Madrid warns of “negative consequences” of Brexit on Spain

Government report predicts heavy cost to economy and risks to tourist industry, as well as migration

The crossing between Spain and Gibraltar on Thursday.
The crossing between Spain and Gibraltar on Thursday.Marcos Moreno (atlas)

It’s going to be a so-called hard Brexit: for the European Union, for the United Kingdom, and for Spain. That is the finding of an internal report produced by the government of Prime Minister Mariano Rajoy for the Brexit commission headed by Deputy Prime Minister Soraya Sáenz de Santamaría – a document which warns of the impact on Spain of Britain’s withdrawal from the EU.

The Spanish economy will “suffer the negative consequences” of the departure of one of the country’s leading trading partners from the bloc. The situation of British nationals resident in Spain and that of Spaniards living in the United Kingdom is also a matter for concern: Brexit will lead to “innumerable repercussions” for more than one million people, says the document, which EL PAÍS has seen.

Spain and the EU will suffer negative economic consequences from Brexit, the report says

Spain is exposed: the impact of Brexit will shave between two and four tenths of a percentage point from GDP growth (equivalent to between €2 billion and €4 billion), says the report, citing the International Monetary Fund and the European Commission. The government will have to find €888 million toward the EU budget, based on first estimates, while regions like Murcia or the North African exclave of Melilla could lose EU funding.

The effects of Brexit will also be felt in key sectors such as agriculture, fishing, the automotive industry, and tourism, with a fall in exports of around €500 million, and up to €1 billion in the worst case scenario. The government report also expresses concern about the effect of Brexit on Spain’s leading companies: Banco Santander (some 12% of its revenue comes from the United Kingdom), Telefónica (30%) and electricity utility Iberdrola (12%), which between them make up a third of the value of the Ibex 35 index of leading Spanish companies.

But the consequences of Brexit will not only be economic, warns the government. The document says it will impact on migration policy and the free movement of goods and people in the case of Gibraltar, and will affect the justice and interior ministries, as well as universities. There might even be consequences for soccer: “Brexit could affect Spanish players in the United Kingdom,” says the report.

The United Kingdom is Spain's main source of foreign tourists.
The United Kingdom is Spain's main source of foreign tourists.Getty Images

The report, produced by the Permanent Representation of Spain to the EU and with contributions from the Spanish embassy in London and a range of ministries, does not lay out Spain’s political position, but overall, the report makes it clear that Madrid wants a soft Brexit, rather than an outcome that punishes London. That said, Spain is aware of the way things are likely to go. “Theresa May’s speech on January 17 is definitive;” “it excludes a new relationship framework that supposes the continuance of the United Kingdom in the single market.”

The document highlights the need for Brussels to bear in mind Spanish demands in the withdrawal negotiations ­– with similar positions to Ireland, Poland and Italy – on issues such as social security, free movement of people and tourism. “The objective is to provide certainty to citizens and to support the [European] Commission in its negotiating role. At the end of the process, the United Kingdom cannot be in a better situation outside the EU than inside it. But if London doesn’t play dirty, the best thing would be not to cause mutual damage,” say Spanish sources.

Fall in exports

The report says the impact of Brexit will be “greater in the United Kingdom,” but that the EU and Spain “will suffer negative economic consequences,” noting the close trade ties between Spain and the United Kingdom.

Spain has had the better of the trade balance with the United Kingdom in recent years and is the main destination for Spanish foreign investment. The United Kingdom provides the greatest number of tourists to Spain, and is the country to which most Spaniards emigrate.

Brexit could even affect Spanish soccer players in the United Kingdom, the report warns

Brexit will likely trigger a fall of some €464 million in Spanish exports, with the food, automotive and pharmaceutical sectors hit hard. To try to mitigate the impact, Spain will be supporting a number of the United Kingdom’s demands at the negotiations, such as a temporary trade deal in parallel with the withdrawal agreement. The report talks of “temporary measures” in a number of areas.

Beyond exports and tourism — with 15 million tourists a year affected by the fall of the pound — the consequences of Brexit will be felt by the hundreds of thousands of British nationals resident in Spain, the largest foreign community after Romanians and Moroccans, while the future could be uncertain for the 300,000 Spaniards living in the United Kingdom.

English version by Nick Lyne.

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