Malta set to benefit if gaming companies leave Gibraltar

Malta’s gaming industry looks set to benefit greatly from Brexit, picking up the business lost by Gibraltar, experts have told The Associated Press.

Deep inside the Rock of Gibraltar is a room known as The Vault. Dug by the British army in World War II, it now houses servers that power the websites of dozens of international online gambling companies.

Those companies were lured to this speck of British territory on Spain’s southern tip by its low taxes and its unimpeded access to the European Union’s single market of around 500 million people.

It’s a flourishing and hugely important business for Gibraltar, accounting for around 25 per cent of the economy, some 40 per cent of corporate tax revenues and almost 3,000 of its 26,000 jobs.

And the European market is only set to get bigger. According to market data company H2 Gambling Capital, it could be worth around €30 billion a year by 2021, nearly double current levels.

Britain’s looming departure from the EU, therefore, has cast a cloud over Gibraltar’s future because Brexit could see it shut off from the rest of the EU. That possibility is already having an indirect impact on Gibraltar, by magnifying the appeal of other low-tax jurisdictions, such as Malta.

Nobody is panicking yet, and no gambling company has said it intends to leave Gibraltar while EU and British officials negotiate Brexit. In March, before calling an early general election for 8 June, Prime Minister Theresa May formally triggered the twoyear Brexit process.

Senior executives of 888, which runs one of the world’s biggest online casinos, have already sounded the alarm over potential dangers, however.

Earlier this year, they warned that 888’s reach into the EU’s other 27 member countries could be limited in the event of a socalled ‘hard Brexit’, whereby Gibraltar, like the rest of Britain, could see trade disrupted by the imposition of tariffs, and businesses potentially becoming ineligible for regulatory licenses in some EU countries.

In its full-year financial report, 888 said it “would reconsider the appropriateness of remaining registered, licensed and operational in Gibraltar in these circumstances,” and added that “Malta may be considered as an alternative ‘dot com’ licensing jurisdiction.”

Malta stands ready to attract Gibraltar’s gambling firms. “The Maltese government is another champion of the online gambling sector, which represents 11 per cent of the nation’s GDP and employs 8,000 people,” the AP said.

Two other gambling industry big-hitters, Ladbrokes Coral Group and William Hill, say they are monitoring the Brexit negotiations and, like 888, have no plans to depart just yet.

William Hill has set up a Brexit Working Group to assess Brexit’s possible financial, operational and regulatory consequences and to make sure that “suitable arrangements are in place should there be disruption to the Gibraltar (border) crossing or the availability of any services offered through Gibraltar.”

For those working in the sector, the coming two years are likely to be a worrisome period. Some 1,800 staff — nearly 60 per cent of the sector — commute from Spain to their workplaces, which are often located in smart office blocks overlooking the Bay of Gibraltar, where elegant yachts bob on the calm waters.

Their fate, as well as the industry’s, depends to a large degree on whether Madrid will opt to hinder cross-border traffic following Brexit – something it has already done in the past.

Gibraltar has been a thorn in the side of UK-Spain relations for decades. In 1969, Spanish dictator General Francisco Franco slammed the border shut in an attempt to wreck its economy and snatch the territory from Britain.

Brexit, some fear, might achieve what Franco couldn’t.

The Gibraltarian government has made no secret of the importance of the EU. On its website, it still lauds the benefits of EU membership as one reason why firms should set up shop on The Rock. The people of Gibraltar clearly think it’s important — nearly 96 per cent of Gibraltarians voted to remain in the EU last June.

The territory has prospered under Britain’s rule and free trade with the EU.

For now, officials in Gibraltar are holding their nerve.