Gibraltar Chamber of Commerce 2018 Annual Report & Accounts

2018 Annual Report & Accounts

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Contents

05 06 Foreword

Politics

08 10 The Economy

The Environment

12 13 Wholesale Sector

Fair Trading Act Review

14 17 Financial Services

Port & Shipping

20 22 Tourism

Property

25 33 2018 Annual Accounts

Key Information & Statistics Gibraltar Chamber of Commerce 2018 Annual Report

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Gibraltar Chamber of Commerce 2018 Annual Report

foreword The Brexit impasse which has preoccupied Gibraltar’s businesses with increasing angst for the last three years or so looks set to continue for the foreseeable future as UK parliamentary antics have tried every conceivable way to thwart the 2016 referendum result.

their accounting systems to introduce this new tax and develop a system of registering and collecting it. This will be no easy task, but if the introduction of VAT means reduced political friction from Spain and greater support from the EU it might be worth considering.

Whatever is finally agreed between the UK and the EU, Gibraltar can take some comfort that their government has demonstrated shrewdness and relentless dedication in equal measure to ensure that Gibraltar will be part of any final agreement.

Consideration also needs to be given as to how implementing an additional levy would affect Gibraltar’s competitive position compared with our largest trading partners.

Among the stream of announcements and Brexit updates, the Chief Minister has made reference to the possibility of Gibraltar joining some sort of customs arrangement. The merits of being part of an as yet undefined customs agreement are worth considering if they are truly in Gibraltar’s long term interests. The benefits of doing so would imply the abolition of the border with Spain and thus avoid lengthy queues for workers, visitors and businesspeople alike to get in and out of Gibraltar.

Putting security-related matters of having no frontier to one side, a consequence of being part of such an agreement would mean the introduction of VAT. Determining the appropriate rate would be a delicate task. Currently the EU member with the lowest VAT is Luxembourg with 17%; the EU member with the highest is Hungary with 27%. All local businesses as well as government offices would need to adjust

As the GSLP/Liberal government reaches the end of its second term of office, voters will be evaluating its record, not just during the current term but over the last eight years. Ticking off the list of pledges in both of their last two manifestos is likely to give ministers, as well as many supporters, a warm sense of achievement. A lot has been done in the last eight years although many of these successes are probably now taken for granted by the electorate. Such is the fickle fortune of politics.

However, there are still a number of issues which remain unresolved. For the business community, government efficiency (or lack of it) and the lack of proper E-government are two cases in point. The family friendly hours introduced across the public sector in 2014 promised longer counter hours and more efficient government. Sadly this was only half right: the civil service got better hours but improved efficiency in many government departments remains a distant wish.

A good way to introduce and maintain efficiency would be to have a proper system of E-government. There have been previous attempts to introduce E-government before but for various reasons they never got very far.

Whatever the reason, the lack of a properly functioning E-government system forces too many local businesses to waste too much time travelling to and from government offices to pick up forms, submit paperwork or obtain the relevant official stamp. In this day and age much of this could and should be done electronically. In its 2011 manifesto (page 16) the government said that it was committed to investing in E-government. We are aware that a government team has been tasked with working on this for the last year or so but to date, eight years after the initial commitment, there is little outward progress to show for it.

The government’s Input/Output study was last updated in 2000. Previous studies were undertaken in 1978 and 1988. The study is both a useful and a necessary tool for the government to use in long term economic planning.

The model itself is in need of a revamp to better reflect Gibraltar’s current economic structure. With the changes which Brexit may bring, now would be an opportune time to undertake a new study with a new updated model so that government and business can put in place the new economic framework for Gibraltar which Brexit will inevitably bring about.

Gibraltar Chamber of Commerce 2018 Annual Report

5

P On the surface throughout the EU, 2018 was a quiet year. In the United Kingdom, just as for the Continent, the economic indicators have defied the uncertainty brought about by Brexit. Just below the surface of peace and prosperity the negotiations for Brexit continued with periodic reports from Michel Barnier who adopted a schoolmasterly approach ending with comments equating to: “must try harder”.

As the terms for the divorce from the EU began to take shape there were a number of high-profile resignations in Westminster. Boris Johnson, the Foreign Secretary, being the most prominent of the Cabinet Ministers who walked out of Mrs May’s government. Nothing came of it and the “phoney peace” continued as before: the markets were buoyant and EU Governments came under pressure to begin lifting their austerity measures.

During this time Gibraltar has continued to boom.

In the summer 2018 Spain found itself, suddenly, as the result of a well-timed motion of “No Confidence”, with a new governing party and a new Prime Minister. Pedro Sanchez came to office with a message of hope and goodwill 6

politics

but, to date, there has been no way for the PSOE to find a way out of the Catalan impasse and particularly the release of its imprisoned separatist leaders.

In Gibraltar the news that Pedro Sanchez had ousted Mariano Rajoy was met with some optimism, but generally it was felt that the work to deliver a “Brexit-proof ” understanding with the Partido Popular had been constructive. The new regime in Madrid took over from where the PP had left off. It followed the same agenda that had been set by Foreign Minister Dastis. There were early indicators that the new incumbent in Madrid would work constructively with London and Gibraltar to find agreement for “business as usual” even in the event of a “hard” Brexit and the Chief Minister and his closest advisers set to work. The Chief Minister continued at the same pace as before with relentless shuttles to and fro: London, Brussels and Madrid.

The frontier, a good barometer of relations, remained fluid throughout the year and Gibraltar entered into a Memorandum of Understanding with Madrid to address the first two of the three stand-out items from the agenda: Tobacco and Tax.

Gibraltar Chamber of Commerce 2018 Annual Report

It seems clear that, despite occasional attempts to undermine Gibraltar’s position by “separating it from the herd” in the UK, Brexit arrangements and continuing mischief on the question of territorial waters, a level of entente exists between Gibraltar and Madrid and Gibraltar and the Campo political leadership. The question remains: will it be sufficient to ensure that “Brexitproof ” agreements hold in any political storm? Also, will these arrangements survive to ensure that Gibraltar is included with the rest of the United Kingdom in any future treaty with the EU? The answer is not certain but there are enough positive factors to look back on 2018 as an optimistic indicator.

With global markets in good shape and Brexiteers and Remainers providing only the hum of low-level disaffection, what could go wrong?

First out of the blocks: the Irish backstop. The Withdrawal Agreement, Mrs May’s flagship, which was referred to Parliament for approval repeatedly failed to pass. At the first hearing in January 2019 the defeat was by a greater margin than for any previous motion in Parliamentary history. The fatal blow

was struck by the backstop which, it was argued, could be used to keep the United Kingdom in the EU, against its will, on an indefinite basis. The repeated defeat of the Withdrawal Agreement has given rise to a struggle for control of the Brexit process between Government and Parliament and between Brexiteers and Remainers. The first quarter of 2019 has done away with the phoney peace and the battle between factions has made Westminster the eye of the Brexit storm.

The United Kingdom entered into crisis in January 2019 with the rejection of Mrs May’s EU deal.

In some ways the uncertainty that now makes it almost impossible to predict the outcome of the struggle taking place in Westminster may not immediately affect Gibraltar. More so now that a tax treaty has been agreed between London, Madrid and Gibraltar, which if it leads to “white listing” Gibraltar, will be a milestone in relations with our neighbour. It comes at a cost but Gibraltar should embrace the opportunities provided and build on the platform of better understanding that it represents.

Although many deplore the “last minute” cliff edge of the Brexit debate there probably could have been no other path for a majority to be found without the urgency of the cliff edge. These debates could not have reached the level of cross party understanding that a sense of crisis permits. Brexit was always going to go down to the wire.

