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Malta: Your future-proof manufacturing base

Manufacturing has been a vital sector for Malta since the 1950s and is still one of the main pillars of the local economy to this day.

In recent years, Malta’s economy was among the strongest performers among EU member states, with an average growth rate of around 6%.

A myriad of companies nowadays use Malta to produce goods with a high added value, constantly innovating their processes and products.

The advanced manufacturing sector consequently covers a remarkably wide range of areas, including automotive and aviation components, plastics, precision engineering, medical devices, pharmaceuticals and medical cannabis, among many others.

Some of the leading global players have set up their own facility in Malta to take advantage of the business-friendly environment, competitive cost structures, and highly skilled workforce.

With its strategic location, Malta can serve as a hub to target nearby markets within the EU and MENA region.

English is one of the country’s two official languages. Besides reflecting the longstanding relation between Malta and the UK, this simplifies the provision of training, as well as investors’ interactions with other stakeholders and suppliers, access to legislation, and ease of communication with the authorities.

An efficient and transparent tax system is undoubtedly another important factor in attracting investors to Malta. This is further complemented by a wide range of assistance provided by Malta Enterprise, the government’s economic development agency.

All this provides that essential factor so important to any investor: stability. Indeed, it is this economic, political and social stability which has provided the bedrock for existing operations to flourish and serves as an attraction to a steady stream of new investors, not only within manufacturing.

Through a very competitive institutional and legislative framework, Malta has also effectively established itself as the leading distributed ledger technology jurisdiction and has already attracted a number of blockchain companies. This transformational technology has a tangible potential of revolutionising a number of niches including manufacturing.

The role of blockchain for Industry 4.0 and the Internet of Things (IoT) is considerable and some companies are already combining blockchain solutions with 3D printing and other processes to enable new manufacturing methods.

Malta Enterprise will ensure that any investor will get the best possible benefits out of a Malta operation.

For more information about Malta Enterprise, please visit: https://www.maltaenterprise.com/

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EU business leader ‘optimistic’ Britain will strike Brexit deal

Christoph Leitl, President of Eurochambres (European Chambers of Commerce and Industry), wants the UK to remain tied to the Customs Union once it leaves the single bloc.

Mr Leitl warned that EU countries would need to recruit thousands of extra customs officers to beef up border security if Britain leaves the union.

He said: “If there is no customs union, that will mean that we will need 10,000 extra customs officials in Europe.

“Huge waiting times, huge traffic measures to handle the traffic jams, so to speak. Those who initiated it really did not think things through and act irresponsible in my view.

He added: “I say, stay inside the Customs Union, in the single market.”

The EU and Britain’s current Brexit position was “completely confusing”, Mr Leitl believed, but he was “optimistic that they can find an agreement”.

And with negotiations between Theresa May and the EU negotiating teams reaching deadlock, Mr Leitl admitted the current economic outlook was “insecure”.

But he warned Theresa May that failing to strike a trade deal with the EU would harm British business more than the 27 other EU states’ economies.

“If there is no customs union, we will need 10,000 extra customs officials. I say, stay inside the Customs Union, in the single market.” ~ Christoph Leitl

Mr Leitl said: “Fifty percent of all UK exports go to the markets of the European Union, but only five percent from the markets of the European Union to Great Britain.

“It must be in the vital interest of Great Britain to get out of politics, but to stay in business economically.”

The Austrian president of Eurochambres called for a “transitional regime for he issue of migration that concerns you so much.”

He added: “As always in such negotiations, it’s a poker game till the end, as solutions are being sought.

“Then, at some point the clock is stopped, and a solution is announced.”

Last week’s Brussels summit failed to break the deadlock with Mrs May accused of offering “nothing new”.

EU leaders and the British negotiating team remain divided over as solution to the Northern Ireland backstop to ensure a free-flowing border.

Theresa May has vowed not to accept a deal that keeps Northern Ireland tied to EU customs rules while the rest of the UK leaves.

At last week’s talks, she admitted she could seek an extension of a few months to a December 2020 transition date.

A showdown summit planned for November may now be pushed back to December.

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Italy to cut deficit from 2020, provides relief to markets

Italy will cut its budget deficit targets from 2020 and reduce its debt over the next three years, Prime Minister Giuseppe Conte said on Wednesday, easing fears about fiscal policy in the euro zone’s third-biggest economy.

The ruling coalition last week stunned investors by tripling Italy’s previous deficit target for the 2019-21 period to pay for tax cuts, welfare for the poor and a planned revision of an unpopular pension reform.

Speaking to reporters after a meeting of ministers, Conte said the government would push ahead with its expansionist fiscal programme but would keep its spending in check.

“We will show courage above all in 2019, because we believe that our country needs a budget that calls for strong growth,” said Conte, flanked by deputy prime ministers Luigi Di Maio and Matteo Salvini, and Economy Minister Giovanni Tria.

Conte confirmed a deficit target of 2.4 percent of gross domestic product (GDP) in 2019 and said this would fall to 2.1 percent in 2020 and 1.8 percent in 2021.

