Spain’s regions concerned about impact of a hard Brexit

Stalled investment, fewer tourists, and a drop in food industry exports – these are just a few of the concerns Spain’s autonomous regions have about the potential economic impact of a hard Brexit.

Around 40 regions from across Europe have analyzed how they would be potentially hurt by Britain’s exit from the European Union in a new study coordinated by the European Committee of the Regions, the body which represents these regions in the EU. The document, which EL PAÍS had access to, emphasizes the “current uncertainty” in Brexit negotiations between London and Brussels and anticipates “immediate effects on commercial trade and the movement of people,” including tourists.

Around 10,000 Spaniards cross the border daily to work in Gibraltar

Spain provided the greatest input in the text, with eight regions outlining their concerns. Catalonia however, while one of Spain’s wealthiest regions, did not participate. The region lost its autonomous powers after Prime Minister Mariano Rajoy activated Article 155 of the Spanish Constitution in response to the unilateral declaration of independence. Catalan members of the regional committee were ousted from government, which has impacted the region’s representation in Brussels.

These are the main findings.

Madrid. According to the document, the two areas most affected by Brexit are trade and tourism. Madrid explains that the United Kingdom has been its main foreign investor since 2009 and Brexit could lead to a “possible sharp fall in the volume of investment from the United Kingdom, at least until the relationship between the EU and the United Kingdom is in full force and effect.” The premier of the Madrid region, Cristina Cifuentes, put a positive spin on Britain’s exit from the EU: “Many British companies may feel the need to set up in Madrid in order to serve the domestic market, given they will not be able  to access the European market from the UK.”

The United Kingdom has been Madrid’s main foreign investor since 2009

To lessen the sweeping effects of Brexit, Madrid has created a plan in cooperation with the central government. The region is asking Brussels “to mitigate, in any way possible, the impact of a hard Brexit.” This would occur if the United Kingdom leaves the European Union without any bilateral agreement, which would be very damaging to the European – and especially British – economy.

Basque Country. This region has expressed concern about the impact of Brexit on the automobile, aerospace and energy sectors as well as on financial services and the rail industry. The United Kingdom is the fourth top destination for Basque exports and one of the most attractive regions for Basque investment. More than 50 Basque companies have offices in Britain. While there is no data on the financial impact, “the Basque Country will be directly affected by Britain’s exit from the EU”, the document maintains. The region is asking for “the necessary mechanisms” to be activated so that regions and municipalities can also take part in the Brexit negotiations between the UK and EU negotiator Michel Barnier.

Andalucía. The United Kingdom’s new status will affect foreign investment, agriculture, trade but most importantly the region’s relationship with Gibraltar, a British offshore territory on Spain’s southern coast. In the document, Andalucía points out that 58.7% of Spanish workers in Gibraltar will be negatively affected. Around 10,000 Spaniards cross the border daily to work in the British territory. The region notes that British tourism contributes 1.2% of its GDP. The document also highlights the potential loss of subsidies from the EU Common Agricultural Policy (CAP) when London no longer contributes to the budget, arguing losses could be as high as €190 million a year. As a solution, the regional premier Susana Díaz has put forward a plan “to influence the British market” with objectives and strategies, without providing more details. Andalucía joined other regions in Europe in calling for a European fund to mitigate the harmful effects of Brexit.

Valencia. The sectors most affected will be agriculture, trade, tourism, health, education and social sectors. A large number of Spain’s British residents live in Valencia (100,000 – a third of the total). The United Kingdom is also the region’s third most important export destination. The region worries that a “possible fall in tourism could affect the property market and services”. The regional government outlines a large number of regional contacts to try to soften the effects of Brexit and calls for Brussels to maintain the EU budget, whose framework after 2021 must be negotiated now.

Balearic Islands. It main areas of concern are the economy in general and more specifically tourism, property investment and boating activities. The region says the service industry is also likely to be affected because tourism and related activities represent 80% of the region’s GDP. “Any change in the freedom of movement (of European citizens) will be felt, given that 25% of tourists are from the UK.” The UK is also the second biggest foreign investor in the region.

Tourism and related activities represent 80% of the Balearic Islands’ GDP

Canary Islands. The regional government of Fernando Clavijo is concerned about the impact of Brexit on tourism, investment, alcohol, automobile and property industry. Like in other Spanish regions, the UK is the main destination of its food products. “A sharp withdrawal without a free trade agreement on goods and services could destroy this situation,” according to the document.

Castilla-La Mancha. The region has emphasized the need to maintain European funds, which are at risk because the United Kingdom will no longer be making contributions, creating an annual hole of €10 billion in the EU budgets.

Murcia. Agriculture and tourism are listed as the areas that will be most affected by Brexit. The United Kingdom is “the greatest source of tourists to Murcia (43%) and the second biggest importer”, adds the text. Like Castilla-La Mancha, the region warns against the loss of structural funds from the EU as a result of Brexit.

English version by Melissa Kitson.