• No discernible benefit to the private sector from the budget.
• Gibraltar’s minimum wage is now 37% above Spain’s at £10/hour (Spain is equivalent to £7.20/hour).
• Annual cost to business of the increase in minimum wage is £1,000 per employee.
• Minimum wage has increased at double the rate of inflation for the last 15 years (86% vs 42%).
• Annual public sector pay awards for the next 10 years of inflation +1% is another indirect burden for the private sector.
• Public sector pay rises merely increase polarisation of society.
• No signs of any efficiency gains from public sector or from e-government as civil service continues to grow.

In general terms the budget was disappointing as there was nothing in it for business to celebrate. No new measures to assist or support business. No new initiatives to attract new investment to Gibraltar. In fact,there was little or no recognition of the massive contribution that the private sector, Gibraltar’s main wealth creator, makes to the economy. Whilst it is encouraging that the economy has grown, this belies the fact that certain sectors are not growing and continue to face significant above inflation increases every year. And it is these very sectors that will principally suffer the burden of the increased costs and bureaucracy that the Treaty will bring in the short term.

The increase in public sector pay for the next five years plus the ten-year inflation busting pay rise will add between £12-£15m a year to the public sector’s wage bill. This will need to be funded in the main by the private sector through the payment of taxes etc. To our knowledge, there are no corresponding efficiency or productivity requirements. So the private sector gets all of the cost with little additional benefit. Furthermore, this award has been made in the context of Gibraltar facing, as the Chief Minister mentioned, ‘the greatest change in the operation of the Economy in 55 years’!

Public sector average pay is already more than 40 per cent higher than in the private sector which leads to pressures on recruitment in a difficult job market. Such policy decisions will continue to polarise the community. The civil servant paid an average of £50,000+ per annum plus benefits including a pension lives well compared to a worker in the private sector who earns on average around £36,000 per annum. With long hours and growing competitive pressures, private sector businesses are being penalised by additional costs for taking risks.

Apart from gaming and possibly finance, there are very few parts, if any, of the private sector which can point to an increase of 86% in revenue over the last 15 years. And the competitive pressures will increase further with an open frontier. The transaction tax, minimum wage, pension contributions and other cost increases will make it very difficult for many sectors of Gibraltar’s private sector to remain competitive. The Chamber welcomes the announcement by the Minister for Business regarding the government’s proposed transition tax support scheme and looks forward to receiving more detailed information on the scheme, including how it will be assessed and how businesses can access this. Nevertheless, the Chamber calls on Government to improve and introduce measures which will cut costs for businesses in the retail and wholesale sectors as they transition to the new post treaty environment.

Minimum wage erodes Gibraltar’s competitiveness

Those employees who are paid the minimum wage tend to be cross frontier workers from Spain where the cost of living is significantly lower than in Gibraltar. The increase in import duty/transaction and excise taxes from 15th July are designed, we are told, to level the playing field between Gibraltar and Spain with the removal of the Frontier. The minimum wage in Spain is €8.42 or £7.20/hour equivalent, markedly lower than in Gibraltar. Conversely the increase in the minimum wage announced in the budget, something which is in Gibraltar’s full control, just serves to widen this gap even further in the opposite direction when, if anything, this should be allowed to converge. So, the justification for increasing this by twice the rate of inflation is unfounded. (The minimum wage in Spain was increased by 3.1% in 2026, the increase in Gibraltar is 5.3%). This will cost every local employer an additional £1,000 minimum per year for each employee.

For a shop, bar, restaurant or any small business trading in goods this is very damaging especially as it is these very business sectors that are having to face the uncertainty, the extra costs and bureaucracy that the Treaty will bring. This all erodes Gibraltar’s competitive position as it increases the cost of doing business when we can least afford it. The Unions should take good note of this if their aim is to protect employment.

The Government needs to do much more to ensure that all of the hours worked by employees are properly registered for PAYE and Social insurance. The increase in the minimum wage to £10/hour will encourage the black-market economy where unscrupulous traders pay cash to the worker and avoid the full PAYE and social insurance obligations thus creating an unfair competitive advantage.

As we have said on several occasions over the years, the Chamber is happy to work with the Unions and the Government to clamp down on illegal labour and particularly those who abuse the employment system by paying cash in hand to avoid their obligations on social insurance and income tax. This distorts Gibraltar’s employment market and adds to the cost burden for many businesses which do play by the rules.

ENDS