He predicted the debt/GDP ratio would fall beneath 130 percent next year and hit 126.5 percent by 2021. It is currently around 131 percent, the second highest in Europe after Greece.

The government did not release growth targets, but Tria said the gap between Italian growth and the rest of the eurozone would halve next year. The IMF has forecast growth of 1.0 percent in Italy in 2019 against 1.9 percent for the eurozone.

News the coalition planned to cut the deficit faster than previously indicated caused Italian government bond yields to fall sharply on Wednesday, while the Milan bourse outperformed other major stock exchanges in Europe to close up 0.9 percent.

Investments

The coalition came to power in June promising to slash taxes and boost welfare spending, and says an expansionary budget is needed to lift Italy’s underperforming economy, which is some six percent smaller than it was a decade ago before the sovereign debt-crisis exploded.

Tria said the 2019 budget would include a lift in public investment and would offer tax breaks to firms investing in equipment and staff. The jobless rate would fall from around 10 percent now to as low as 7 percent, the prime minister said.

European Commission officials and EU allies had expressed their concern over Rome’s spending plans and there was some relief over the reduced targets.

“It’s a good signal that the trajectory has been revised because it shows the Italian authorities are hearing the concerns and remarks from their partners and the European Commission,” EU Commissioner Pierre Moscovici said in Paris.

Italy’s minister for European affairs, Paolo Savona, went to Strasbourg on Wednesday to try to reassure EU lawmakers that Rome was not being irresponsible.

“I think there is no chance that Italy will default on its public debt,” said Savona, who has previously called into question Italy’s membership of the euro currency.

“I do not intend to take any action against the euro. On the contrary, I want to strengthen it,” he said on Wednesday.

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Chaotic Brexit will ‘hit property market for six’

The average house price across the UK inched up in September according to a leading survey, but experts are stepping up their warnings that a chaotic Brexit will hit a weak property market ‘for six’.

Property values rose by 0.3 per cent on August, according to figures by Nationwide, to reach on average £214,922 – although that disguised significant regional disparities with the capital again experiencing falling values. Annual price growth remained stable at 2 per cent, unchanged from the August rate which was the slowest in five years.

Jonathan Samuels of property lender Octane Capital said that despite a rising average price, the property market is ‘sterile at best’.

‘The little annual house price growth there is, is being driven as much by the lack of supply as it is demand,’ he added. ‘A strong jobs market and continued low borrowing rates are keeping transactions ticking over despite pressure on household finances, interest rate uncertainty and the ever-present threat that is Brexit.

‘Few would bet against the market staying in the same supply/demand rut for the rest of the year and well into 2019. A chaotic Brexit has the potential to hit confidence and the property market for six.’

That sentiment was echoed by Jonathan Hopper of Garrington Property Finders, although he noted that, while prices in the capital are still falling and have now notched up five straight quarters of decline, the slide is slowing.

‘For London house prices, there may be light at the end of the tunnel,’ he added. ‘The only problem is no-one is yet sure if the light is a Brexit-shaped train.

‘While many regional markets are relatively insulated from Brexit concerns, in London and the South East these fears are a real threat to the market.’

Lucy Pendleton of independent estate agents James Pendleton said that people are ‘waiting to see whether the Brexit gods deliver us a very bad Brexit or just a tumultuous one’.

Like other recent surveys, the Nationwide report showed that prices in London and the outer commuter belt continued to fall, while Yorkshire and Humberside and the East Midlands saw the strongest growth in the country.

Robert Gardner, chief economist at Nationwide, said overall national growth was stable in September, but said future developments depended on how broader economic conditions evolved, especially in the labour market, but also with respect to interest rates.

The Bank of England raised interest rates to 0.75 per cent from 0.5 per cent in August, but is not expected to make the next hike until next year.

‘Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low,’ Gardner added.

‘Overall, we continue to expect house prices to rise by around 1% over the course of 2018.’

Yorkshire & Humberside was the best performing region for the first time in more than a decade with a 5.8 per cent rate of growth, while the North saw the biggest annual price fall of 1.7 per cent.

In London, prices fell by 0.7 per cent last month – the fifth quarter in a row of declines, Nationwide said.

However, if we look at the change in prices since the peak of 2007 just before the credit crunch, the picture is reversed, according to the report.

Prices in London are still over 50 per cent ahead of its 2007 figure, while Wales, Scotland and the three regions of northern England are largely unchanged over the past decade.

Nationwide found that the East Midlands continued to see ‘relatively strong growth’, with prices up 4.8 per cent year-on-year, followed by Northern Ireland, which saw a pick up in annual price growth to 4.3 per cent and was the best performing amongst the home nations.

Wales saw a slight softening in growth, with prices up 3.3 per cent year on year. Price growth also slowed in Scotland, from 3.1 per cent in the second quarter to 2.1 per cent. England was the weakest performing nation, with prices up 1.4 per cent year on year.

It comes as Theresa May announced at the weekend plans for foreign buyers to be charged a higher stamp duty rate when they buy property in the UK.

The move will be seen as an attempt to neutralise the success of Jeremy Corbyn’s drive to attract young voters with pledges to provide more affordable housing and target high earners.