The same rubric will apply to Gibraltar, but hopefully, our watershed moment is still some months ahead so we must use the time to build bridges. If the Brexit debate has lessons for the future then when the moment comes our status as “the biggest factory” in Andalucía and the strength of our relationship with the neighbouring community will be our ace card.

The existential threat we now face is likely to be in connection with Gibraltar’s inclusion in the UK/ EU new treaty package. It would help if we adopted a bi-partisan approach to deal with the questions ahead. Some of these are already visible: will it serve our interest to be included in a future Customs Agreement? We need to find a path that allows for a positive response. The Opposition can, of course, cry foul at whatever decision

Photo: HM Government of Gibraltar on flickr.com

Government may take. This seems to have been the approach taken on all Brexit negotiations to date. (Not much different to the position of Brexiteers in Westminster who rubbish Mrs May’s Withdrawal Agreement and claim that it was poorly handled). We should not fall into the same trap. It is ironic that the GSLP opposition in 2006 were adamant in rejecting “Cordoba” and now cling to it like “shipwrecks in a storm”. If the Opposition return the compliment the likelihood is that time will show that they

were not equal to the challenge posed

by Brexit. The Chief Minister warrants our continued support. Unquestionably his Brexit negotiations have been in Gibraltar’s best interests, including the Tax treaty. His efforts to establish a more positive narrative with Madrid and to keep Westminster “on side” need to be recognised. They are both magnificent achievements. The GSD should not take their eye off the ball. The main threat to our continued prosperity is in the future.

The challenge lies ahead.

Gibraltar Chamber of Commerce 2018 Annual Report

7

£ the economy With the twin benefits of low interest rates and low inflation, the continued uncertainties over the outcome of Brexit discussions did little outwardly to discourage inward investment during the year. This has been reflected in both the public as well as the private sectors.

Strong investment, coupled with a 3.5 per cent increase in the number of jobs being created led to a forecast rise in GDP over the year (2017/18) to £2.18 billion.

The concern is how Gibraltar’s economy can continue to defy economic gravity when the very real threats of prolonged Brexit uncertainty and economic slowdown elsewhere, particularly in Europe are likely to impact Gibraltar at some point.

The slowdown is likely to have implications for the government’s 8

building programme which has been one of the main drivers of GDP growth in the last decade.

Since gaining power in 2011, the GSLP/ Liberal government has spent over £500m on a series of major projects: the small boats marina, refurbishing government housing estates, several new schools, the new university, a new bank, two new low cost housing schemes, rebuilding the MOD’s four corners estate, the power station and a new primary care centre. It is an impressive set of accomplishments, although some may question the value for money of some of these projects. These have been funded by a combination of increased tax revenues on the one hand and higher borrowing secured against government assets on the other.

Gibraltar Chamber of Commerce 2018 Annual Report

Increased use of borrowing by government-owned companies could become an issue should there be a shortfall in the income generated by these companies to fund and repay the money they have borrrowed. In a similar vein, the Chamber agrees with the pronouncements by Sir Joe Bossano that continued growth of the public sector “is not sustainable financially nor defensible socially.” Continually doling out largesse to the civil service paid for by the taxpayer will only serve to polarise the community. The government announced that over 700 additional posts had been added to the government payroll since it came into office in 2011. One wonders who was doing all this work beforehand.

The use of contract workers is an acceptable practice for any employer to meet short term peaks in work flows.

Government Revenue, Expenditure & Surplus (£M) 700

70

600

60

500

50

400

40

300

30

200

20

100

10

0

2010/11

2011/12

Revenue

2012/13

Expenditure

2010/11

2014/15

Shrinking surplus

The above inflation rise in the minimum wage announced in the July budget has become customary but local businesses suffered a double whammy with a second 10 per cent increase in social insurance in two years. Other measures such as the 50 per cent hike in duty on diesel may not affect all businesses directly but over time these costs will need to be passed on.

Last year we commented that since 1985, Gibraltar’s successful economic model had been based on a free flowing frontier and access to EU markets.

2016/17

2017/18

2018/19

0

Surplus (right hand scale)

These certainties had enabled Gibraltar to diversify its economy over the last 30 years or so from one based on the MOD and government spending to one taking advantage of the growth in international financial services, tourism and the Port.

We also said that a hard Brexit would put much of this at risk. Twelve months on and those observations still stand.

Most if not all members have been busy putting in contingency plans in place in the last two years just in case the fallout from Brexit is worse than feared. Perhaps what is more unwelcome than the Brexit deadline is the prolonged uncertainty which it is causing many businesses.

This merely postpones decisions which companies need to make to run their businesses and in time is likely to lead to slower economic growth.

Less so if those workers are retained year after year on non-permanent rolling contracts with few if any employment rights. Responsible employers should treat their workers with equal terms and conditions.

2015/16

The current administration’s forecasts for economic growth have been exceeded every year it has been in office. Similarly, its level of recurring expenditure has risen to match this. At each budget a surplus is announced but it is shrinking

as a percentage of both revenue and expenditure. As a percentage of the annual budget, the surplus is now less than half what it was in the government’s first term of office, so this does not leave much margin of safety if growth slows or the knock-on effects of Brexit turn out to be worse than feared.

Employment numbers have been robust and it is this which continues to give reassurance that Gibraltar’s economy is more resilient today than at any time since the border reopened fully in 1985.

It will need to be if the uncertainty over the outcome of Brexit is prolonged.

Perhaps just as importantly, almost half of the Rock’s workforce crosses the border each day from Spain and as both of the Chamber’s Impact studies have showed, the earnings of these workers are spent almost entirely in Spain.

In the last two years there have been repeated reassurances from the Spanish government that it does not want the livelihoods of Spanish citizens to be damaged by the Brexit outcome. Only time will tell.

Employment Growth 2008-2018 30000 25000 20000 15000 10000 5000 0

10/08 Male

10/09

10/10

10/11

10/12

10/13

10/14

10/15

10/16

10/17

10/18

Female

Gibraltar Chamber of Commerce 2018 Annual Report

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the environment Our comments in last year’s report appear to have had some impact.

In its 2018 budget the government announced a raft of measures designed to reduce the number of petrol and diesel cars, albeit over a long period.

Cars powered by internal combustion engines (petrol or diesel) will be prohibited in Gibraltar from July 2030. This seems a long way off but in reality the date is less ambitious than other economies like Norway or the Netherlands, both of which have pledged to outlaw petrol and diesel cars by 2025. In all likelihood the car manufacturers will beat the government to its target as most are forecast to cease production of internal combustion engine vehicles well before the 2030 deadline. Nevertheless, this goal shows somes progress on last year when no such targets were in place.

Similarly, the incentives announced to encourage purchases of electric or hybrid vehicles in the form of reduced import duty or cashback incentives should also help to change behaviour.

A full scale switch to hybrid or full electric vehicles will also greatly improve air quality in Gibraltar.

10

Gibraltar Chamber of Commerce 2018 Annual Report

Gibraltar might also consider learning from other small communities and see what measures and innovative technologies have been introduced to reduce the impact of climate change.

The BIGHIT scheme in Orkney is small and relatively new but it is already demonstrating that it can operate a small number of vehicles using emission-free hydrogen fuel cell technology.

There have been other notable successes during the year such as the reduced power consumption of street lighting due to the change to LED lighting.

This cut the amount of power used by between one quarter and one fifth.

The installation of PV panels on the roof of New Harbours will also reduce the amount of electricity demand taken from the grid and go some way towards meeting the government’s selfimposed target of generating 20 per cent of Gibraltar’ energy needs from renewable sources.

