Gibraltar, a rocky British enclave on Spain's southern tip that has positioned itself as a springboard for finance to the European Union, may have to reinvent itself after Britain voted to split from the bloc.
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Fund managers and insurers have been drawn to "the Rock" because of an attractive tax and regulatory regime, location in mainland Europe and proximity to the European market. Financial services account for about a third of the economy.
But Gibraltar is now considering refocusing on the British market in case London fails to secure financial access to the EU in talks with Brussels about its EU exit.
Fund lawyers in Gibraltar say they have not seen a drop off in client queries since the June vote to leave the EU, which 98 percent of residents opposed, but Chief Minister Fabian Picardo, has warned of an "existential threat" to the economy. The government is now preparing a plan B for its financial center.
Albert Isola, Gibraltar's financial services and gaming minister, says the territory would re-invent itself as an entry point for EU firms wanting to access a cut-off British market via Gibraltar's attractive tax and regulatory regime.
"Being outside the EU is an opportunity not a threat," said Isola in an interview in his office that looks out across the bay to the Spanish port of Algeciras.
There is little alternative. A "hard" Brexit, in which Britain loses automatic access to Europe's single market, would prevent financial firms based in Britain and Gibraltar from offering their services in other EU countries.
This would abruptly end Gibraltar's efforts to lure firms looking to Europe, with the promise of corporate tax of 10 percent, easy-to-access regulators, and Mediterranean lifestyle.
The British overseas territory, which Spain ceded in 1713 but would now like to reclaim, is home to over 100 regulated funds, which manage assets worth around 3 billion pounds ($3.91 billion). It is also an important cog in Britain's insurance industry, with 20 percent of motor insurance being underwritten there.
Isola said that even if Britain loses its right to a "passport" allowing it to sell financial products into the EU, the British market will remain one of the largest in Europe.
Any firms wanting to do British business would need to set up subsidiaries in Britain - or Gibraltar.
GIBRALTAR TO MALTA?
Gibraltar's financial district has grown rapidly along the narrow strip of land between the sea and the towering limestone rock, famous for its monkeys and views out across the narrow strait to Morocco. Some of Britain's biggest motor insurers, such as Admiral and Hastings , have Gibraltar subsidiaries, and although the bulk of their business is in the British market, some insurers and other finance firms are making inroads into mainland Europe.
Firms that are there now have to decide whether to stay.
"There obviously are a lot of exploratory talks with countries like Malta to keep, if and when needed, access to the continental European market," said Ron Westdorp, managing director of Taler Asset Management, a fund in which the majority of investors come from EU countries other than Britain.
One British general insurer with a Gibraltar operation, Elite Insurance, has already decided to set up a subsidiary in Luxembourg.
"The issue for us is that we cannot afford to let our customers just wait and see what happens between the British government and the rest of Europe, we do not feel that is fair, "Elite's Chief Executive Jason Smart told Reuters.
HEAD IN THE SAND
Gibraltar has a history of adapting to adverse circumstances, particularly on its border with Spain, which was closed by former dictator Francisco Franco in 1969 and only reopened in the 1980s.
Gibraltarians say it can re-position itself far faster than Britain. "Because we are such a small jurisdiction we are able to adapt very quickly," said Joey Garcia, a lawyer at family law firm Isolas.
Garcia said his pitch to clients would have to change in the worst case scenario of a loss of EU passporting rights: he would be selling them access to Britain, not to the EU.
Isola said Gibraltar's government would help its licensed businesses to make arrangements with other jurisdictions that would allow them to maintain access to the single market.
One option on the table, he said, would be to set up a dual-legislative regime comparable to arrangements in British overseas territory Guernsey. One regime would be in line with European standards to allow Gibraltar to be included in EU passporting and the other regime would have its own domestic standards.
A further option under consideration, according to local lawyers, is an agreement with an EU jurisdiction that would allow Gibraltar to passport into the EU through that territory. In return, businesses in the other jurisdiction would be able to set up in Gibraltar on a fast-track basis.
But Isola concedes that Brexit will hurt, as firms that rely on business with the EU move elsewhere.
"Anyone who doesn't know that is digging their head into the sand," he said.
(Writing by Angus Berwick, additional reporting by Noor Zainab Hussain; Editing by John O'Donnell and Anna Willard)