Mr Murphy at the CML said: ‘Any impact that the potential introduction of additional Stamp Duty on overseas buyers on investment property is likely to be more keenly felt in the capital, however how much of a bearing it will have in real terms is potentially up for debate.’

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London loses top financial centre ranking to New York

London has been replaced by New York as the world’s most attractive financial centre, a survey has indicated, as Brexit prompts banks to shift jobs out of the city to keep access to Europe’s single market.

Britain’s decision to leave the EU poses the biggest challenge to the City of London‘s finance industry since the 2007-2009 global crisis, since it may mean banks and insurers lose access to the world’s biggest trading bloc.

New York took first place, followed by London, Hong Kong and Singapore in the Z/Yen global financial centres index, which ranks 100 centres on factors such as infrastructure and access to quality staff.

London‘s score fell by eight points from six months ago, the biggest decline among the top contenders. The survey’s authors said this reflected the uncertainty around Britain’s departure next year.

“We are getting closer and closer to exit day and we still don’t know whether London will be able to trade with all the other European financial centres,” Mark Yeandle, co-creator of the index, said.

“The fear of losing business to other centres is driving the slight decline and people are concerned about London’s competitiveness.”

Since Britain voted in 2016 to leave the EU, some of the world’s most powerful finance companies have started moving staff from London to countries that will remain in the bloc to preserve the existing cross-border flow of trading.

Financial services firms, which account for about 12 per cent of Britain’s economic output and pay more tax than any other industry, potentially have a lot to lose from the end of unfettered access to the EU.

About 5,000 roles are expected to be shifted from London or created in the EU due to Brexit by March, a Reuters study published earlier this year found.

The head of the City of London predicted in July that 3,500 to 12,000 financial jobs would go because of Brexit in the short-term and more might disappear later.

Asian competitors are closing in, with Hong Kong only three points behind London, the survey found.

Many London executives have warned the biggest threats to London are not from other European centres but from global competitors, such as New York and Hong Kong.

The rankings, which are based on nearly 2,500 respondents working in the industry, provide a twice-yearly guide to the relative performance of financial centres globally.

The number of banks saying they plan to set up new EU subsidiaries after Brexit has picked up in the past year. Most major US, British and Japanese banks said they would build up operations in Frankfurt, Paris or Dublin.

Other European centres moved up in the global rankings. Zurich rose to ninth place from 16th six months ago and Frankfurt to 10th from 20th, while Amsterdam climbed to 35th place from 50th.

“London and New York have long vied for the top spot of this index and the uncertainty around the future shape of Brexit is likely to be a factor in their latest switch in positions,” said Miles Celic, chief executive of the lobbying group TheCityUK. “In a competitive world we cannot afford complacency.”

A Bank of England official expressed optimism on Wednesday about the future.

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Theresa May pledges Africa investment boost after Brexit

In a speech in Cape Town, Theresa May pledged £4bn in support for African economies, to create jobs for young people.

She also pledged a “fundamental shift” in aid spending to focus on long-term economic and security challenges rather than short-term poverty reduction.

She will also visit Nigeria and Kenya during the three-day trade mission.

On her way to South Africa, the prime minister played down warnings from the chancellor about the economic damage a no-deal Brexit could cause.

Talking to journalists on board RAF Voyager on Tuesday morning, Mrs May reiterated that she believed a no-deal Brexit was still better than a bad deal – adding no-deal “wouldn’t be the end of the world”.

Last week Chancellor Philip Hammond warned in a letter that a no-deal Brexit could damage the economy.

Mrs May’s trip – which will see her meet the presidents of all three countries – aims to deepen economic and trade ties with growing African economies ahead of Britain leaving the EU in 2019.

Arriving in South Africa on Tuesday morning, Mrs May said she wanted the UK to overtake the US to become the G7’s biggest investor in Africa by 2022.

She promised to continue existing economic links based on the UK’s EU membership – including an EU-wide partnership with the Southern African Customs Union and Mozambique – after Brexit next year.

Promising an extra £4bn in direct UK government investment – which she expects to be matched by the private sector – she said while the UK could not match the “economic might” of some foreign investors – such as China or the US – it offered long-term opportunities of the “highest quality and breadth”.

She defended the UK’s aid spending in Africa, a target of criticism from some Tory MPs, saying it had “worked” to give millions of children and women an education and immunise millions against deadly diseases.

But she said she was “unashamed” that it had to work in the UK’s own interest and pledged a new approach in future, focusing on helping British private sector companies invest in fast-growing countries like Cote D’Ivoire and Senegal while “bolstering states under threat” from Islamist extremism such as Chad, Mali and Niger.

“True partnerships are not about one party doing unto another, but states, governments, businesses and individuals working together in a responsible way to achieve common goals,” she said.

The UK’s overseas aid budget totalled £13.9bn in 2017, an increase of £555m in 2016.

UK direct investment in Africa was £42.7bn in 2016, compared with £44.3bn from the US, £38bn from France and £31bn from China, according to data from the United Nations Conference on Trade and Development.