Gibraltar: How Deep Is The Green?

I have attempted in previous articles to ascertain whether the global economy is improving. Some "green shoots" had certainly been identified by economists but, as I found, it was much harder to determine the depth and extent of the "green-ness".

In other words, can we say a recovery is really underway or is new growth so fragile that it could vanish at the first blow of the levanter? Worse, and to borrow an over-used phrase, could it be that the light glimpsed at the end of the tunnel is actually another train bearing down on us from the opposite direction?

As usual, I should remind you that these columns represent my personal opinion rather than those of my employer. This month, that disclaimer is necessarily broader than usual because my opinion is firmly skewed in one direction – that there are "green shoots" to be found and therefore reasons for optimism.

We should also bear firmly in mind that it's not the same story for everyone. Far too many people – here in Gibraltar or further afield, notably Spain – are dealing with, or living in fear of, unemployment. Personal financial concerns remain the concern of the majority rather than the minority, whether it be paying bills now or worrying about savings in the future.

So where do I detect these green shoots of recovery? Beginning at home, I have always contended that Gibraltar has shown real resilience in facing the recent economic maelstrom. We are extremely fortunate here to have a robust, growing economy based on several, widely diverse, sectors – financial services, tourism, gaming and shipping to name a few.

So to call a recovery here might be misleading. Indeed one might say that Gibraltar is only now seeing the real impact of the financial woes that have affected the rest of Europe in recent years. Everyone is aware of the difficulties in distinct sectors – local banking to cite one example – but taken overall, opportunities are already presenting themselves in Gibraltar as we face the realities of a new economic order.

It is pleasing to see new businesses setting up in Gibraltar every month. Some of these represent brand new economic interests whilst others build on existing activities where we have proven experience and can offer highly trained personnel.

A good example of the latter is Hyperion Family Office, a recent addition to the Gibraltar finance scene although the principals are all well-known locally. I listened to an economic presentation at one of its recent breakfast events that was so positive about "green shoots" that I was in danger of turning green myself – with jealousy. But as the speaker was a client director at a global investment firm, you would perhaps expect him to be a "glass half full" type.

I follow several "barometers" in order to gauge how real any recovery might be. Stock markets around the world are very volatile but several of the major indices are at levels not seen for many years. Indeed some, such as the Dow Jones in New York and the DAX in Frankfurt, are at or close to "all time" highs. The trend in recent years has certainly been upwards. Why should this be, at a time of such economic upheaval?

There are several reasons. Firstly, the indices are simply representative of a broader picture. The UK's FTSE100, for example, is a snapshot of the top 100 companies measured by their market capitalisation value. As companies fall by the wayside, others replace them so, by definition, the index measures only the top tier firms and some of these are doing very well indeed. There is a great deal of money sitting on the balance sheets of some of these companies just waiting to be used. Couple that with the possibility of increased lending from the banks and it becomes easier to understand the reasons for optimism that are starting to appear.

Staying in the UK – although this is also true in the US and elsewhere – the government may soon be able to recoup some of the money spent on the bank bailouts. The cost of these rescues has been one of the main drags on the budget deficit, so this should lead to a welcome reduction in the previously eye-popping national "overdraft".

In Europe too, all is not doom and gloom. Although the state of many European economies remains highly volatile, the eurozone has not imploded. Latvia plans to replace its currency with the euro in 2014 and Croatia should have become the EU's 28th member by the time this column is being read. It is good to see these positive developments at last. Time will tell if such confidence is justified.

There are even encouraging signs in the housing market – where everything went wrong in the first place. There are real reasons for optimism in several countries. In Spain, foreign buyers – in particular Russians – are coming back into the market by acquiring whole blocks of so-called "toxic debt" directly from the banks. Hmm! Buying Spanish property on the cheap hoping to make a quick buck when prices recover? We have heard all this before, but it's a start.

Unemployment in Europe remains the greatest challenge to a sustained recovery. Recent figures show an overall rate of 11% unemployed across the EU (the lowest being Austria, which reported 5%, and the highest, Greece, at 27%). We read alarming reports of the situation leading to an entire "lost generation".

But consider other parts of the world where the impact of the global recession has been muted, or at least less marked, than in Europe. Over the past year I have written about the successes of the BRICS countries – Brazil, Russia, India, China and South Africa. Although beset by different problems, all five are economic powerhouses; they remain priority targets for the Gibraltar government which is targeting them as a source of inward investment. I also pointed out recently that GDP is growing in all 60+ African countries. That is to say there is no "recession" anywhere on that continent – from Algeria to Zimbabwe.

Speaking of Zimbabwe, I read a fascinating article recently by Matthew Parris, former MP and now one of my favourite columnists. In it, he described a recent visit to the country he knew as Rhodesia when growing up there as a boy. He didn't hide the enormous problems the country faces but in highlighting the benefits of the travel experience there – reasonable prices, incredible safaris and tourist sites far less crowded than, say, Kenya – he got me thinking.

Tourism is one of the fastest growing business sectors worldwide. Given cheaper air travel and more choice generally, personally tailored itineraries are easy to arrange, especially online. If a recovery really is underway, people will be looking to travel more.

To return home to Gibraltar in summing up, I don't speak for the government, or the local Chamber of Commerce – which compiles empirical data as part of its day job – but I see what I see. Look around you. Yes there are difficulties; some companies are reducing their staff complement, or even closing up altogether. But I see encouraging signs too. Many firms, including Sovereign where I work, are taking on staff regularly as business grows. The official Gibraltar Gazette keeps publishing new business applications – many of them made by local people. On the tourism front, more visitors will lead to more spending and so it goes on.

That is why I welcome the publicity afforded Gibraltar by a string of TV programmes shortly to air, ranging from documentaries to police dramas. We will also be seeing Michael Portillo and Top Gear mention our home. It all builds on the impression that there is much more to our tiny corner of the Mediterranean than apes on a rock. In fact that may be a good way for all of us to help this effort. Spread the word that we have apes, and a whole lot more. Summer in Europe may be the time when everyone else is on holiday but down here it should be busier than ever for all of us. Enjoy the sun!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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