After an almost never ending, and ever rising, degree of uncertainty, the United Kingdom withdrew from the European Union at the turn of the year as the Brexit transition period came to its scheduled end on December 31, 2020.
Many questions remain, and numerous more will undoubtedly come to fruition during the coming weeks and months, but right now CasinoBeats is looking into the potential ramifications for one particular overseas territory, Gibraltar.
Despite mounting fears to the contrary, the home to many gambling incumbents was the subject of an 11th hour deal between ministers and the Spanish government over the region’s post-Brexit future.
Under these terms, Gibraltar could join the Schengen Area, a zone that spans 26 countries and allows for the free and unrestricted movement of people.
Dominic Raab, UK foreign secretary, called the arrangement a “political framework” to form the basis of a separate treaty between the UK and the EU regarding Gibraltar.
Here, we speak to Andrew Lyman, executive director at the government of Gibraltar – gambling division, who dissects the potential fallout for the industry.
CasinoBeats: In a broad sense, what does Gibraltar’s Brexit deal mean for the gaming industry?
Andrew Lyman: The Gibraltar gambling industry was founded on the basis of the EU fundamental principles, but well before the 2016 Brexit vote the nature of the Gibraltar industry was changing as the EU markets matured. It has been changing and evolving since 2014 and has sustained despite legal changes in the UK and elsewhere.
In the broadest terms, operators have moved the EU elements of their business from Gibraltar, but in the main their UK facing business and non- EU international has remained under Gibraltar licensing.
“The ‘win- win’ is the continued shared prosperity between Gibraltar and the campo”
The jurisdiction maintains its attractiveness as one which is (a) supportive of business (b) providing a stable, transparent accessible and democratic political system;(c) providing the lifestyle benefits of both Gibraltar and Southern Spain (d) a centre of industry expertise and one that still has a vibrant industry labour market.
CB: What major benefits, particularly with the industry in mind, will being a part of the Schengen Area bring?
AL: One of the key risks was the prospect of reduced border fluidity; making it difficult for operators to recruit and retain cross border workers. With access to Schengen and improved air links, Gibraltar will become even more attractive for entrepreneurs, senior gaming executives and high net worth individuals. These are the individuals who anchor businesses in Gibraltar and bring new business to the jurisdiction.
CB: With such an influx of workers travelling to the region from Spain, how crucial was this late agreement?
AL: This will be a UK/ EU Treaty, but nothing can be agreed without the government of Gibraltar being at the heart of negotiations and agreeing the detail, and its parliament legislating for it.
The ‘win- win’ is the continued shared prosperity between Gibraltar and the ‘campo’ in which some 15,000 workers live in Spain, but work in Gibraltar. Their ranks are swelled by gambling and financial services industry workers. Some 10,000 of these are Spanish cross frontier workers.
Gibraltar provides around 25 per cent of the GDP of the campo area. Gibraltar businesses purchase £400m per year from Spanish businesses. Residents of Gibraltar spend over £70m per year on goods and services from Spain. Gibraltar is the second largest employer in the neighbouring region of Andalucía.
The economic case for a mutually beneficial cross border agreement is self- evident. Without either side conceding on issues of sovereignty, the benefits for both sides have enabled negotiators to find workable and acceptable solutions that can form the basis of an international treaty. The ‘in principle’ agreement is very much forward looking and both sides have been able to put 300 years of difficult history to one side.
“To be honest, M&A activity is more likely to have an impact on the structure of the Gibraltar gambling industry”
CB: Were there any fears that the industry could be particularly hard hit as a result of the UK’s withdrawal?
AL: The lack of EU access for both gambling and financial services is a negative and there is no point in pretending otherwise. However, the gambling industry model is now multijurisdictional in nature. Gibraltar is a small jurisdiction and can be agile in its approach. Of critical importance has been the direct access negotiated and granted to Gibraltar in respect of the UK market, which Gibraltar enjoys to the exclusion of all other territories.
It is perfectly understandable that businesses wanted to position for a ‘worse -case’ scenario and to continue to access EU markets. However, history may show that some operators may have moved critical mass too early. There was always optimism that a gambling industry would be retained in Gibraltar, but whether that was a declining or growing issue was the question. There is continued interest in the jurisdiction and my belief is that the industry, particularly for UK and non-EU international business will grow and thrive here.
CB: Are there any other repercussions, either to be felt immediately or a future date, that industry incumbents should be aware of or concerned about?
AL: To be honest, M&A activity is more likely to have an impact on the structure of the Gibraltar gambling industry than the repercussions of Brexit. The government of Gibraltar has demonstrated how it works constructively with business during the COVID-19 crisis.
Gibraltar is a jurisdiction committed to tax transparency and international standards generally. Gibraltar is not going to reduce its attractiveness to business whilst at the same time remaining a jurisdiction which commands international respect and full UK support. It also wants to continue to build a close relationship with the EU. I am very optimistic for the future.