second biggest bunkering port in the Mediterranean. This in turn generates valuable additional business and has a positive effect on employment. Having greater control of fundamental assets such as land based storage facilities would give the Port flexibility as well as security, two factors that are likely to be much needed in the years ahead.

Level playing field Port operators have long been seeking a level playing field for their businesses. However, this seems to be an issue which creates tension amongst well and long established players in the sector. There has been strong opposition, with sound arguments and evidence presented, from members of the Port Operators Association to the awarding of licences in over-exploited areas of the industry.

However, it seems these arguments have apparently fallen on deaf ears of those in authority. The result has been that although the pie is stable it is being shared by an increasing number of operators, including a number of non-local firms which ply their trade from across the border, unregistered and unlicensed. “The more the merrier” attitude seems to apply to just some parts of the industry at a time when we should all be trying to pull in the same direction. Those with a direct finger on the pulse

24 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

of port business comment on how, for various reasons, the variety and volume of services provided to ships has fallen in recent years. This is despite an overall increase in the number of port calls. The end result is that some of the large but non-local operators get to take more and more local business and leave the smaller locally-licensed operators to scrap for the smaller lower yielding business.

Crew changes Not widely known outside specialist shipping circles, Gibraltar is almost unique in Europe as a port for undertaking crew changes due to the lack of visa requirement and having the airport next to the maritime port. Crew changes continue to be undertaken regularly at Gibraltar with relief crews being flown out to the Rock. However, ship owners require their ratings be accommodated in budget hotels, but the sale of the Queens Hotel has left a big void in Gibraltar to serve this specific market. When temporary visas are not required, Gibraltar finds it very difficult to compete against the hinterland ports, and on occasions it is extremely hard to obtain any accommodation at all.

Some local agents have been working collectively on a project to tackle this lack of budget accommodation but it has met with a mixed reception from the powers at be. With the new Schengen directives, shortly to be introduced and the uncertainty of the Brexit settlement this private sector initiative should be given greater consideration.

Port & Shipping

Challenging times ahead no doubt, but like Benjamin Disraeli once said “the secret of success is constancy of purpose”.

Brexit as an opportunity With the advent of Brexit looming over us, we should give due and careful consideration to some of the abovementioned issues, especially to proposals where private investment is required. Gibraltar’s shipping industry has always been resilient and considered to be one of the pillars of the economy. This has been the case in times gone by irrespective of whether the frontier was closed or open. Those long enough in the business can recall the days when irrespective of a closed frontier in the 1970s and early 1980s there were far more spares and stores received and delivered to ships, more provisions purchased locally and more electronic/electrical repairs carried out during bunkering operations. Actually, this also brings to mind another issue which logistics operators continue to raise, the general lack of storage of goods.

Thanks to computerised inventories and just in time deliveries these days, the shipping industry in Gibraltar is heavily dependent on a fluid frontier for many of the services extended to ships calling at the port.

Nevertheless, fluidity is required not just at the land frontier (which includes the pedestrian, vehicular and commercial posts), but also require fluidity at the port itself. This is because most of the bunker fuels supplied out of Gibraltar are stored in Algeciras and barged across for delivery in Gibraltar waters.

We would do well to take advantage of the possible threats Brexit and the new Schengen directives may bring about, to study our overall dependency situation and start looking into the opportunities these could bring about for us to secure a long term future for our shipping industry, with more locally-based services and adequately trained local personnel.

Hopefully frontier flow will continue to maintain a degree of normality, but Gibraltar cannot afford to be reactive to any sudden change implemented by those who seek to put pressure on our economy. We should anticipate and plan accordingly. This is particularly the case when it comes to ensuring that adequate port infrastructure is in place and capable of handling increased volumes should a sudden switch to sea-freight become necessary. Assessments need to be made on the adequacy of current and future berthing facilities with sufficient draft and apron for container vessels calling to discharge alongside wharf; whether there is a need for Ro-Ro ramps as well as other shore handling facilities such as electrical points for refrigerated cargoes.