The dual fuel power station on the North Mole underwent final testing and was about to be commissioned by the year end. This major project has been many years in the planning and development but it is important to take this time as it will serve Gibraltar for the next fifty years or so and give much greater security to the Rock’s energy needs.

Each of these steps will, over time, lead to Gibraltar having a reduced carbon footprint.

Noise Sadly, there is little progress to report on dealing with excessive and almost continuous noise in Gibraltar in the last 12 months. Whatever the reason for this, the community has been forced to become accustomed to all manner of disturbance throughout the day and often during the night.

The government’s Noise Action Plan is based on the EU’s Environmental Noise Directive which came into force in 2002.

The local Action Plan has a duration of 5 years and was last reviewed in 2013 and was concerned almost entirely with noise mapping the major roads in Gibraltar. Most of the EU Directive is difficult to apply in Gibraltar so the governmnent has concentrated almost exclusively on noise mapping the major roads in Gibraltar. No consideration appears to have been given to noise pollution generated by other sources such as construction sites which frequently exceed the 70 decibel guidelines set out by the Environmental Agency as the level to identify priority areas. Similarly, there are still too many vehicles - cars and motorbikes, which have exhaust’s fitted which exceed acceptable noise levels. These vehicles travel on all roads, not just the major ones and cause excessive noise pollution across Gibraltar but nothing is done by the relevant authorities.

E

The Government’s stated long term strategy is to manage and reduce environmental noise in a cost-effective manner, under the direction of the Noise Core Steering Group. It is clearly not working. The Action Plan which expired in 2018 said that Gibraltar has no statutory noise limit values nor any guidance on how to set these values. So what we have is a free for all where anyone can do what they want.

It is within the government’s power to introduce noise limits and then ensure that the relevant authorities enforce them. There is no excuse for this unnecessary and unpleasant form of pollution.

Waste and Recycling One of the consequences of Gibraltar leaving the EU which was identified soon after the 2016 referendum, was that potentially Gibraltar would no longer be able to export its waste to the nearby recycling depot at Los Barrios.

As part of the government’s recycling programme it would be interesting to see how much of Gibraltar’s rubbish has been recycled in the last 5 years and also whether the act of recycling has led to an overall reduction in the amount of rubbish generated in Gibraltar each year.

Gibraltar Chamber of Commerce 2018 Annual Report

11

wholesale sector Government contingency plans (what are they?)

As preparations for leaving the EU single market progressed during the year, the wholesale sector and their network of logistical cousins drew up a range of plans for ensuring that the Rock’s businesses would continue to be supplied post-Brexit. The hope throughout the year continued to be that some sort of agreement would be reached between the UK and the European Commission to ensure an orderly exit. The government had obtained the necessary guarantees of support from the UK that Gibraltar would be included in any agreement, but until the deal was made a degree of uncertainty prevailed.

Planning alternative logistical operations takes time and distracts from the regular operations of local wholesalers, many of whom do not have the resources for all of the additional work which these plans entail. Just as important has been the need to trawl through the dozens or sometimes hundreds of documents published by the EU on transporting goods into, out of and across the European Union. Which licences or permits are needed for those transport companies not based in EU member states. None of this had been necessary before and it proved to be a steep learning curve for most. Finding the answers was challenging but asking the right questions proved to be a difficult 12

starting point for many, particularly as there was little indication of the type of agreement which would be made between the EU and the UK. As the end of the year approached there was a sense of relief that the Christmas period would bring a brief but much welcomed respite from the anticipated chaos of the 29th March (2019) deadline.

In preparation, a number of local wholesalers adopted what seemed to be a prudent policy of buying ahead to ensure that they did not run out of stocks to supply the local market. There was no indication that border fluidity would be interrupted but many did not want to take this risk. Buying forward was possible for non-consumable items but in turn created additional problems: additional warehouse space had to be found and leased and the increased stocks had to be paid for which affected cash flow. There was little chance of passing these additional costs on to the consumer, they did not want to know.

Against this tide of uncertainty local wholesalers continued to deal with the day to day difficulties of operating in Gibraltar. The roll out of the residential parking scheme during the year has affected the ability of firms to carry out deliveries around town. Similarly, service companies which had hitherto been able to use vacant parking spaces

Gibraltar Chamber of Commerce 2018 Annual Report

around town found that without a residence permit they could no longer do this. Alternative solutions to resolve this were proposed by the government and by the Chamber but to date no firm working alternative has been put in place.

The 50 per cent increase in duty on diesel announced in the July budget was another unwelcome cost increase for the local wholesale and distribution sector.

Granted, the duty on diesel has remained unchanged since 2010 but the increase was three times the rate of inflation over the same period. In the last few years there appears to be little correlation between the prevailing inflation rate and the various cost increases levied by the government on local business. With the almost unprecedented challenges for local business presented by Brexit, a number of which are still unknown, the Chamber urges the government to be more restrained in the burden of costs imposed, whether they be increases in the minimum wage, social insurance or other mandatory charges. Double digit annual increases in these charges make it even more difficult for local businesses to compete with the constant caravan of companies from the other side of the frontier. Many of these cross-border operators are unregistered, pay no tax, no social insurance and cause net economic leakage from Gibraltar.

The Fair Trading Act 2015 Review: A new approach to business licensing The Fair Trading Act 2015 came into effect in October 2015 following consultation by the Government with the Chamber of Commerce and the Gibraltar Federation of Small Businesses. Part 9 of the Act created a new business licensing system which, although largely based on the Trade Licensing Act it replaced, had notable changes, including the requirement for service providers as well as traders to be licensed and the opportunity for businesses to obtain a waiver from the requirement to have premises (premises waivers).

Part 9 of the Act is now being replaced by new Regulations. The aim of the new legislation is to iron out administrative bottle necks with the current system and to provide a more transparent, efficient and effective licensing process which works for both applicants and the OFT. GoG has therefore once again engaged with the Chamber and GFSB throughout this process to ensure the local business community’s needs are met. Here is a brief overview of the proposed main changes:

1

Simplified application process

4

OFT business licensing policy

7

Licence conditions

Licence applications shall be made directly to the OFT by submitting one consolidated application form without the need to first publish advertisements.

Not only does this streamline applications, but also allows the OFT to raise issues with applications at the first instance before businesses have spent money and time on advertisements.

A detailed written policy has been drafted to accompany the Regulations and shall assist the OFT to process applications fairly, consistency and efficiently. The policy benefits from almost four years of BLA precedents set with the involvement of the Chamber and the GFSB. It will contain a detailed premises policy setting out the type of premises that businesses will require and the types of business that may be considered for a premises waiver. Parts of the policy will be published to assist applicants.

The OFT shall have the power to impose new conditions and amend existing conditions after licences have been issued.

This will only happen in clearly defined circumstances as set out in the OFT policy (see above) and will assist the OFT to encourage start-ups (by dealing with any initial specific concerns), to prevent business practices that harm consumers and to maintain a level playing field among businesses. OFT’s decisions in this regard will be appealable.

2

Services categories

5

Two tier appeal process

8

New licence renewals process

Service providers will no longer be required to categorise their businesses using the broad licensing classes in schedule 3 of the Act (which will be repealed). Instead applicants will be permitted to accurately stipulate the nature of their service from the outset avoiding the need for the OFT requesting further information from applicants.

Applicants dissatisfied with an OFT decision shall have the right to appeal to a new Business Licencing Appeal Panel. The panel will be composed of a Chairman and representatives of the Chamber and GFSB. These appeals are designed to be quick, simple and to avoid the formality and costs related to a court process. If appellants remain dissatisfied with a determination of the new panel they can thereafter still appeal the OFT’s decision to the Magistrates’ Court.

