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We are all aware of the changes that have been forced on Gibraltar since the 2016
referendum. Whilst we do not yet know the outcome of the discussions about the
future relationship which Gibraltar will have with the EU or with Spain, government
statistics show clearly how parts of the Rock’s economy have changed in the last ten
years or so and the last five years in particular.
The growth of Gibraltar’s economy has continued almost unchecked over the last
decade even with the effects of the pandemic. As expected, the rate of growth slowed
between 2020 and 2021 but it resumed its upward trend once the lockdowns had been
fully lifted.
What is less well-known is that import duty revenues fell by more than a third from
an all-time high of £176m in 2017/18 to a low of £111m in 2021/22 recovering slightly
in the last 12 months. It is common knowledge that certain categories account for
significant portions of the import duty which is collected each year, but the figures
also show a sharp decline in the total volume of goods being imported and sold in
Gibraltar over the last seven years or so. The trend seems to be pretty clear.
The reasons for this (see related article on summer trading on page 37) will come as
little surprise to local traders: the relentless increase of online shopping, coupled
with people doing more of their shopping in Spain. Since the pandemic it has
been notable that fewer tourists are coming to Gibraltar from up the coast and the
number of cruise calls has not returned to the peak of 247 reached in 2019 despite
neighbouring ports having recovered to pre-pandemic levels.
The implications for government revenues and expenditure are also pretty profound.
The fall in duty is equivalent to 10% of the government’s overall budget. The jury is
out on how this hole can be plugged.
Against this background, the prospects for Gibraltar’s retail and wholesale sectors
do not look promising. The number of vacant premises on Main Street is stagnant
at around ten in total with many more empty units in neighbouring side streets.
Nevertheless, some landlords are demanding ever higher retail rents in an attempt
to make up the shortfall which was forced upon by the government them during the
pandemic. For many Main Street traders though, the underlying retail trade is just
not there to sustain another increase.
So if fewer goods are being imported into Gibraltar to sell to locals and tourists,
which sectors of the economy are creating the growth? Well, three sectors stand
out in particular: construction, online gaming and financial services. These are the
sectors which have seen steady growth in employment over the same period. The
government also continues to be an important economic engine in its own right
having built new schools, new housing projects, a new power station, and completed
the new runway tunnel among many other projects.
The statistics point to concerns over the longer term about the structure of the
economy. An economy which becomes too dependent on construction, online
gaming and financial services as the primary sources of economic growth might be
storing up trouble.