Port operators also continue to raise their concerns on various issues at the Port that we have highlighted in previous years, but have yet to be addressed. These range from basic toilet and showering facilities, re-surfacing of certain areas to the provision of adequate lighting to improved passenger landing points from launches.

Challenging times ahead no doubt, but like Benjamin Disraeli once said “the secret of success is constancy of purpose”.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 25

Tourism Sector

Brexit referendum

Brexit referendum

Turnout

voted Yes

84% 96%

“The Government has done very well in identifying event-led tourism (chess, literary, music, backgammon etc.) as a growth opportunity, which specifically captures overnight stays�

Overview In November 2015 the Chamber submitted, at the request of the Government a positioning paper for a strategic review of the Tourism sector in Gibraltar.

With the new challenges we face as a result of the brexit vote, it is now critical that we come up with an exciting and game-changing approach to a sector, which continues to suggest it has much more potential. We must invest further in our tourist offering.

The Chamber has advocated far greater investment in the tourism sector in Gibraltar, describing it as the lost pillar of

26 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

the economy. Despite successive Governments making some progress in different areas of the tourism product in particular, it remains the Chamber view that there has been no long term strategy and a distinct lack of ambition to pursue an exciting and game-changing approach to a sector which continues to suggest much more potential.

There have been some milestones in 2016, with our airport recording it highest ever levels of passengers in one year, surpassing the half a million mark. Our new state of the art coach park in the centre of town appears to be working but there are issues with signage and a pedestrian crossing for disembarking passengers wishing to walk into town.

Tourism Sector

2016 Cruise calls

2016 Cruise calls

vessels

passengers

224 224k “Whilst there are plenty of compliments from visitors, it has to be said that the overall experience does not meet expectations” The current GSLP/Liberal Alliance administration, through the auspices of the Tourism Advisory Council, has now sought to deliver a long-term strategy for this important economic pillar. With positive changes already being made, we hope that this new strategy will provides a real platform to unlock the undoubted potential Gibraltar has as a top short break destination in Southern Europe.

Transport Transport is undoubtedly the most significant key to unlocking greater potential for increased visitor numbers and an enhanced visitor experience. Whilst we claim the Upper Rock to be our “Jewel in the Crown” visitor numbers have been more or less static for the last decade.

This is in large part due to an inefficient transport system and resultant congestion. The effect of this is a very poor experience and unless resolved will always inhibit numbers to the Reserve. Additionally current tours do not give flexibility to visitors to enjoy different sites of their choice but are controlled by the Operator. The Chamber strongly recommendations the development of a hop on, hop off experience, linked to wider improvements to upper rock transport system.

Hotels Whilst the Hotel offering has seen important improvements with the opening of the Sunborn and the refurbishment of the Rock Hotel, and now the Elliot, the hotel offering remains below par if we have ambitions to be a worldclass city break. Bed numbers also remain relatively small if we wish to deliver ambitious growth. An internationally recognized Brand is crucial to development of this opportunity along with a more family-friendly offering. We understand Government is encouraging further operators and would like to see real incentives provided to make growth in the number of hotels a reality: we need more quality bed nights.

28 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

The Experience Whilst there are plenty of compliments from visitors, it has to be said that the overall experience does not meet expectations if we are to fulfil the ambition of being a world-class destination. The business community of Gibraltar need to see that the long term strategy of the Government is to convert the Rock into a leading destination and bring onside all interested parties so that private operators, the retail and hospitality sector etc. start to meaningfully buy-in to this vision.

Our poor service culture, poor signage and dis-jointed literature need updating. Sub-standard visitor facilities at the Frontier and Cruise Liner terminal and coach park must be addressed.

The new suspension bridge is to be commended, but it appears that it is being used more by locals than tourists, as signage to this spectacular asset is sadly lacking.

The Government had done very well in identifying eventled tourism (chess, literary, music, backgammon etc.) as a growth opportunity, which specifically captures overnight stays, this can be developed further. Business travellers bring a higher spend if targeted to extend their business trips over weekends.