Licence-holders shall confirm that their details remain unchanged, that they have not changed their premises and they are up to date with their tax and social security obligations. This will ensure the licence register is up to date and that all businesses are operating on a level playing field.

3

Disbanding the Business Licensing Authority (BLA)

6

Simplified licence fees

9

Enforcement Powers

The current BLA will be disbanded.

All licence applications will instead be processed directly by the OFT. This is an extension of the OFT’s current authority to issues straight forward licences without referral to the BLA. The OFT will consider applications based on clear licensing policies (see below). There will no longer be a delay for processing applications referred to BLA meetings.

There will no longer be a cumulative licence fee for every additional business category licensed. There will be one licence fee for traders and another for service providers irrespective of the number of goods traded or services provided.

There shall be a sliding scale of enforcement powers to assist the BLA in dealing effectively and proportionately with non-compliance by licence holders.

Additional changes may be introduced in due course, but the new Regulations will represent a significant improvement in the business licensing process all round with tangible benefits for local businesses and at the same time help to ensure that a level playing field is being maintained.

Gibraltar Chamber of Commerce 2018 Annual Report

13

financial services Increased regulation is the price of competing with other financial centres.

The past ten years have seen a dramatic increase in the amount of regulation impacting the financial services industry, from the Solvency II directive shaping the capital, risk management and reporting requirements of EU insurers to the implementation of FATCA and Common Reporting Standards, both of which have been designed to combat tax evasion. 2018 has been no different, with new, high-impact regulatory standards coming into effect.

First, MiFID II (‘Markets in Financial Instruments Directive’) arguably the most significant piece of legislation affecting a range of financial counterparties and investment firms.

MiFID II came into effect on 3rd January 2018 and was designed to address the limitations of its predecessor, MiFID, in light of the financial crisis, the evolving financial markets landscape and both the development and use of technology in this industry. Institutions in scope of MiFID II have dedicated considerable time and resource to meet the minimum standards that this directive imposes in areas of investor protection and conduct of business, with the aim of strengthening the functioning and transparency of financial markets and restoring confidence in the industry.

14

Then the most important change in recent EU data privacy history took effect; in came GDPR (‘General Data Protection Regulation’). Four years in the making, it was approved by the EU parliament in April 2016, while becoming enforceable as from May 2018. This legislation generally applies to organisations that either collect and/or process data pertaining to EU residents, financial services firms included. The objective? To harmonise data privacy laws across Europe, protect and empower EU citizens when it comes to their personal data and to redefine how organisations collect, process and store data. So just when banks, investment firms and other financial institutions were coming out of the laborious process of implementing MiFID II, the attention quickly turned to GDPR and as such another regulatory project ensued.

We also saw our financial services regulator, the GFSC’s (‘Gibraltar Financial Services Commission’), publish amended AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) Guidance Notes, providing regulated entities with heightened guidance on the controls required to protect the financial markets from being used for money laundering and terrorist financing purposes.

Gibraltar Chamber of Commerce 2018 Annual Report

Gibraltar Chamber of Commerce 2018 Annual Report

15

“the development of legislation relating to tokenised digital assets.”

While these regulatory initiatives have resulted in financial institutions adopting a more robust and resilient risk management and compliance culture, thereby reducing the ability of illicit activities or the proceeds of such from infiltrating the financial system, it is widely criticised that they have also shifted the focus away from growth initiatives, increased costs and reduced profitability of those firms that are captured by the burden of such regulation.

From a commercial perspective, the more traditional areas of financial services, such as banking, insurance and funds, seem to have remained somewhat muted in 2018 as far as growth by way of 16

new players to Gibraltar are concerned.

Yet, Gibraltar has made significant progress in its bid to promote the jurisdiction as a credible global player in the Fintech industry, particularly in the DLT (‘Distributed Ledger Technology’) and cryptocurrency industries.

The GFSC’s DLT Regulatory Framework came into effect on 1st January 2018, becoming the first jurisdiction in the world to offer a DLT regulatory framework, with the first ‘in-principle’ approvals communicated by the GFSC in August 2018. The framework is based on a principles-based approach to regulation therefore offering a degree of flexibility while setting high minimum standards.

Gibraltar Chamber of Commerce 2018 Annual Report

In February 2018 we then saw the Minister for Commerce, Albert Isola, alongside the GFSC in what was a joint press release announce the development of legislation relating to tokenised digital assets. What’s more, through various news outlets, not least social media, it was evident that the Gibraltar Government, the Finance Centre and elements of the private sector pursued a focused international marketing campaign to position Gibraltar as a centre of excellence in the DLT and cryptocurrency arena.

One of many positive outcomes of this was the GFSC signing its first Fintech agreement of cooperation with the Hong Kong Insurance Authority. According to a GFSC press release the agreement would provide ‘a framework for sharing information between the innovation teams of the two bodies, and in which the two can offer the fullest mutual assistance’.

Of course, Brexit continued to dominate the agendas of Government, the regulator, and the financial services private sector among many others, with a large number of organisations developing Brexit contingency plans during 2018, in most cases based on a range of potential scenarios given the uncertainty that still exists.

During 2019, the Gibraltar financial services community must rise to the challenge by pursuing business opportunities that are not reliant on access to the EU single market, taking advantage of our bilateral relationship with the UK and continue to explore new markets in which Gibraltar can aim to become a centre of excellence.

To increase our chances of success, the industry must come together to share ideas, support each other and strive to remain competitive while not compromising on standards.

port & shipping Worrying times and not just down to Brexit Year

Cruise vessels

Cargo

Bunkers

Repairs

Off Limits

Other

2008

222

253

5965

154

2006

2009

238

193

6712

132

2010

175

178

6724

128

2011

187

164

6181

2012

173

161

2013

180

2014 2015

Vessels on Eastern side

Total No calls

Gross Tonnage

301

9749

288,409,608

1460

543

10042

276,370,000

1365

505

11134

258,148,181

117

1492

597

10350

275,168,505

6362

127

1259

444

9581

277,483,060

164

5988

115

1175

248

9140

253,843,589

180

20

5475

48

1181

1414

194

8512

238,409,636

204

7

5571

55

1136

1593

188

8754

243,440,385

2016

224

3

5720

63

1202

1563

226

9001

247,329,293

2017

235

4

6298

57

1071

1668

131

9464

275,347,179

2018

243

49

5829

65

1045

1719

157

9107

268,985,938

A minor observation on the above chart, cargo vessels showed a substantial decline between 2014 and 2017, however on investigating with involved parties we have found out that numbers must have been substantially greater, however they were for some reason been classified under the “Other� column.

Authorities were duly informed and relevant changes have now been made.

The year got off to promising start but the initial optimism was soon dashed by the realisation that 2019 cruise calls were due to fall by 25% on 2018. This was followed later in the year by the shock to local port operators that one of the major bunker suppliers in Gibraltar had to cease trading and another supplier’s main hub was filing for Chapter 11 in the US. Whilst the first supplier had apparently left some heavy debts and claims, it also created a big void in the market.

The second supplier continued trading under Chapter 11 protection and indications among local operators were

fairly positive regarding their continuity after major changes and a wholesale restructuring of the group.

devastating effects on many sectors that depend on the number of ships calling at at Gibraltar.

Bunkering

The proposed expansion of storage tanks at the Western Arm, North Mole,

by World Fuels (through their local subsidiary, Gib Oil) has been met with repeated delays at a time when Gibraltar needs the presence of a fully functioning player in the market. This has become even more urgent given the void which has opened up during the year.

