Malta could have scored even higher on the Movinga survey of cities for London professionals to move to after Brexit, had different factors been chosen, the chairman of Finance Malta, Kenneth Farrugia, believes.
Malta ranked third out of the cities surveyed, after Dublin and Amsterdam, based on 12 factors.
“Malta ranked poorly in some but strongly in others. Admittedly we do not have any Michelin-starred restaurants here – but we do have some excellent ones,” he smiled.
On a more serious note, Mr Farrugia said that Malta was well aware of its competitive advantages, such as cost competitiveness.
“Employing a resource in Italy or France is much more expensive when compared with here, especially when it comes to social security contributions, which are capped in Malta,” he added.
Finance Malta has deliberately been keeping a low profile about the impact of Brexit on the financial services sector, but Mr Farrugia has no doubt that big firms could consider setting up in Malta. He is, however, keeping his feet firmly on the ground.
“I don’t think you would get a firm commitment from any of them yet. Very few have taken any decisions as they are still evaluating their options. Remember that some have been in the UK for years and they would not move out on a whim,” he said.
“Quite frankly I do not think that they will move out of the UK lock, stock and barrel. There will be challenges for them but we should not disregard the opportunities that the UK will try to leverage, within the Commonwealth, with new markets that they have not yet focussed on,” he said.
Various companies have already considered Malta, although so far without success. Lloyds had scouted out the island, and insurer Hiscox put it on the shortlist with Luxembourg, while Easyjet is also considering Malta for its air operators’ licence.
“It is quite normal that the main cities mentioned in media articles are Dublin, Paris, Frankfurt and Luxembourg. These are the pre-eminent jurisdictions – and you are referring to high-end firms.
“Ultimately companies will come to Malta and evaluate the ecosystem and the operational infrastructure, and determine whether it will fit in with their operation or not – in full or in part. I am sure that they will evaluate various jurisdictions and take into account various factors, like tax, the regulatory philosophy, the cluster of operators. Any big organisation would do that,” he stressed.
Mr Farrugia believes that although Malta already has much to offer, it can also provide resources it currently does not have.
“We tend to disregard our ability to import labour if we need to service an operation here. We are already seeing industry adapt to demand, for example through the construction of high-rise buildings,” he said, adding that Malta was a relative newcomer to financial services.
The best tactic would be to remain focussed on the critical success factors that have attracted business to Malta so far
“We only entered the fray in late 2007 – that is when Finance Malta was formally established. Since then we have grown in a sustained manner, despite the challenging economic environment.
“We did not grow vertically – as that would have been a problem with regard to resources such as office space. We are now seeing the infrastructure adapting to the requirements of the industry, with a considerable amount of commercial office space being developed.
“We have also seen an increase in recruitment services as a result of the demand for employees, and a number of foreign workers are coming here, which is healthy for a number of reasons,” he said.
Malta – like other jurisdictions in EU member states – is being positioned as a jurisdiction from where UK operators in a post-Brexit scenario can sustain their business in Europe through access to the single market.
Though British Prime Minister Theresa May triggered Article 50 a week ago, there is still considerable fear of the unknown – and quite a few “known unknowns”, he said. Most of these centre around the type of agreement the UK will eventually strike with the EU: the Norwegian model; the Swiss model; or a bespoke model through a bilateral agreement.
However, Mr Farrugia said that companies also had various options to consider: they could decide that they do not need passporting and go down the route of private placements, promoting products on a one-to-one basis. Conditions vary country by country, so it could be a painful process, he noted.
“They could also set up an operation in a European jurisdiction and relocate employees there, not necessarily lock, stock and barrel but enough to sustain and passport products and services cross-border. There are various ways in which this can be done.
“They can also use an existing licence holder in an EU jurisdiction, which already has a passport into Europe and use their services,” he explained.
Mr Farrugia said that depending on the scope of the operation in the new jurisdiction, corporates would have to take other factors into consideration, such as how human resources would fit in – in terms of lifestyle, health and education, especially since many would move with their families.
He stressed that the best tactic for the island would be to remain focussed on the critical success factors that have attracted business to Malta so far.
“I am very confident that we can succeed if we sustain these factors: an efficient regulatory approval process, an industry which is responsive to the needs of international business, the skill sets of the industry, less bureaucracy.
“Don’t underestimate the impact of being able to meet the regulator within a few weeks, believe me. I know that they write to regulators abroad and do not even get an acknowledgement,” he said.