Cruise calls In 2016 we had encouraging figures of 224 cruise ships calls with passenger numbers of 224,000 and average of 1,844 per call. For 2017 provisional figures show calls of 266 ships with 430,333 passengers this shows a drop in the average to 1,618 which a significant fall due to the fact that more calls are being made by smaller ships. We need to be on the top of our game to keep attracting this lucrative line of business. We must continually upgrade and diversify our tourist offering to passengers, who may well be visiting for a second time.

The new small boat marina has provided new and well overdue berthing facilities for the super yacht fraternity, which at peak season has been fully utilised. The captains and skippers alike universally appreciate this facility as it provides tax efficient bunkering and a convenient location close to an airport, which can accommodate private jets.

Conclusion The Chamber wish to see Tourism catapulted in to a major contributor to economic activity and private sector growth. It is often said that Gibraltar has the natural product and history yet this has never been fully exploited.

Over the last 20 years, whilst investment has been made, there is ample evidence that the product still falls short. In our annual report, the Chamber calls on the Government to deliver a real long-term vision for the sector matched by the required ambition. This needs to be evidenced by a coherent strategy and supported by the hard capital and innovation required. Budgets should be re-assessed and the Government may consider a 10-year capitalspending programme aligned to a strategy rather than current short-term budget allocations. Tourism must be taken seriously.

The political climate and on-going threats and challenges to those “pillars” that have progressed Gibraltar over the last 20 years point towards an ideal opportunity to grab the bull by the horns.

Tourism is one of the key growth drivers to many small locations around the world and as the prospect of random terror attacks become more prominent it is likely short break European travellers will evaluate security as a key consideration when choosing their next destination.

Gibraltar has an opportunity not to be missed.

Tourism Sector

Yachts

We trust the Government and the Minister responsible to pursue the stated desire to develop a long-term strategy matched by the ambition and resources required, and the Chamber remains committed to fully engage with all parties.

It is also true that without a proper partnership with the private sector Government cannot embark on the journey alone. We firmly believe that if and when the Government take the lead and commit to real long-term initiatives and use language, which turns the attention fully to this sector, and then the private sector will follow. The announcement of “Gibraltar 2025” is a further opportunity to provide that leadership, for example, in challenging the future of Main Street and how we can provide incentive schemes to create diversity and a compelling shopping experience.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 29

Property Report

“So far, our key industries have not been significantly impacted by the referendum result in terms of manpower. No company has relocated and employment rates remain high”.

The referendum might have disrupted the strength in Gibraltar’s property of the last few years. Evidence suggests otherwise.

Sales and rentals of residential properties have continued apace in this post referendum era.

The demand to purchase is from investors, relocating executives and high net worth individuals in particular.

Hence the popular properties are those that are correctly priced and attractive to these user groups.

The availability of mortgages also seems to be improving.

Interest rates remain low and there appears to be healthy competition amongst Gibraltar’s mortgage lenders for both owner occupier and buy to let mortgages.

So far, our key industries have not been significantly impacted by the referendum result in terms of manpower.

No company has relocated and employment rates remain high. Hence the demand for property remains ever present.

30 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

Indeed, the government has recognised that the forgotten sector of property occupants need looking after if Gibraltar is to remain internationally competitive. Whilst government continues to build new residential property for locals, and developers target the wealthy, the nonlocal employee earning below the average wage is often forced to live in Spain on financial grounds. With potential looming border problems, local employers need certainty that their staff who live in Spain, around 70% in the gaming sector, will be able to get to work. The answer is more affordable housing for these ‘key workers’ who do not qualify for government housing. Gibraltar must find a way to house more of these individuals.

The government introduced a tax break immediately after the referendum for investors who purchase off-plan property to protect them from tax on future rental receipts (first 2 years) which has encouraged investors to continue to purchase off-plan enabling developers to sell stock which generally releases bank debt for projects. So we expect the current construction boom to continue.

23%

increase in office space Some estate agents have noticed a divide in the level of confidence of post referendum property buyers.

The international, or ex-pat, buyer remains generally confident that Gibraltar will navigate its way through the unchartered waters that lie ahead, emerging as a strong economy outside of the EU. This view is supported by the fact that some 90% of Gibraltar’s trade is with the UK and a common market between the UK and Gibraltar looks quite certain. These buyers identify the fact that some 6,000 non-Spanish workers cross the border each day to work in Gibraltar and would potentially live in Gibraltar if the right property was available at the right price.