Initially, 2018 looked to be very similar to 2017, with a modest increase of approximately 2.4% over the first five months on a like for like basis compared with the previous year. However, from June onwards volumes began to fall by as much as 19% in the last quarter of 2018 with an all-time decrease of just under 34% during the month of December alone. This obviously has had

The three remaining bunker suppliers depend on hinterland facilities for the

Gibraltar Chamber of Commerce 2018 Annual Report

17

storage of their bunker products, with two of them using facilities just across the Bay. This could make a No-Deal or Hard Brexit another significant threat to this important pillar of Gibraltar’s economy.

A number of Chamber members operating in this sector have repeatedly requested that Gibraltar becomes selfsufficient in the storage of bunkers.

Bunkering is what really brings in the bulk of the ship calls to our port and provides substantial additional business to many companies, as mentioned in previous Annual Reports. Overall this creates direct employment for about 1000 people.

The Chamber believes that Gibraltar requires as many different physical suppliers as possible within the limits of our territorial constraints, not just to cater for demand, but also to ensure a healthy competition.

Cruise ships 2018 lived up to expectations and we came relatively close to the record level set in 2009 of 252 calls. Unfortunately, we had to begin coming to terms that 2019 is not going to prove to be as successful with a projected 26% drop in number of calls.

In previous reports we have mentioned the need to enhance our tourism product, not just to create interesting new excursions, but also be able to cater for greater capacity with less congestion at our various tourist sites. This should be achievable if we were able to implement an effective hop-on hop-off service for 2018

Visa Nationals Airport Arrivals

Cruise calls to Gibraltar, Cadiz and Malaga 2008-2019 350 300 250 200 150 100 50 0

2008

2009

Gibraltar

2010

2011

Cadiz

2012

2013

2014

2015

2016

2017

2018

2019

Malaga

visitors. Additionally, we should also be providing a free shuttle bus service for cruise liner visitors in an endeavour to attract them to come ashore and not remain on board during the ship’s visit.

no cruise business to speak of but this year will host 285 calls against Gibraltar’s 193.

What are they doing which is proving so much more attractive to cruise operators?

How can we learn from this?

Three years on and the the cruise terminal duty free shop remains open, despite assurances from the Chief Minister that it would be closed. This discourages cruise passengers from coming into town, especially those who are repeat vistors to Gibraltar. This may benefit the operator of the duty free shop but does little for the wider economy overall.

Another concern is that a fourth port across the Strait is gearing up to increase their share of the cruise market, and offer cruise operators significant advantages.

It is therefore even more important that Gibraltar raises its game so that we can optimise all that Gibraltar has to offer.

For comparison, it is worth looking to see how we fare against neighbouring competing ports against whom, many feel Gibraltar has more to offer The graph above highlights recent trends. It is noteworthy that ten years ago Malaga had 2017

Visa Nationals Airport Arrivals

Crew changes In last year’s report we highlighted the impact which the demise of Monarch Airlines had brought about on crew changes during the final quarter of 2017.

This impact has continued to be felt throughout 2018 and there is an urgent need to address this matter as it has had

2016

Visa Nationals Airport Arrivals

2015

Visa Nationals Airport Arrivals

Month

Crew

Month

Crew

Month

Crew

Month

Crew

January

373

January

358

January

353

January

379

February

300

February

441

February

429

February

460

March

182

March

386

March

423

March

421

April

303

April

450

April

469

April

440

May

381

May

532

May

472

May

616

June

308

June

442

June

471

June

455

July

298

July

407

July

499

July

375

August

288

August

388

August

517

August

353

September

343

September

528

September

382

September

348

October

311

October

327

October

526

October

449

November

253

November

388

November

519

November

517

December

292

December

231

December

449

December

387

Total

3,632

Total

4,878

Total

5,509

Total

5,200

Figures for 2013 were 5,525 and the estimated figure for 2014 was around 6,000, but no confirmed record was available.

18

Gibraltar Chamber of Commerce 2018 Annual Report

port & shipping cont. adverse knock-on effects on other related sectors, not just ship agents and launch operators, but also hotel operators and transport providers (mainly taxis).

The problem is not just the lack of adequate flight connections/availability and their cost. It is also greatly affected by the type, availability and cost of local short term accommodation required by Ship Owners/Managers for their crew members.

The real advantage Gibraltar has had over neighbouring ports on crew changes has been their requirements for Visa nationals to be in possession of Schengen Visas., These were not necessary when travelling to Gibraltar via London Heathrow. With fewer connections and lesser and more expensive seat availability the number of crew changes undertaken in Gibraltar have dropped quite drastically.

It is difficult to assess the total numbers of crew members arriving and departing from Gibraltar, but a reasonable estimate is that the industry has been selling around 20,000 bed nights per year between 2013 and upto September 2017.

However, if we go by the table below, there is a good chance that these figures could have reduced by more than a third.

The tables below show Visa Nationals arriving via Gibraltar airport, but we need to remember that each crew member arriving, is usually replaced by another, therefore there is also one departing. Both normally make use of hotel accommodation and require transport to/from the airport, hotel and the port.

This particular part of the local shipping sector could benefit from a drastic increase in the availability of low-cost seats on the London Heathrow route and the expansion of budget accommodation available locally. Whilst we are aware that there are many difficulties on both counts, we are also aware there have been initiatives and proposals from industry players, getting together in an attempt to address the situation, but for one reason or another these have not been successful.

Ship Agency The Port Authority’s policy seems to be one of “the more the merrier” when it comes to the awarding of Ship Agency Port Operator Licences, with four new ones in the offing as the year came

to a close. We acknowledge that it is sometimes difficult to refuse parties arriving from overseas new licences, but the Chamber questions if all of the following points are always fully considered: • The average number of ship calls between 2008 and 2018 has been 9,530, ranging from a high of 11,134 to a low of 8,512. The size of the market is finite and despite the peaks and troughs from year to year there is not sufficient business to justify increasing the number of operators.

• In the last 15 to 20 years the number of agents have almost doubled, now totalling close on to 30, which means that the percentage possibilities of attending ships is also halved whilst number of calls are about the same, actually decreasing in the last few months of 2017.

• The net income derived from ship calls during has been reduced over the years to practically one fifth or even one sixth what it was in the 1980s, due to the increased competition. Much of this competition has come in the form of unlicensed operators coming into Gibraltar to fulfill orders. These non-local unregistered operators have minimal physical staff presence, if at all, whilst bone fide operators have a full compliment to be able to provide the necessary services required.

• With the globalisation offer of agency services by many networks, there are many organisations which hold worldwide contracts with Principals offering them standardised fees, financial reporting and other rates they may have access to. Independent local port agents are simply not able to offer the same level of services. Within this worldwide offer to Principals, these networks are able to make their monies on key load/discharge ports, be it through liner or even tramp business where they might be in control of, not just the port call but also of the terminal, cargo operations, logistics etc etc, whilst offering very low rates at bunkering ports like ours. Some of these agency networks’ port offices don’t even control their own local hotel bookings as these are managed by a central hub where economies of scale can obtain better rates. As the expenditure is slowly leeched away from Gibraltar to these

hubs, one wonders just how many of these newly licensed operators actually have any investment in Gibraltar at all?

Surely there should be some ongoing and sustained economic benefit to Gibraltar other than the cost of an annual licence. If not, these operators should be encouraged to work through partnership with locally established agents.

• Are all the members of the awarding authority Board deciding on the new licences which are awarded? Perhaps the relevant Port Operators Association and even other independent parties may have objected to the granting of these licences, but if the members of the Board had been more fully briefed, a more equitable decision which benefitted Gibraltar as a whole would have been reached over whether to grant a licence. Licensing awarding procedures in other business sectors appear to be much more stringent.

