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BREXIT

ANALYSIS: Why aren’t Spanish companies preparing for Brexit?

How are Spanish companies facing up to the consequencies of Brexit? John Wetherell, professor of Economics at EAE Business School believes they are not.

Published: 14 May 2018 17:41 CEST
ANALYSIS: Why aren’t Spanish companies preparing for Brexit?
Photo: AFP

The Spanish authorities are concerned about the apparent lack of urgency with which Spanish companies are facing up to the consequences of Brexit. 

According to the latest surveys, the fact that the EU’s second economy, its financial centre and second biggest net contributor to the EU budget is leaving is at the bottom of the list of Spanish companies’ priorities at this moment in time.

This has come as a surprise given the close relationship that unites Spain and the UK in terms of citizens living in the other country, trade, tourism and FDI.

There are probably several quite valid reasons for this situation.

The first one would be the difficulty of planning for the unknown. If we consider that often governments pass legislation which has clear implications for businesses and they fail to comply with these new laws until the very last minute or even need a period of grace before their application, it is maybe not so surprising that many businesses have made no preparations for something that has already been delayed by eighteen months and has yet to be defined.

READ ALSO: 


Photo: AFP

And as businesses bide their time, it is becoming clearer that the natural majority of UK citizens that don’t want a hard Brexit – that is the close to half the population that voted Remain plus the part of the people who voted Leave but would prefer to keep different degrees of ties with the continent – are going to have their say in the final shaping of the Brexit deal. 

This will be done through Parliament and will be helped by the fact that the majority of both Houses are favourable to a soft Brexit. The House of Lords has been most active so far, even insisting that the Parliament vote on whether to remain in the Customs Union, but given the very slender Conservative majority in the Commons it is more than likely that the government will have serious difficulties passing the necessary legislation of a hard Brexit through the lower House as well.

Should they be unable to do so and the UK remains in the Customs Union or votes to join the European Economic Area then most businesses will hardly be affected by Brexit at all.

The second reason why companies might not be responding to the vision of the authorities of the importance of preparing for Brexit is that they are made up of citizens and as such share one of the principal characteristics of post-crisis Europeans – a lack of confidence in the elite.


Anti-Brexit demonstrators holding EU flags protest outside the Houses of Parliament in central London on March 29th. Photo: AFP

If there is one thing that Brexit has taught us it is that the experts that represent our institutions always get it wrong. The British government were sure they would win the referendum; the EU thought that nobody would be stupid enough to vote themselves out and the IMF predicted economic doom for the UK if they were to vote leave. 

Now the same experts tell us that if Brexit were to catch us unawares, possible tariff and administrative barriers could have a big impact on trade; a fall in the pound could force many British tourists to holiday outside Spain and the eurozone and FDI flows between the UK and the continent could be seriously disrupted. And this would obviously affect many Spanish companies.

They could, of course, be right this time but who would believe that based on their past track record? Probably not a company that has got other more immediate issues to resolve.

Finally, and maybe most importantly, the reality of the companies is being changed by globalisation. Even if the worst came to the worst and Spanish companies did lose revenues as a result of Brexit, the world is a very different place today than it was in 1986 when Spain joined the EU.

Today it is possible for many companies to sell their products and services in any country in the world. To export to Morocco, Nigeria, India or Kenya is both feasible and profitable. Behind this is the global city – whether it be Casablanca, Lagos, Mumbai or Nairobi, where there are literally millions of urban consumers with similar tastes and very used to satisfying their needs with products from all over the world.

A decline in a particular European market like the UK no longer determines the financial future of many companies. Alternatives exist. And this is ignoring the fact that this network of global cities has its own hierarchy with two cities at the top and one of them happens to be in the UK. Spanish businesses will continue to want to have a presence in London regardless of whether the UK is in the EU or not.

John Wetherell is a professor of Economics at EAE Business School which has campuses in both Madrid and Barcelona.

 

 

 

 

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GIBRALTAR

Why has Gibraltar still not reached a Brexit deal with Spain?

With yet another round of Spain-UK negotiations set to begin more than eight years since the Brexit referendum, Gibraltar is still without a deal and a November deadline looms over any treaty. Why has it proven so hard to break the deadlock?

Published: 17 September 2024 13:38 CEST
Why has Gibraltar still not reached a Brexit deal with Spain?

On Thursday September 19th, Spain and the UK resume talks on Gibraltar’s post-Brexit status, and has been the case since 2016, uncertainty is still the prevailing feeling.

