Gibraltar's Future Hanging In The Balance
More Brexit wreckage or future financial powerhouse? This is the question that investors are asking about the British territory of Gibraltar.
The tiny British enclave at the mouth of the Atlantic has acted as the crossroads of the Mediterranean since before the time of the Phoenicians.
Located at tip of the Iberian Peninsula, a mere 14.3 kilometres from the shores of Africa, it has been of vital strategic and economic importance to Britain (and a humiliating thorn in the side of the Spanish government) for over three centuries.
Today it remains a thriving hub of finance, trade, tourism and shipping, as well as being home to Europe's most prominent i-gaming operators.
Though small – its population is estimated at just 30,000 – it boasts a broad set of cultural demographics and a significant number of multinational companies.
On paper its prospects look remarkable; with growth of over 10.6% in 2015 Gibraltar could easily be classified as a true tiger economy, but for one big question mark looming larger than the Rock itself.
This summer, while work continued on Gibraltar's brand new World Trade Centre, Britain voted to leave the European Union.
It's a stark contrast to Gibraltar who, despite being defiantly British, unanimously rejected Brexit by a massive 96%.
The special position that Gibraltar currently enjoys is just one of the many thorny issues that complicates Theresa May's efforts to navigate the stormy seas ahead.
This uncertainty is of concern to industry, particularly those involved in i-gaming. Investors are understandably cautious, while the estimated 10,000 workers who travel across the border from Spain each day, fear their livelihood may also be at risk.
Gibraltarians, meanwhile, view Brexit not just as a threat to their prosperity, but to their very existence.
Gaming Industry Hedges Its Bets
EU membership, direct access to the British market, highly competitive taxation plus a prestigious gaming license – just some of the reasons why Gibraltar remains the most popular location for the majority of Europe's leading gaming companies.
That could soon change, however.
For the most part the reaction has been muted. Though it should hardly come as a surprise to learn that companies who make their millions in online poker, and other forms of gambling, are keeping their cards close to their chest regarding Brexit.
One notable exception was Lottoland who, mere days after the result was announced, took out full page ads announcing its ongoing commitment to Gibraltar.
"Last Friday’s result does not change our firm commitment to staying here", Lottoland CEO, Nigel Birrell told the Gibraltar Chronicle, "Our business is thriving and the benefits of staying in Gibraltar remain very strong indeed."
For British brands in Gibraltar, most notably Bet 365, William Hill, Gala/Coral and Ladbrokes, the UK market remains the primary focus. Other companies meanwhile, such as 888.com, Bwin Party Digital Entertainment and NetEnt, are more international in outlook.
For the former, retaining key operations in Gibraltar still makes perfect sense, though not necessarily for the latter.
Despite Gibraltar's favourable taxation and other benefits, these may no longer count for much without direct access to the Eurozone.
The Maltese Hawk
One country that's watching the drama unfold with keen interest is Malta. Itself a British colony until 1964, Malta will gain the EU presidency of the EU in 2017. This means that, if Article 50 is triggered in March, as Theresa May insists will happen, Malta will be hosting the very first official negotiations of Brexit – and the tiny island nation has already made its intentions very clear.
When Malta's prime minister Joseph Muscat famously told Theresa May, "you cannot have your cake and eat it", it was seen by many as a subtle jab at an earlier comment by Boris Johnson, but there may also be another subtext.
"Expect the format to be more or less like what happened with Greece", Muscat said, before later referring to the UK's position as being "between a rock and a hard place."
Was this the use of simple vernacular, or was the "rock" in question a not-so-subtle reference to the Rock of Gibraltar?
Gibraltar is not a part of the UK, but rather an overseas territory – an important distinction, though not necessarily one all stakeholders are willing to make.
The Gibraltarian government is pushing hard for a special deal which would take its unique situation into consideration.
At September's Labour Party Conference in Liverpool, Fabian Picardo, Gibraltar's First Minister, proclaimed "we want access to the single market and we fully accept the free movement of people going forward."
For the Maltese government, and for the many EU hardliners who will be meeting in Malta next year, that could easily prove to be be one slice of cake too many.
While many companies have offices in both countries already, Malta plays second fiddle to Gibraltar in terms of both its gaming and finance industries.