• A further consequence of this devolution of power and expenditure away from Gibraltar means that apart from the loss of income, Gibraltar keeps on losing qualified and experienced personnel.

Brexit With the continued uncertainty over Brexit it is worth considering just what contingencies are there at our Port.

What facilities are available to berth larger sized container ships? Do we have enough frequency of these ships? Do we have enough apron space to handle a larger numbers of containers? Is there enough warehousing for unloading containers, storing and onward delivery?

Is there adequate handling equipment at the port?

If Gibraltar does not have the means to deal with sharp increase in capacity of sea freight, what contingencies have been made with other nearby ports which are outside the EU? One never knows what the future might have in store for us, but irrespective of political outcomes we should concentrate on redressing the negative situation on all the issues highlighted above as soon as possible.

As Winston Churchill said at a time of national crisis, “It is no use saying, “We are doing our best.” You have got to succeed in doing what is necessary.”

Gibraltar Chamber of Commerce 2018 Annual Report

19

tourism

Worrying times and not just down to Brexit

easyJet’s first flight on its new Luton - Gibraltar route Photo: HM Government of Gibraltar on flickr.com

Upper Rock investment bearing fruit The improvements which have been made to the Upper Rock in the last eight years are great. Some of these improvements, like better signage and secure fencing, have been necessary and others like the Sky Walk and Windsor Bridge have been nice additions to enrich the overall visitor experience. The early indications are that these changes have had some success: entrance fees for the Upper Rock paid by walkers increased elevenfold between 2017 and 2018. The total take is still small at around £340,000 but this was generated by just 60,000 people over the year. Whether this increase was connected to the ban on foreign registered vehicles to the Upper Rock is uncertain but it demonstrates that the Nature Reserve is without doubt Gibraltar’s principal tourist asset. It is both permament and sustainable.

For this reason alone the Upper Rock should continue to receive both maintenance as well as new capital investment each year. The facilities in the 20

Reserve should not be left to deteriorate to such a degree that they become either unuseable or downright dangerous.

But it is not just about maintaining and investing in various site facilities. What makes a real difference to tourists is the personal touch of local knowledge.

Every taxi driver and tour bus driver knows that most visitors are fascinated with Gibraltar’s history and heritage.

Pamphlets and posters can explain only so much. The personal descriptions and storytelling bring the whole experience to life. Locally trained and qualified guides have been great ambassadors for Gibraltar’s tourism product over the years. We need more of them on the Upper Rock during peak tourist season to guide, assist and relate Gibraltar’s story to visitors.

The fall in the number of cruise calls this year (covered in more detail in the Shipping Report) has been disappointing for tour operators, taxi drivers and local retailers alike. The indications are this this is temporary and next year is already

Gibraltar Chamber of Commerce 2018 Annual Report

showing a 10 per cent increase in the number of cruise calls expected.

It would be useful to put in place some form of data collection system so the Tourist Board knows for certain how many passengers disembark and come into town or go on a shore excursion.

Anecdotal evidence implies that for some cruise calls, more than half of the passengers remain on board. This does little for Gibraltar’s tourism sector.

Gibraltar has much to offer visitors, even those who have been to the Rock on several occasions. We need to encourage these passengers to get off the ship and come and experience Gibraltar firsthand.

With this in mind, the Chamber has suggested that the government lays on a free shuttle bus service to transport passengers to and from the cruise terminal to the mid town coach park.

The current system takes too long and does not suit the larger sized cruise ships which are becoming the norm.

Linked to this is the fact that another year has gone by without the long sought

after resolution of traffic management for moving tourists from one part of Gibraltar to another. This needs to be addressed for the benefit of all, not least the tourists themselves. We need to be able to transport large numbers of visitors quickly and efficiently around Gibraltar and this will become increasingly important in the future if we want to continue developing our tourist business.

Part of this resolution is likely to involve private sector investment. This should be warmly welcomed at a time when the lack of Brexit certainty continues to cast a shadow over Gibraltar’s future economic model.

The Holiday Inn Express was the first new hotel to be built in Gibraltar in over 25 years when it opened its doors in May and makes a very welcome addition to Gibraltar’s hotel stock. As part of one of the world’s largest hotel chains its presence will also help to promote Gibraltar through its network.

Despite the caution we expressed in last year’s report about the deteriorating occupancy levels at local hotels, the Holiday Inn Express has got off to a roaring start. Long may it continue, although

once the £7 million refurbishment of the Eliott is complete there may be some rebalancing of demand and supply of room availability. Nevertheless, these investments represent a very welcome vote of confidence in Gibraltar’s tourist sector.

Two further hotels are due to open in Gibraltar in the next year or so. These are badly needed and will come on stream at around the same time as the runway tunnel is completed. With greater operating efficiency, the airport should be able to attract more airlines and these will bring increased numbers of tourists as well as a steady stream of business visitors to Gibraltar.

The entire sector is still suffering from the loss of Monarch’s services in 2017 but with the runway being able to remain open once the tunnel is complete, it is hoped that other carriers will be attracted to add Gibraltar to their networks.

But where’s the strategy?

With prospects for the sector looking good over the short to medium term, one might wonder why the Chamber keeps banging on about the importance Photo: HM Government of Gibraltar on flickr.com

Sheila Hancock at Gibraltar Literary Festival 2018

of having a long term strategy for developing tourism. The reason is simple: attracting tourists is becoming increasingly competitive as other destinations seek to appeal to wider audiences and spend increasing sums of money on promoting and on developing their tourist infrastructures. Forecasting is always an inexact science but it is better to have a direction and measurable set of objectives to work towards in say, the next five or ten years, than operate year to year, budget to budget. Investment and activities can then be put in place to work to achieve these objectives over the longer term.

That said, there is a lot which Gibraltar does very well already and the Tourist Board works relentlessly throughout the year to forge relationships with operators, airlines and agents to inform and update them on what Gibraltar has to offer. But all the time other destinations, both near and far are working hard to attract tourists and spending money to incentivise operators and airlines to bring more visitors to their markets.

The success which Gibraltar has developed in event-led tourism has been a great achievement, whether it is in chess, weddings, music or the literary festival among numerous other events.

The new sports facilities at Europa Point and Lathbury Barracks will open up possibilities to attract a wider range of sporting events to Gibraltar and enable the Rock to be used for out of season sports training camps or for pretournament acclimatisation. Not only is this important for continuing to develop Gibraltar’s niche as a tourist destination, but it will help to recoup the significant capital investment which has been made in these facilities.

There will always be an element of competition between local operators and that is no bad thing. Improvements hardly ever come as a result of complacency. However, if the size of the market continues to grow through a combination of planning, hard work and delivering a consistent level of service, then there will be more than enough business for all local companies in the tourism sector which offer a quality product or service. But it would be better and far more effective if this was coordinated through a coherent longer term strategy which everyone could agree on. Then everyone would benefit: local businesses, the economy and visitors alike.

Gibraltar Chamber of Commerce 2018 Annual Report

21

Residential sales Prices of residential properties broadly continued to hold up during the year although in several cases completion dates became extended as buyers took longer to make their final decision.

Buyers have also become increasingly picky at the top end of the market. Sellers have found that unless their properties are well-presented with a realistic asking price it will take much longer to complete the sale. In some cases, sellers of larger properties have had to wait for more than a year to find a buyer. At the lower end and mid level of the market there has been reasonable turnover and overall sale prices achieved have been closer to the asking prices.