The contrary view, anecdotally held more by locals than ex-pats according to estate agents, is that there is trouble ahead at the border and history tells us that we can’t trust the Spanish. This more cautious view, underpins the reduced activity in the property market by Gibraltarian investors.

The fact that residential property prices are still rising, especially on properties below £500k, volumes rising and huge scarcity of supply in the residential rental sector suggests that the optimists outnumber the cautious.

Midtown adds

11k

more square metres

Property Report

WTC represents a

However, our members’ feedback is that there needs to be more sophistication in the setting of rents and an easier route to dispute resolution. The Chamber has previously stated that valuers should adopt the UK methodology of zoning areas when it comes to valuing retail space.

It is common sense that the front of a shop, the part seen by passers-by, is worth more than the back. It follows from this that a shop with a 12 metre frontage and a depth of 6 metres should command a higher rent than a shop of 6 metre frontage and depth of 12 metres.

The principle of zoning is that the front band of space (usually the first 6 metres of depth) is valued at one rate, the next band of 6 metres at half that, and so on. Yet what is standard in the UK is not applied in Gibraltar.

We also call upon the government and the commercial property industry generally to establish an alternative dispute resolution service in respect of disputes arising from commercial leases. Such a body should be a cheaper and faster route to a commercial lease dispute using trained specialists from the UK who will not be conflicted in any way. We will develop this proposal further in the coming year.

So Gibraltar must build more property to withstand the demand from key workers and to prevent the cost of housing becoming so unaffordable that businesses flee to other, cheaper, jurisdictions.

In the commercial property sector, the World Trade Center, 15,000 square metres of high quality office space in Marina Bay, opened at the end of the year. BetVictor, Stan James Unibet, Ramparts, BDO, WaveCrest, Eyespy Recruitment, Image Graphics and Collingwood Insurance are some of the tenants who have signed up. In a market of around 65,000 square metres, the capacity has increased by over 23% which will take some time to absorb, even more so given that Midtown will add a further 11,000 square metres in quality office space in late 2017.

These developments have to be good news for businesses who have sought greater quantity and higher quality offices in Gibraltar for many years. We believe that the town centre will now see a swing back to residential use, the original purpose of most of the first floor and upwards of the older buildings. Rent increases should also be limited now whilst excess capacity exists.

Main Street retail rents continue to edge higher. Despite this, the quality of product and shopfitting continues to improve. The new Trends superstore of branded clothing is a good example of what is achievable. Debenhams is currently preparing to open as a replacement of BHS.

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 31

THE GIBRALTAR CHAMBER OF COMMERCE

Report to the Auditors TO THE MEMBERS OF THE GIBRALTAR CHAMBER OF COMMERCE

Directors, Officers & other information Directors C Hernandez J Isola M Nicholls M Cartwright N Quigley F Cassar G Desoisa G Dyke E Felipes A Haynes J Nicholls N Russo

President Vice President Hon Treasurer Hon Secretary

Honorary Auditors

REPORT OF THE AUDITORS

to the members of The Gibraltar Chamber of Commerce.

We have audited the financial statements on pages 34 to 41 which have been prepared under the historical cost convention and on the basis of the accounting policies set out on page 37.

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;

•

state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•

prepare the accounts on the going concern basis unless it is inappropriate to presume that the Chamber will continue in operation.

Baker Tilly Gibraltar Regal House Queensway Gibraltar

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.

Registered Office

Basis of opinion

2/6 Casemates Square Gibraltar

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 as at 31 December 2016 and 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: 10th April 2017

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 33

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of income and retained earnings for the year ended 31 December 2016

2016 2015

£ £

TURNOVER 112,833 105,185 Administrative Expenses

SURPLUS/(DEFICIT) FOR THE YEAR Retained surplus at 1 January

(106,823)

(109,627)

6,010 (4,442) 73,742

78,184

Retained surplus at 31 December 79,752 73,742

The operating results for the year arise from the Company’s continuing operations.

