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Gibraltar’s Brexit Challenge

Chris Grocott
Commentary, 5 July 2016
Brexit, European Union, International Security Studies, Europe
Gibraltar’s voters opted overwhelmingly to remain in the EU, by an astounding majority of 95% of the ballots cast, in a turnout of 83% of the electorate. Now the territory faces a dilemma, as the rest of Britain went in a different direction.

Gibraltar’s Chief Minister Fabian Picardo is already in discussions with Scotland’s first minister, Nicola Sturgeon, about jointly drawing-up plans to remain a part of the EU when the UK government triggers Article 50 of the Lisbon Treaty, which should result in Britain’s eventual departure from the EU.

Whilst the government in Westminster has dithered over when to launch negotiations to leave the EU, Gibraltar and Scotland have been quick to reach for ways to remain part of European markets and political institutions. In the case of Gibraltar, such a strategy will be essential in attempting to safeguard the Rock’s economic future.

Gibraltar’s difficulties stem from the terms of the UK’s accession to the then European Economic Community in 1973. Special arrangements were made which allowed Gibraltar to join alongside the UK and, to this end, Gibraltar has voted since 2004 in the South West England constituency for the European Parliament elections. As things stand, when the UK leaves the EU so too, by default, will Gibraltar.

The Rock’s economy may well have strong links with the UK. But it also has strong links with its Spanish hinterland. Every year, millions of tourists – over 9.5 million in 2015 – travel across the land frontier from Spain. Gibraltar also draws in labour and supplies from the surrounding region too. And the Rock derives considerable advantages from its unique position: it is a UK overseas territory – it is able to set its own tax levels and regulatory frameworks – which is a part of the EU and is located on mainland Europe at the intersection between Mediterranean and Atlantic shipping lanes. Anything that disrupts this economic ecology, as Brexit does, could be disastrous for Gibraltar.

Brexit poses two separate but related dangers for the Gibraltar economy. First, with Gibraltar outside of the EU, its frontier with Spain would become an external border. This would allow the Spanish government, should it so wish, to close the frontier to traffic and trade, re-imposing the economic blockade laid down by General Franco in 1969. That blockade was only lifted in 1985 as part of Spain’s negotiations to join the EEC – and then only under the British threat of veto of Spain’s own membership in the EU.

The second threat to Gibraltar’s well-being would be the inevitable difficulty of accessing the European common market generated by Britain’s departure from the EU. No doubt some arrangement would eventually be arrived at, but it might not allow the Gibraltar economy to operate in the way it has in the last 25 years or so. Any deal between the UK and the EU is likely to be heavily contested by Spain in regards to Gibraltar, and in the meantime future uncertainty might well encourage firms to relocate from the Rock as a precautionary measure.

In the weeks before Britain’s EU referendum, José Manuel García-Margallo, the acting Spanish foreign minister, suggested that joint sovereignty between Britain and Spain over Gibraltar would solve the threat to the Rock’s economy by leaving it within the EU should Britain decide to leave. The call was repeated on the morning of the result of the referendum. But this proposal is a veiled threat and not an attempt at reconciliation on the part of Madrid, although the inference is clear: without joint sovereignty, the status of the frontier is ambiguous at best.

Despite Spain’s efforts to use Brexit as leverage in the sovereignty dispute, Gibraltar will certainly not bow to pressure from Madrid. Joint sovereignty would be perceived by Gibraltarians as a starting point to an inevitable, if forced, repudiation of British sovereignty. And Spanish sovereignty, even joint sovereignty, will be politically unacceptable to Gibraltarians. Moreover, the local economy depends upon its institutional separation from Spain. In this sense, the EU referendum changes nothing in regards to the sovereignty dispute; any form of concession to Spanish sovereignty is as unacceptable to Gibraltarians now as it was before the referendum.

The ‘Vote Leave’ campaign made much of the idea that exit from the EU would save the British Exchequer money which it could then spend in other ways. This may well become necessary in Gibraltar’s case. Between 1970 and 1973, the closure of the Gibraltar frontier necessitated the UK government to provide Gibraltar, in total, with £4 million; from 1974–7 it provided a further £7.6 million; and the contribution peaked at £14 million between 1978 and 1981 (in total perhaps as much as £137 million in today’s prices).

Whilst money might solve some problems in the event of a frontier closure, it could not hope to solve a labour-shortage crisis. In the 1970s, many women in Gibraltar did not work, providing a reserve pool of labour. But today employment rates amongst women are high in Gibraltar, and overall there is very little unemployment, indicating a tighter labour market.

Whatever emergency steps might be taken in order to safeguard the Gibraltar economy when the UK exits the EU, and if the Spanish government disrupts or closes the frontier, Gibraltar will certainly not want to live on hand-outs. Rather, there will need to be alternatives that allow the Rock’s economy to remain buoyant and to prosper. It is no surprise that one of the options being considered would involve a re-casting of Gibraltar’s constitutional relationship with the UK.

Of late, the UK has been slow to defend Gibraltar’s interests. Disruption at the frontier in 2013 was only eased after the intervention of the EU, whilst incursions into Gibraltar’s territorial waters continue. Nevertheless, the protection Gibraltar might traditionally have expected from the EU can no longer be relied upon. It is therefore unsurprising that the chief minister and deputy chief minister of Gibraltar have recently been in London and in Scotland, discussing future plans. A common market with the UK has been floated as a mechanism whereby gaming companies in Gibraltar – an important business sector – might be assuaged; the involvement of Gibraltar in the Brexit negotiations has been welcomed; and a meeting with the All Parliamentary Group on Gibraltar was held in London.

Gibraltar is now more reliant than ever upon the UK for diplomatic, military and economic protection. It’s now up to the UK to deliver on its commitments to Gibraltar in a post-referendum world.

Dr Chris Grocott is Lecturer in Management and Economic History at the University of Leicester and author of Gibraltar: A Modern History, Cardiff, University of Wales Press, 2012. 

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