Residential lettings By contrast, the lettings market has remained bouyant in terms of rental rates and this has been helped by the usual constraints on supply coupled with a rise in the number of people wanting to move from Spain into Gibraltar. However, as a number of new developments come on stream in Ocean Village, Mid Town, Kings Wharf and elsewhere, rental rates are likely to stabilise instead of increase year on year. Many of the flats in these properties had been bought off-plan by buy-to-let investors and a number of resales have already taken place before completion. Certainly a percentage of these developments will be lived in by owner-occupiers, but like many of the larger developments which have been 22

P

built in the last 15 years or so, it is expected than the majority of the apartments will be put up for rent. With the continued uncertainty of Brexit it is likely to take some time for a new equilibrium between supply and demand to establish a new price level. Another factor which will affect rates is the number of other developments which are currently going through the planning process or are still some way off completion. Whichever way you look at it, there is a lot of new residential property due to come on to the market in the next five years and much of this new property comprises studios, 1, 2 or 3 bedroom apartments.

There are few large apartments. And that does not include the government schemes of Hassans Centenary Terraces and Bob Peliza Mews which together will add over 1,000 new properties to the local residential market. The questions have to be asked: how far will the supply of properties being built match the predicted demand and will the level of future demand be able to maintain rates at their current levels?

Commercial – Office space Just as we commented in last year’s report, there has been a significant increase in the volume of office space which has been released onto the market in the last two years: two projects alone, World Trade Centre (WTC) and Mid Town have together added 26,000 square metres of new office space to the market.

For Gibraltar that is a lot of property

Gibraltar Chamber of Commerce 2018 Annual Report

to absorb. WTC is virtually full and it is expected that the new tower in Mid Town will follow suit in due course due its central location, build quality and high specification. The tenants who vacated older premises to move into these new developments have left a lot of empty office space behind. With few large companies relocating to Gibraltar due to Brexit uncertainty, it was only a matter of time until owners of these empty office blocks cut rents to try and attract new tenants. This is the first time in perhaps two decades that rental values for offices have fallen in parts of town.

With an increased supply and reduced demand there was only really one way for office rates to go. And there is more office property due to come in stream in the next couple of years with some potentially very significant projects being planned for the next decade.

After a prolonged period of being a sellers’ market, slowly it seems that the pendulum is beginning to swing in favour of tenants.

property sector Commercial - Retail Rents continue to rise when periodic reviews come due. The difference now is that some landlords have become more flexible having seen what has happened in parts of the office market and are perhaps fearful that the same could happen in the retail sector. This is less likely as no significant increase in supply is forecast. Shops and retail space cannot just be built and Gibraltar’s retail market is much more sensitive to location than office space. The best locations on Main Street still command a premium. Nevertheless, the pragmatism of retaining a regular tenant by offering the same or slightly increased rent has won out against the prospect of extracting a much higher rent from a new but possibly non-existent occupier.

That said, whenever a new Main Street retail lease becomes available, depending on location, it tends to be snapped up quickly and there are usually a number of suitors bidding for the premises. But the retail sector has other concerns. As in the

UK, Gibraltar’s retail sector continues to be challenging due to the combination of increased online shopping, locals going across to Spain and a lower number of tourists who seem to spend less each year.

What would help is for there to be a truly transparent rental system or an index of rents for all commercial premises: offices, retail and warehousing district by district and street by street. The land registry’s search facility is sometimes not as up to date as it should be and does not always represent all the terms and agreements which have been entered in between landlord and tenant. This can make rent review negotiations a bit hit and miss and when they become protracted, the process is needlessly expensive for all involved.

Financing

increasingly difficult in the future due to concentration risk for the lenders.

Developers will probably be required to put in more equity for future projects and pay more for financing unless they are able to secure lending from overseas.

If developers cannot secure finance from commercial lenders, they should not expect the taxpayer, directly or indirectly to fund their developments either unless the taxpayer receives a reasonable chunk of the equity in return and the terms of the financing are made public.

Similarly, once a future residential development has been completed, there will be fewer sources of mortgage finance available for purchasers. Unless one or more new financial institutions enter the market this conundrum is likely to restrain the upward spiral of prices which the local market has seen over the last two decades.

A consequence of the reduction in the number of local banks and building societies is that financing any new property development is likely to become Gibraltar Chamber of Commerce 2018 Annual Report

23

24

Gibraltar Chamber of Commerce 2018 Annual Report

Independent Auditor’s Report

TO THE MEMBERS OF THE GIBRALTAR CHAMBER OF COMMERCE 31 DECEMBER 2018

DIRECTORS C Hernandez J Isola M Azopardi T Howard J Bray G Desoisa G Dyke J Morgan-Kent N Quigley J Risso N Russo K Grant F Cassar OFFICE BEARERS C Hernandez J Isola M Azopardi T Howard F Cassar

Elected 12th June 2018

Elected 12th June 2018 Resigned 12th June 2018

President Vice President Hon Treasurer Hon Secretary Hon Secretary

Elected 30th January 2018 Elected 12th June 2018 Resigned 12th June 2017

HONORARY AUDITORS BDO Limited 5.20 World Trade Center 6 Bayside Road Gibraltar REGISTERED OFFICE 2/6 Casemates Square Gibraltar

Gibraltar Chamber of Commerce 2018 Annual Report

25

The Gibraltar Chamber of Commerce STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017

£ £

TURNOVER 106,540 116,715

Administrative expenses (89,626) (107,822)

SURPLUS FOR THE YEAR 16,914 8,893

Retained surplus at 1 January 88,645 79,752

Retained surplus at 31 December 105,559 88,645

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.

26

Gibraltar Chamber of Commerce 2018 Annual Report

The Gibraltar Chamber of Commerce STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017

Notes £ £

TANGIBLE FIXED ASSETS 5 3,034 4,620

CURRENT ASSETS Debtors 2 9,120 11,684 Cash at bank and in hand 3 111,724 84,723

120,844 96,407

CREDITORS: amounts falling due within one year 4 (18,319) (12,382)

NET CURRENT ASSETS 102,525 84,025

TOTAL ASSETS LESS CURRENT LIABILITIES 105,559 88,645

RESERVES 105,559 88,645

Approved by the board on:…21st May 2019…………..

M Azopardi Honorary Treasurer

Gibraltar Chamber of Commerce 2018 Annual Report

27

The Gibraltar Chamber of Commerce STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017

Notes £ £

CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year 16,914 8,893

Depreciation 5 1,586 1,734 Decrease in debtors 2 2,564 3,717 Increase in creditors 4 5,937 2,895

NET CASH GENERATED FROM OPERATING ACTIVITIES 27,001 17,239

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of tangible fixed assets 5 -

NET CASH OUTFLOWS FROM INVESTING ACTIVITIES -

NET INCREASE IN CASH AND CASH EQUIVALENTS 3 27,001 17,239

Cash and cash equivalents at the beginning of the year 84,723 67,484

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 111,724 84,723

28

Gibraltar Chamber of Commerce 2018 Annual Report

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 The 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 to 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.

TURNOVER Turnover represents subscription income and other income which is accounted for on an accruals basis.

TANGIBLE FIXED ASSETS Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses.

Cost comprises purchase price and attributable costs.

Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets over their expected useful lives, 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

IMPAIRMENT OF ASSETS At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

SHORT-TERM DEBTORS AND CREDITORS Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the statement of income and retained earnings.

TAXATION As a non-profit making organisation, the Gibraltar Chamber of Commerce does not accrue money for profit or personal gain. Accordingly, the entity is exempt from paying corporation tax.

Gibraltar Chamber of Commerce 2018 Annual Report

29

The Gibraltar Chamber of Commerce NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

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

Subscriptions

Other debtors

Prepayments and accrued income

3.