No separate Statement of Comprehensive Income has been presented as there are no items in these financial statements that require recognition in Other Comprehensive Income.

34 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of Financial Position at 31 December 2016

2016 2015

Notes £ £

TANGIBLE FIXED ASSETS 5 6,354 7,705

CURRENT ASSETS Debtors 2 15,401 23,606 Cash at bank and in hand 3 67,484 49,141

82,885 72,747

CREDITORS: amounts falling due within one year 4

(9,487)

(6,710)

NET CURRENT ASSETS 73,398 66,037

TOTAL ASSETS LESS CURRENT LIABILITIES 79,752 73,742

RESERVES 79,752 73,742

Approved by the board on 4th April 2017 M Nicholls Honorary Treasurer

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 35

THE GIBRALTAR CHAMBER OF COMMERCE

Statement of cash flows for the year ended 31 December 2016

Notes 2016 2015 £ £

CASH FLOWS FROM OPERATING ACTIVITIES Surplus/(Deficit) for the year 6,010 (4,442)

Depreciation 1,889 2,176 Decrease/(Increase) in debtors 8,205 5,224 (Decrease)/Increase in creditors 2,777 (16,113) NET CASH GENERATED FROM OPERATING ACTIVITIES 18,881 (13,155)

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

(753)

NET CASH FROM INVESTING ACTIVITIES (538) (753)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 3 Cash and cash equivalents at the beginning of the year

18,343 49,141

(13,908) 63,049

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 67,484 49,141

36 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

THE GIBRALTAR CHAMBER OF COMMERCE

Principal Accounting Policies

BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention and in accordance with Gibraltar Accounting Standards.

FINANCIAL STATEMENT PRESENTATION A single Statement of Income and Retained Earnings, Statement of Financial Position and Statement of Cash Flows have been presented. A single statement of Income and Retained Earnings has been presented as the only changes in equity during the year arise from profit or loss. No Statement of Comprehensive Income has been presented as there are no items that require recognition in Other Comprehensive Income in accordance with Gibraltar Financial Reporting Standard 102.

PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment shall initially be recognised at cost. Cost comprises purchase price and attributable costs.

Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to an estimated residual value evenly over its expected useful life, as follows: Furniture and fittings Office equipment Computer equipment Air conditioning units Leasehold improvements

15% on cost 15% reducing balance 25% reducing balance 20% on cost over 9 years

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 37

THE GIBRALTAR CHAMBER OF COMMERCE

Notes to the Financial Statements for the year ended 31 December 2016

1.

BASIS OF PREPARATION These financial statements have been prepared in accordance with Gibraltar Accounting Standards including Gibraltar Financial Reporting Standard 102.

In addition, Section 1A of GFRS 102 has been adopted as the company falls within the threshold of a small entity and is permitted certain presentation and disclosure exemptions.

2.

DEBTORS

2016 2015

£ £

Subscriptions 5,563 6,927

Other debtors 9,322 16,123

Prepayments and accrued income 516 556

15,401 23,606

3.

CASH AT BANK AND IN HAND

2016

£

2015 £

At 1 January 49,141 63,049

Net cash inflow/(outflow) 18,343 (13,908)

At 31 December

4.

CREDITORS: amounts falling due within one year

67,484

49,141

2016 £

2015 £

Creditors and accruals 7,935 4,629

PAYE and Social Security 1,552 2,081

9,487 6,710

38 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

THE GIBRALTAR CHAMBER OF COMMERCE

Notes to the Financial Statements for the year ended 31 December 2016

5.

FIXED ASSETS

Leasehold Furniture Office Air Computer improvements and fittings equipment Conditioning equipment

Total

£ £ £ £ £ £

Cost: At 1 January 2016 Additions during year

35,755 -

11,856 -

26,114 538

7,355 -

12,011 -

93,091 538

At 31 December 2016

35,755

11,856

26,652

7,355

12,011

93,629

Depreciation: At 1 January 2016 Charge for year

35,702 27

11,837 13

22,961 554

3,865 1,047

11,021 248

85,386 1,889

At 31 December 2016

35,729

11,850

23,515

4,912

11,269

87,275

Net book value: At 31 December 2016

26

6

3,137

2,443

742

6,354

Net book value: At 31 December 2015

53

19

3,153

3,490

990

7,705

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 39

THE GIBRALTAR CHAMBER OF COMMERCE

Notes to the Financial Statements for the year ended 31 December 2016

6.

