NEW Year articles are often full of positive messages that seem to imply that, whatever has taken place during the previous 12 months, simply changing the number at the end of the year will make everything better again.
We all know that this cannot be true but it is natural, as we move into the New Year, to focus on rebirth and all things positive. And why not? There is, after all, plenty of good financial news around to keep us cheerful as 2016 dawns – but that’s not the whole picture.
Gibraltar relies, perhaps more than is often realised, on its international trade and not just with the UK, Spain and other parts of Europe. It’s possible, depending on the particular business sector, to find Gibraltar firms working with clients and partners worldwide. Apart from those local companies involved in the import and export of goods, it is the services sector – and especially the financial services sector – that operates on a global basis.
For firms such as my own – which focuses on the provision of ‘market entry’ services to companies based in one country that are seeking to develop or expand their business into another country or region worldwide – it is vital that we monitor the international situation closely on behalf our clients and ourselves. Herein lies my theme. Whilst a general economic recovery is underway in many countries, it is fragile and prone to unexpected shocks.
The UK economy, for example, is in better shape than a year ago – but controlling the deficit remains a serious issue. There is some good news from Spain but serious challenges persist, exacerbated no doubt by the inconclusive recent general election result. More concerning is that Greece and Portugal are still struggling to manage their debt and the rising pressures against austerity in these countries could yet destabilise the euro in 2016. The economies of all five ‘BRICS’ countries are suffering – albeit for different reasons – while the situation across the Middle East and the resultant terrorist and migration issues are of concern to us all.
The issue that worries me most, however, is the collapse in the price of oil. Whilst this is of obvious benefit to consumers, the impact on oil producing firms and countries could be calamitous. Many of the recently- established fracking businesses are highly leveraged and their product is more expensive to produce, leaving them (and their backers) acutely vulnerable. The oil price reduction is largely the result of Saudi action but even they are struggling to balance their books. Smaller producers such as Venezuela and Ecuador have seen their economies crumble as a result. And then there is Russia. I will return to this theme in a future column but the economic and political implications could be massive in 2016.
There is precious little we can do to influence global markets but businesses in Gibraltar with an international focus must remain alert to such developments. And not just to manage their risks, but to spot opportunities that might be exploited – to the benefit of us all.
On behalf of my colleagues at Sovereign Gibraltar, I wish all readers a very happy, healthy and prosperous 2016. The only certainty is that we live in a time of great uncertainty. An exciting year lies ahead for us all.