The rise of UKIP: would an EU exit cut Gib’s throat?

Gibraltarians have grown disenchanted with the EU, yet their continued economic success depends on it. In light of UKIP’s surge in the recent European elections, Michael Castiel asks what an in-out referendum would mean for the Rock and which areas of industry might be able to go it alone.

By New Statesman

(Photo By "This is somebody who thoroughly dislikes what modern Britain is.(Photo: Getty))

Gibraltarians are generally politically savvy, lean away from extremist views, and are far more enthusiastic in support of their choice of party than most of their British counterparts. But the average Gibraltarian’s growing disenchantment with the European Union – stemming as much from the avalanche of Brussels-spawned directives and regulation as from the European Commission’s (EC’s) lacklustre approach to Spain’s border violations – was reflected in the low turn-out in last month’s European parliamentary election. Fewer than one-third of the Rock’s electorate voted – in a jurisdiction where local general elections draw percentage polls of 70 per cent or more, and are consistently higher than in most other western countries where voting is not mandatory.

Rightly or wrongly, there is a public perception that Brussels and Strasbourg are “on the other’s (i.e. Spain’s) side”. And more recently – at least among those in business and finance who observe events in the EU with closer interest – this perception is being coupled with concern that the probable next president of the EC is Jean Claude Juncker – not only a federalist likely to uphold the status quo in any dispute between Gibraltar and Spain, but also a former prime minister of Luxembourg, a bitter rival of the Rock in the provision of financial services.

So, the existing disenchantment is understandable.

Yet Gibraltar’s continued economic success – which has allowed the Rock to weather the financial turmoil of recent years better than most other financial centres, big or small – depends on our continued membership of the European Union. Our burgeoning financial services sector is based largely on Gibraltar’s role as a stepping-stone for non-member states into the EU, with its potential market more than double that of the US.

Indeed, any British decision to quit the EU would cut the Rock’s economic throat, for our membership – so frequently under fire from Spain – came and remains under Britain’s umbrella, Gibraltar having become an EU territory when Britain joined in 1973 and forming part of the UK Member State. Even any renegotiation of the UK’s relationship with Europe could have an impact on Gibraltar’s economic welfare.

Should Britain decide to quit the EU and Gibraltar applied separately for membership in her own right, almost certainly Spain would block that route.

Earlier this year, Gibraltar’s Chief Minister Fabian Picardo suggested that if Britain left the EU, Gibraltar would “go it alone.” But in the same brief statement, he acknowledged that this goal might be impossible to attain.

“The snapshot is that it would be a disaster,” the Chief Minister said. “If we had to apply our minds to an economic model that might enable us to survive exit from the EU, it might be possible to design something where a lot of belt-tightening might mean that we might not actually disappear from the economic map. But I think everyone in Gibraltar agrees that we don’t want to even countenance that, because the short answer – that it would be disastrous – is actually the best way to represent what would happen.”

Against this backdrop, the results of the recent European parliamentary elections are doubly ironic for Gibraltar. Not only has the South West constituency*, of which we are part, swung (along with many others) further towards UKIP, but the former Liberal MEP Sir Graham Watson lost his seat, and Sir Graham (one of the highest profile MEPs to go) was the staunchest of the Rock’s advocates in the European Parliament and in the media.

The Chief Minister’s argument – peppered as it is with “mights” – that Britain’s withdrawal would be “disastrous” for Gibraltar is sound, but may be overly bleak. There are some significant sectors of the economy where we could still hold our own on the international stage.

Across-border tourism would be hit, though impacted by the recent border queues and deliberate delays to traffic. However it is possible that the growing numbers of cruise-ship visits could compensate for this.

Our links with Britain would remain as would the close ties between our financial services industry and the City of London – though, here, as its own business lessened, we would feel the greater impact.

And although our motor insurance sector would lose business from expatriates in Spain, it presumably would continue to account for a tenth of all British car-owners’ cover.

Similarly, our growing expertise in the international funds industry would stand us in good stead – while we would lose support from investors in EU countries, we would find other markets.

And this would apply to the economically significant online gaming industry, a sector already looking with some success to the lucrative sources of the Middle East and China.

Our Admiralty Courts (maritime courts) and bunker services – we’re still the biggest supplier of fuel at this end of the Mediterranean – should also remain unaffected.

So perhaps we could survive a British exit from the EU? Yes. But only just…and at what cost? Gibraltar will continue to eye a possible UK referendum on Europe with some apprehension.

Michael Castiel is a partner at Hassans International Law Firm

*Formed in 1999 to replace a number of single-member constituencies, the South West was expanded to include the Rock before the 2004 elections. This followed a European Court of Human Rights ruling that Gibraltar should be entitled to vote in European elections. A Spanish complaint against Gibraltar’s participation was dismissed by the ECJ (European Court of Justice).