OTHER FINANCIAL COMMITMENTS At 31 December 2016, the Chamber had annual commitments under non-cancellable operating leases as set out below:

Operating leases on land and buildings which expire: 31 December 2016 31 December 2015 £ £

Under five years

40 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

7,874

7,647

THE GIBRALTAR CHAMBER OF COMMERCE

Detailed Profit and Loss Account for the year ended 31 December 2016

TURNOVER

2016 2015

£ £

Subscriptions 58,430 54,810 Annual report income 7,900 5,500 ATA Carnets 2,050 1,261 Fees for certificates of origin and invoices 21,031 11,997 Chamber dinners 5,785 4,685 Other publications income 12,072 24,427 Other certificates 1,595 785 Mailing list rental - 300 Office hire 2,950 1,420 Training income 1,020

112,833

105,185

ADMINISTRATION EXPENSES

2016 2015

£ £

Staff remuneration and social insurance 44,929 44,929 Office rent and rates 12,369 8,046 Electricity and water 792 1,006 Bad debt written off 1,485 Provision for bad debts - 2,060 Depreciation 1,889 2,176 Advertising 1,634 2,066 Telephone 2,198 1,660 Printing, postage and stationery 5,047 12,863 Miscellaneous expenses 450 594 Insurance 435 435 Travel and Entertainment 12,356 4,915 Office cleaning 2,496 2,251 Repairs and maintenance 9,892 4,454 Subscriptions 571 207 Accountancy fees 3,400 1,200 Professional fees 3,510 2,695 Training expenses 600 Bank charges 71 155 Impact study fees - 17,915 Sponsorship 1,000 Presentations and meetings 1,467 Equipment hire 232

(106,823) (109,627)

SURPLUS/(DEFICIT) FOR THE YEAR

6,010

(4,442)

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

| 41

Gibraltar: Key Information

(All figures relate to 2016 unless otherwise stated)

Average earnings

Gross Domestic Product

(2015)

(per capita)

28k 55k

Population:

33,140 (2014)

Total land area:

6.5 sq km

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

Natural resources: None Head of State:

Her Majesty Queen Elizabeth II

Chief Minister:

Hon Fabian Picardo, MP, QC

Legislature:

Parliament (no upper house)

Languages:

English & Spanish

Business hours:

9 am - 5 pm Monday to Friday

Inflation rate:

2.5% per annum (Jan-Dec 2016)

Minimum wage:

£6.28 per hour (£244.92 per week)

Average earnings:

£28,090 (2015)

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

Registered employed: 26,144 (Oct 2015) GDP per capita:

£54,979 (2015/16)

lmports:

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

2000

20000

1500

15000

1000

10000

500

5000

0

0

2000/01

2005/06

Gibraltar GDP 2000 - 2016 (£m)

2010/11 Male

2015/16

Female

2000

2002

2004

2006

Employment Growth 2000 - 2015

Corporation Tax

Tax payable

Resident Companies

10%

Utilities Companies

20%

2008 Male

2010

2012

2014

Female

Personal Income Tax £0 - £10,000 of annual gross income

6%

£10,001 - £17,000 Annual gross income

20%

Balance 28% No capital gains taxes

No tax on dividends

No Inheritance tax/death duties or estate duty

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.

42 |

Gibraltar Chamber of Commerce Annual Report & Accounts 2016

www.gibraltarlawyers.com

When volatility is the only certainty, ISOLAS can help guide you through stormy seas ISOLAS, celebrating 125 years in Gibraltar - Trusted since 1892

For further information contact: info@isolas.gi Portland House Glacis Road PO Box 204 Gibraltar. Tel: +350 2000 1892