In the aftermath of the results of the Brexit vote ,
John Huber is interviewed by the ‘Malta
Today ’ in anticipation of the effect that Brexit may have on the Maltese
economy . The article is reproduced hereunder
http://www.maltatoday.com.mt/printversion/67006/#.V4yz4qXr2po
UK’s woes, Malta’s delight:
Brexit brings a mixed bag
Prime Minister Joseph Muscat has stated Malta could
become the UK’s gateway to Europe and vice versa, and seize the bountiful
opportunities that a Brexit could create for Malta
Paul Cocks
30 June 2016,
10:00am
The UK’s exit from the European Union could prove to
be extremely beneficial for Malta, while Brexit risks costing the City of
London billions of pounds, thousands of workers and its spot as the world’s top
financial centre.
This possible
lost status hinges on one simple process that Malta could take over from the
UK: passporting.
Passporting
allows British-based financial institutions such as banks, fund managers and
insurers to seamlessly sell their services across the 28 EU nations without
having to get regulator approval or set up subsidiaries in each member
state.
And in the
immediate wake of the “leave” vote, the governor of France’s Central Bank
fuelled the fears for London’s lost financial hub status.
François
Villeroy de Galhau said that keeping the so-called “passport” would not be
possible if the UK left the single market of trade in goods and services.
Passporting
has proven extremely popular in the UK, where banks use it to expand their
customer base in the union, while EU firms use it to tap into the international
financial markets via London, as a global financial hub.
Non-UK and
non-EU banks use passporting as a financial springboard to do business with the
entire EU, with the benefit of only having to set up a base in one place.
Swiss and US
banks, for example, use London for easy access to the European single
market.
And given
passporting is of vital importance, then it will mean a shake-up for the
sector, and one would expect non-UK firms currently based there to relocate
some or all of their operations to within the single market.
Enter Malta.
Following the
Brexit vote, many – including prime minister Joseph Muscat – have indicated
that Malta could serve as the UK’s gateway into the EU once the country left
the union.
Joe Zammit
Tabona, former Maltese high commissioner to the UK, told MaltaToday that Malta
should set itself up as a base where UK companies would have a foothold into
the EU, providing passporting services for those companies currently
headquartered in the UK and offering services in other EU countries.
“Malta should seize the opportunities that the UK’s
exit from the EU could create, especially within the financial services sector,
but also in other sectors like manufacturing,” he said.
Zammit Tabona
said it would be best for everyone involved if the UK’s exit strategy was made
clear as soon as possible, to limit speculation and let companies plan future
strategy.
The top 14
global investment banks operating in the UK at the moment employ between them
alone more than 60,000 people.
Attracting
those companies to Malta would fall under the remit of Malta Enterprise and
FinanceMalta, a non-profit public-private initiative set up to promote Malta’s
international business and financial centre within and outside Malta.
A
spokesperson for Malta Enterprise told MaltaToday that it was guided by the
government on its position on Brexit and its possible effects on those economic
activities for which Malta Enterprise is responsible.
As to whether
any additional incentives could be introduced to attract those companies, banks
and firms that could be considering leaving the UK following the Brexit vote,
Malta Enterprise said it continuously monitored what other countries were
offering in terms of incentives to attract Foreign Direct Investment.
“Of course, when we devise such incentives, we
comply strictly with EU State Aid regulations,” the spokesperson said.
John Huber of
advisory firm John Huber & Associates, and a member on the board of
governors of FinanceMalta, said that potential opportunities for Malta could
develop once the UK negotiating position became clear, but insisted it was way
too early for tangible forecasts.
He
acknowledged that Malta could be a very attractive option for companies which
would potentially choose to leave the UK once the country officially left the
EU.
“Our language and legislation could prove very
attractive for such companies seeking to relocate outside the UK,” he said.
“And having our tax system mostly based on the UK’s is an added bonus.”
Huber also expressed concern at one possible major
negative effect Brexit could have on Malta.
“Once the UK leaves the EU, Malta will have lost its
strongest ally within the bloc,” he said. “I wonder how that will affect
Malta?”
“My hope is
that Malta realises itself as an attractive stepping stone for passporting
services for UK-based companies who will need access to the EU, as we currently
serve for Middle East and African companies,” he said.
Huber has
served as an adviser to the Maltese government and as a technical reference
point in the drafting of the Malta Retirement Programme, the Global Residence
Programme and The Residence Programme.
He is also a
member on the board of governors at FinanceMalta. But any decision – in the
City of London and in Malta – will have to wait until the UK exit strategy
becomes apparent in its negotiation with the EU.
And
meanwhile, some argue that the Brexit fears are overblown.
“Leave” campaigners say that quitting the union
would free London from the EU’s regulatory restraints and allow the financial
services industry to become more competitive.
By leaving
the union, the UK could, for example, revert the cap on banking bonuses that
was introduced after the financial crisis against Britain’s will.
Removing that
cap and letting bonuses run high again could provide a lift to financial
activity in London, offsetting some of the negative impacts.