CASH AT BANK AND IN HAND

At 1 January

Net cash inflow

At 31 December

2018 £

2017 £

2,535 4,375 2,210

3,675 5,761 2,248

9,120

11,684

2018 £

2017 £

84,723 27,001

67,484 17,239

111,724

84,723

4.

CREDITORS: amounts falling due within one year 2018 2017

£ £

Creditors and accruals 16,087 11,310

PAYE and social security 2,232 1,072

18,319 12,382

30

Gibraltar Chamber of Commerce 2018 Annual Report

The Gibraltar Chamber of Commerce NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

5.

TANGIBLE FIXED ASSETS

Leasehold Furniture

Office

Air Computer Total

improvements and fittings equipment Conditioning equipment

£ £ £ £ £ £

Cost: At 1 January 2018

35,755

11,856

26,652

7,355

12,011

93,629

Additions during year - - - - -

At 31 December 2018

35,755

11,856

26,652

7,355

12,011

93,629

Depreciation: At 1 January 2018 Charge for year

35,755

11,856

23,985

5,959

11,454

89,009

-

-

400

1,047

139

1,586

11,593

90,595

At 31 December 2018

35,755

11,856

24,385

7,006

Net book value: At 31 December 2018

-

-

2,267

349

2,667

1,396

418

3,034

557

4,620

Net book value: At 31 December 2017

6.

-

-

OTHER FINANCIAL COMMITMENTS At 31 December 2018, the Chamber had annual commitments under non-cancellable operating leases as set out below:

Operating leases on land and buildings which expire: 31 December 2018 31 December 2017

£ £

Within one year 8,472 5,906

The operating lease agreement was renewed on 18 October 2018. The yearly rate of £8,422 is expected to apply until the next lease review date scheduled for 1 October 2021.

Gibraltar Chamber of Commerce 2018 Annual Report

31

The Gibraltar Chamber of Commerce DETAILED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017 £ £

TURNOVER Subscriptions 56,510 58,220 Annual report income 7,453 7,375 ATA Carnets 1,875 1,750 Fees for certificates of origin and invoices 35,865 25,910 Chamber dinners - 9,410 Other publications 312 9,050 Other certificates 1,595 1,395 Office hire 1,375 2,520 Training income 1,555 1,085

106,540 116,715

ADMINISTRATIVE EXPENSES Staff remuneration and social insurance 45,486 45,204 Office rent and rates 8,689 12,067 Electricity and water 923 1,084 Bad debt written off 6,457 5,342 Depreciation 1,586 1,734 Advertising 761 9,699 Telephone 1,817 1,904 Printing, postage and stationery 5,595 6,276 Miscellaneous expenses 20 Insurance 2,510 435 Travel and entertainment 2,038 11,121 Office cleaning 2,924 2,460 Repairs and maintenance 3,089 5,517 Subscriptions 4,577 2,002 Accountancy fees 2,900 2,900 Training expenses 75 Bank charges 179 77

(89,626) (107,822)

SURPLUS FOR THE YEAR 16,914 8,893

32

Gibraltar Chamber of Commerce 2018 Annual Report

Gibraltar: Key Information

(All figures relate to 2018 unless otherwise stated) Population:

32,194 (2018)

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:

2.1% per annum (Jan-Dec 2018)

Minimum wage:

£6.75 per hour (£263.25 per week)

Average earnings:

£30,497 (2018)

Registered employed:

29,995 (Oct 2018)

GDP

£2.2bn (2018)

lmports

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

GDP Growth 2008 - 2018 (£m)

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

Employment Growth 2008-2018

2500

30000

2000

20000

1500

10000

1000 500

0

0 2008/09

2011/12

2014/15

2017/18

10/08 Male

10/10

10/12

10/14

10/16

10/18

Female

Corporation Tax

Tax payable

Resident Companies

10%

Utilities Companies

20%

Personal Income Tax (Allowance based system)

Tax payable

The first £4,000 of taxable income

14%

The next £12,000 of taxable income

17%

The remainder of taxable income

39%

A series of allowances are available to individuals who choose to be taxed under this system. Further information can obtained from incometax@gibraltar.gov.gi Gross Income based system

Tax payable

The first £17,000 of taxable income

16%

The next £8,000 of taxable income

19%

The next £15,000 of taxable income

25%

The next £65,000 of taxable income

28%

The next £395,000 of taxable income

25%

The next £200,000 of taxable income

18%

The remainder of taxable income

5%

Further information can obtained from incometax@gibraltar.gov.gi Social Insurance Employer contributions

Levied at 20% of gross earnings subject to a minimum of £18.15/week or £78.65/month and a maximum of £40.15/week or £173.98/month.

Employee contributions

Levied at 10% of gross earnings subject to a minimum of £6.05/week or £26.21/month and a maximum of £30.25/week or £131.08/mont

Self-Employed contributions

Levied at 20% of gross earnings subject to a minimum of £12.10/week or £52.43/month and a maximum of £36.85/week or £159.68/month.

No capital gains taxes

No tax on dividends

No wealth, gift or capital taxes

No Inheritance tax/death duties or estate duty

Gibraltar Chamber of Commerce 2018 Annual Report

33

GIBRALTAR: KEY INFORMATION

(All figures relate to 2017 unless otherwise stated)

Special Status personal tax rates

Tax payable

Qualifying individuals who are non-resident and derive no income from Gibraltar can apply for Category II resident status.

An individual who has been issued with a Category 2 Individual certificate is taxed under the Allowance Based System but only on the first £80,000 of their assessable income and the amount of tax due and payable in any year of assessment shall be not less than £22,000.

Applications should be made to the Finance Centre Director, info@financecentre.gov.gi Property Commercial Office Rental Rates (annual rates for indicative purposes only)

Residential Property rental rates

Europort

£320 - £385/ square metre

Studio/1-bed apartment

£850-£1300/PCM

Eurotowers

£240 - £275/ square metre

2/3 bed apartment

£1300-£3,500/PCM

Leanse Place

£240 - £275/ square metre

4 bed apartment

£3,500 - £7,000/PCM

Leisure Island Ocean Village

£330 - £415/ square metre

Mid Town

£395/ square metre

Regal House

£250 - £300/ square metre

World Trade Centre

£375/ square metre

Note The above rates are for indicative purposes only. Actual rates may vary depending on the size and condition of individual properties, location and other amenities.

Commercial Rates Rates on commercial offices are levied at 67p in the £ based on the annual rentable value of the premises. Rates are payable quarterly in advance. After the first quarterly payment has been paid, businesses qualify for a 15% discount on subsequent rates bills for prompt payment.

You are not just another customer and we are not just another Bank Our Relationship Managers have extensive experience in managing client relationships and customer service and are able to understand your business and personal financial needs For more information on our products and services please visit our website www.gibintbank.gi or contact us on +350 20013900

traditional banking with a modern feel www.gibintbank.gi | +350 (200) 13900 | Gibraltar International Bank Ltd, PO Box 1375, Ince’s House, 310 Main Street, Gibraltar GX11 1AA Gibraltar International Bank Limited is authorised and regulated by the Gibraltar Financial Services Commission. Company Registration Number 109679

34

Gibraltar Chamber of Commerce 2018 Annual Report

Argus is the only Chartered Insurer in Gibraltar.

The exclusive Chartered Insurers status is evidence of our commitment to an overall standard of excellence and professionalism to our customers, partners and employees.

PO Box 45, Regal House, 3 Queensway, Gibraltar T+350 200 79520

F +350 200 70942

E enquiries@argus.gi

www.argus.gi

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