Gibraltar, a rocky British enclave on Spain’s southern tip that has positioned itself as a springboard for finance to the European Union, may have to reinvent itself after Britain voted to split from the bloc.
Fund managers and insurers have been drawn to “the Rock” because of an attractive tax and regulatory regime, location in mainland Europe and proximity to the European market. Financial services account for about a third of the economy, reports Reuters.
But Gibraltar is now considering refocusing on the British market in case London fails to secure financial access to the EU in talks with Brussels about its EU exit.
Fund lawyers in Gibraltar say they have not seen a drop off in client queries since the June vote to leave the EU, which 98 percent of residents opposed, but Chief Minister Fabian Picardo, has warned of an “existential threat” to the economy. The government is now preparing a plan B for its financial center.
Albert Isola, Gibraltar’s financial services and gaming minister, says the territory would re-invent itself as an entry point for EU firms wanting to access a cut-off British market via Gibraltar’s attractive tax and regulatory regime.
“Being outside the EU is an opportunity not a threat,” said Isola in an interview in his office that looks out across the bay to the Spanish port of Algeciras.
There is little alternative. A “hard” Brexit, in which Britain loses automatic access to Europe’s single market, would prevent financial firms based in Britain and Gibraltar from offering their services in other EU countries.
This would abruptly end Gibraltar’s efforts to lure firms looking to Europe, with the promise of corporate tax of 10 percent, easy-to-access regulators, and Mediterranean lifestyle.
The British overseas territory, which Spain ceded in 1713 but would now like to reclaim, is home to over 100 regulated funds, which manage assets worth around 3 billion pounds ($3.91 billion). It is also an important cog in Britain’s insurance industry, with 20 percent of motor insurance being underwritten there.
Isola said that even if Britain loses its right to a “passport” allowing it to sell financial products into the EU, the British market will remain one of the largest in Europe.
Any firms wanting to do British business would need to set up subsidiaries in Britain – or Gibraltar.