UK could be ‘held hostage’ in Brexit talks over Gibraltar

Added 2nd November 2016

Spain could use the British overseas territory of Gibraltar to hold the UK “hostage” in the final negotiations over Brexit, causing serious problems for businesses, according to former UK foreign secretary William Hague.

UK could be ‘held hostage’ in Brexit talks over Gibraltar

In a speech at London’s Royal Society, Hague said Spain might claim joint sovereignty over Gibraltar, the Financial Times reports.

“The UK has to assume the [Brexit] negotiations will end in two years because it could be held hostage by the demands of one member state refusing to end the negotiations," he said.

Hague said it would be a “miracle” if the talks between the UK and EU could be wrapped up in two years and that transitional arrangements would be increasingly important for both parties as the negotiations reached later stages.      

Gibraltar has been increasing its profile in the financial sector, notably with a recently established stock exchange.

On the question of Brexit, the government said on Wednesday that it was exploring a ‘dual regulatory regime’ for the funds sector in the event of a hard Brexit, one that meets both EU-equivalent benchmarks and less prescriptive international criteria.

According to the Gibraltar Chronicle, the regime would open up opportunities to work both with the EU as a third country and with regions further afield, according to Albert Isola, Gibraltar’s minister for financial services and gaming, at a breakfast briefing to 180 fund administrators and investment managers in London on 1 November.

“What we are looking at doing now is seeing to what extent we can cater both for the business that we currently have and the business that we’d like to attract moving forward, but not being tied down as we have in the past to the EU legislation in the event of a hard Brexit,” he said.

More work needed to build EU relationship

As for the crown dependencies, a post-Brexit EY survey has revealed that more than two thirds (70%) of organisations do not believe enough is being done to secure the Channel Islands’ future relationship with the EU.

However, 80% of respondents expected it to bring new opportunities for their organisations.

The survey also showed nearly half (45%) of respondents working in asset management, private equity and real estate do not foresee a change in fund raising through Channel Islands’ structures, and 73% of organisations interviewed have commenced a review to assess the impact of Brexit on their business

EY’s Channel Islands managing partner, Andrew Dann, said; “For the islands’ continued success it is essential that strategic, business and operational models are assessed and evaluated on the basis that the UK will leave the EU definitively within the next three years.

“The UK faces a period of prolonged uncertainty over the next few years which is reflected in the EY ITEM Club’s revised assessment of its economic prospects.

“However, it’s positive to see Channel Islands organisations already recognising the opportunities post Brexit. We hope this report will be a prompt for other organisations to begin scenario planning, so they are best positioned to leverage the opportunities and mitigate any threats as a result of the Brexit vote. Businesses should recognise that whilst they see opportunities their competitors do too."

On 28 October, the UK's shadow home secretary Diane Abbott said in a debate in the House of Commons on the new Criminal Finances Bill, aiming to tackle tax evasion and financial crime, that “it's frequently argued' that Jersey and Guernsey are “part of the largest tax evasion network in the world”.

Both Jersey and Guernsey countered by calling her comments “baseless and misinformed”.

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Mark Battersby

Editor, International Adviser

International Adviser

Mark Battersby is editor of International Adviser. He is also programme director for International Adviser events in strategic expat locations around the world, and its flagship FundLinks conference in London. Mark joined Last Word Media in February 2012, having previously worked at Citywire, Interactive Investor International, and FT Business.

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