This situation could easily be flipped, however, in the wake of Article 50.
Unlike Gibraltar, which uses the Pound, Malta is a member of the Eurozone. So it would make sense for gaming companies to ship their European operations from Gibraltar to Malta.
From the standpoint of the large multinationals this could prove a logistical irritant, but for the estimated 3,000 foreign workers employed in the gaming industry, it would spell disaster.
Disaster, too, for those working in the service industry – a mass exodus of gaming jobs would also mean less offices to clean, less taxi fares, less sandwiches at local delis, less beers drank in local bars after work…
These allied jobs comprise an extra thousand people, by conservative estimates, bringing the total to five thousand. This number is based only on statistics from Gibraltar, however, and doesn't take into affect the knock-on effect on Campo Gibraltar, in neighbouring Spain, where a vast majority of these workers live and commute from.
It's a slightly sunnier outlook for Gibraltar's finance industry, the majority of which "are British based, and British focused", according to Chief Minister, Fabian Picardo.
Tourism, too, remains predominantly UK-focused, as rain-weary Brits escape to spend their pounds in somewhat familiar surroundings. The only direct flights to and from Gibraltar are from England, with other tourists arriving either from Spain's Malaga airport, or alighting from large cruise ships.
The commercial shipping industry, meanwhile, will no doubt learn to adapt to the new economic conditions, as it always has. The Rock of Gibraltar is one of the "Pillars of Hercules", the exact point where the Mediterranean ends and the Atlantic Ocean begins – a major shipping point since ancient times.
The economic impact of Brexit is just one issue, however. The other is territorial. The Gibraltar question has blighted Anglo-Hispanic relations for centuries.
Following defeat in War of the Spanish Succession, Spain ceded Gibraltar to Britain by treaty in 1713, and the two nations have been at loggerheads ever since.
On the third centenary of the Treaty tensions rose once again, this time over territorial waters and fishing rights, prompting the Spanish to shut the borders, trapping thousands of commuting workers for hours on end in the blistering summer heat.
"Like North Korea?" asked The Economist at the time. The publication wasn't trying to be sensationalist (it rarely is) but was instead referring to a quip made by Chief Minister Picardo, in criticism of the Spanish government.
Tensions were eventually eased through EU intervention, though there's no guarantee this will happen again in any future disputes.
Spain's conservative Prime Minster, Mariano Rajoy, continues to push for a joint sovereignty deal, which would see Spain and Britain sharing power, a proposal Gibraltar flatly rejects.
More hawkish elements in Madrid, meanwhile, have no interest in sharing power in a territory they consider to be rightfully Spanish and are pushing to close the border.
Such rhetoric feeds Gibraltarian fears of a return to the Franco days, when the border was closed for 16 years. The border fully reopened in 1985, as part of Spain's deal to join the EU.
Though much of this is clearly political bluster.
The region surrounding Gibraltar was one of the worst hit by the financial crisis and, eight years on, unemployment remains high despite a resurgent Spanish economy.
The majority of jobs in the area are to be found across the border. So by shutting the border down Madrid would score a devastating economic own goal.
The Spanish need jobs, Gibraltar needs labour and currently, according to Picardo, "More than half of our job market comes from across the frontier every day."
Perhaps the most poignant symbol of this symbiosis is Gibraltar's World Trade Centre, built, in part, by Spanish labour. The politicians could do well to take their cues from this initiative.
The case for cross-border cooperation, post-Brexit, is therefore stronger than ever, and not just for economic reasons. Britain and Spain are NATO allies, let's not forget, and can, and indeed do, collaborate regularly on issues such as drug trafficking and the migrant crisis.
Now, with thousands of jobs in the balance, Gibraltar and Spain find themselves facing yet another common threat.
Locals believe the Rock will endure, as it always has. This, after all, is the region which has given us the phrase "Solid as the Rock of Gibraltar", and history can attest to its sturdiness.
The tiny peninsula, less than 7 square kilometres in size, has repelled numerous Spanish attacks over the centuries and endured throughout the Napoleonic Wars, two World Wars and the reign of Franco.
Given this historical context there's no reason to believe it can't also weather Brexit.