The departure of the UK from the EU could present business opportunities for Malta, but according to the man tasked with drumming up financial sector investment, poaching British-based companies might not be the best approach.  

Kenneth Farrugia is the outgoing chairman of Finance Malta, the public-private partnership meant to help attract financial operators to the island.

He told Times of Malta that he was no “Brexit vulture” and that he believes there is a better way to capitalise on the UK’s planned departure from the union, than trying to get companies to move here lock, stock and barrel.  

A co-location model, he says, might be a better fit. 

“We are not here to play the vulture game, like some other jurisdictions are doing – [trying to bring over entire companies]. So we said we’ll put solutions on the table to allow UK operators to sustain their operations in Europe, without having to go through the unpleasant experience of moving their whole outfit to a new country,” he said.  

Moving an entire operation from the UK to a place like Malta, can be traumatic, and might just not work.  

An operator currently based in London, for instance, might find it very difficult to move key staff. 

“If you are an operator with human resources of certain intellectual capability, who have family there, their children in schools, and a certain lifestyle – trying to relocate that completely to another jurisdiction is a nightmare, and you might run the risk of brain drain because some employees will just not want to move,” he said.  

So what is Malta offering instead? According to Mr Farrugia, the island is pitching the idea that UK operators can use the services of an existing outfit in Malta to front their business requirements into Europe – something often referred to as ‘passporting’.

UK Brexit Secretary Stephen Barclay shakes hands with Prime Minister Joseph Muscat during a visit to Malta on October 8. Photo: DOI

Mr Farrugia is coy about the way the approach is going, saying only “a number” of companies in the insurance and asset management space have “started looking at Malta”. 

The ‘Brexodus’ hasn’t really materialised

“But, the ‘Brexodus’, as they are calling it, hasn’t really materialised,” he adds, saying many UK companies were holding on to see what comes out of Brexit. 

Another thing Malta has going for it, Mr Farrugia said, is that it is part of the Commonwealth and has a long-standing relationship with the UK. 

Trying to relocate that completely to another jurisdiction is a nightmare

This could give Malta an advantage over other countries trying to coax practitioners away from London.  

As Mr Farrugia sees it, the UK’s financial operators are classed into four main groups. 

There are those that already have a presence in large European jurisdictions, such as Germany, France and, perhaps, Luxembourg and who, therefore, don’t need to move.  

Then there are operators in the UK who only service the British market and are agnostic over whether Brexit happens or not. There is also a third group, who chose the UK for its depth when it comes to financial services. These are largely servicing other markets such as Asia and the US. 

The final group is made up of small and medium businesses, and like Goldilocks’ porridge, Mr Farrugia believes this one is “just right” for Malta.  “These are operators who don’t have a footprint in Europe but need one. They can either change market away from Europe to somewhere else, which is a huge headache, or else take-up Malta’s offer of colocation, this is our pitch,” he said.  

It’s been a turbulent couple of months for Malta as a financial jurisdiction. 

Between the publication of a damning report by the Council of Europe’s anti-money laundering experts, and troubles facing the island’s banks, how attractive is Malta looking to foreign operators? 

Mr Farrugia says the country is experiencing some “growing pains”. Malta, he says, is “going through a process”, from the way banks are having to reduce their risk exposure, to the way regulators are having to take a tougher stand on money laundering,

Recently, Finance Malta held an event in collaboration with The New York Times on family businesses where Mr Farrugia says he gave his “spiel on what Malta has to offer”. 

For those wondering how Finance Malta differs from the role of Malta Enterprise, Mr Farrugia says that while ME focuses on non-financial sector, FM is geared exclusively towards financial sector operators. There is some overlap, and the two do collaborate, but the two entities have distinct roles, he says. 

Finance Malta is mainly focused on attracting asset management firms, insurance brokers, Fintech and banking operators, and “the new kid on the block”; Blockchain and virtual assets.