The British Foreign Secretary David Lammy recently received his Spanish counterpart, José Manuel Albares in London. Both did their diplomatic duties and talked up the prospects of a deal, with Lammy stating he hoped for an agreement that would ensure greater “prosperity and security for the people of Gibraltar.”

Albares, for his part, understandably centred any hypothetical deal on a “shared prosperity between Gibraltar and the 300,000 Andalusians connected every day in their normal lives”.

READ ALSO: Gibraltar demands Spain return stolen concrete block in new diplomatic spat

Though Lammy and Albares discussed the Rock, no formal negotiations or deal can be struck without EU oversight, so the meeting also included discussion of bilateral issues and international concerns such as the wars in Ukraine and the Middle East.

The meeting between the two Ministers was therefore a preamble to yet more formal treaty negotiations in Brussels on Thursday. Since Brexit came into effect at the end of 2020, Gibraltar has essentially existed in legal limbo with no formal treaty.

Border controls have been fudged ever since, leaving locals and Spaniards across the border faced with inconsistent rules and forcing travellers to find creative ways to bypass rules and get over ‘La Línea’. 

Why hasn’t a deal been reached?

So why all the meetings and pre-meetings and endless rounds of negotiations? How is it possible that Gibraltar is still without a Brexit deal all these years later?

A recent piece in El País by Rafa de Miguel, the daily’s UK and Ireland correspondent, perhaps put it best: “The amount of warm words in any political statement is inversely proportional to the progress in the negotiations.”

The reality is that, however many handshakes and photo opportunities and positive attitudes expressed between Spain and the UK on a bilateral level, these are ultimately irrelevant as nothing can be signed without the EU’s approval. 

This is further complicated by the fact that this makes any deal dependent on four way negotiations between Spain, the UK, the EU, and Gibraltar.

Each of these parties has their own individual set of needs, preferences and motivations. The EU won’t want to be seen to give Gibraltar, and by extension the UK, any special treatment for fear of emboldening other member states who desire bespoke arrangements when it comes to border controls and customs checks.

In light of Germany recently reimplementing land border checks, something some say is a direct violation of Schengen rules, this will be especially sensitive in these latest rounds of negotiations. 

Spain has long made territorial claims on Gibraltar dating back to the 1713 Treaty of Utrecht, when the overseas territory was first ceded to the UK, and will want to come out of negotiations with something that can be perceived as a political victory, likely an increased Spanish role in border patrols.

Fabian Picardo, Gibraltar’s Chief Minister, has ruled this out definitively over the last few years, citing concerns about British sovereignty.

The UK government in London will also have worries about British sovereignty, but will balance this with the knowledge that Gibraltar negotiations are also an opportunity to reset relations with Europe more widely, something the new Starmer government has repeatedly stated since coming into power.

READ ALSO: ‘It’s time to reset Britain’s relations with Europe’, says UK foreign secretary

Some reports, however, suggest that despite the positive musings coming from London, negotiations have stalled and that Lammy has no intention of signing anything that would deviate from Gibraltar’s needs and concerns.

Political tensions were increased recently when Gibraltar demanded Spanish far-right party Vox return a concrete block stolen from British waters, and the Euro 2024 winning Spanish football team made international headlines when it celebrating by singing ‘Gibraltar es Español’ (Gibraltar is Spanish).

READ ALSO: ‘Gibraltar is Spanish!’: How Spain celebrated Euro 2024 heroes

Despite wanting to improve relations with the EU, Lammy is expected to reiterate the Labour government’s unwavering commitment to the “double lock” on sovereignty, sources told El País.

Perhaps most pressingly, however, is the fact that these new negotiations now have a deadline: the enforcement of new Schengen Area border rules come into force on November 10th and a treaty must be finalised before then. 

READ MORE: Hard border? What we know so far about new Gibraltar-Spain checks

Schengen Zone rules mean that there are two major outstanding points in treaty negotiations: firstly, the sore point of Spanish border guards on British soil, something Gibraltar rejects outright, and also the question of who would run Gibraltar’s airport, which is located on the isthmus between Spain and the British territory, an area Madrid claims was never included in Treaty of Utrecht.

The most contested aspect of negotiations is Madrid’s demand that Spanish agents should be allowed to carry out checks on passengers arriving at Gibraltar airport and that they should be armed and in uniform.

For many Llanitos (Gibraltar locals) this is an intolerable idea and one Picardo rejects outright: “There will be no Spanish boots on the ground,” he has said repeatedly.

On the other hand, Spain argues that no specific protocol can be designed for Gibraltar and that if it wants to join the border-free European area, it must accept Schengen rules.

Spanish boots on British soil is a particularly visceral point for many Gibraltarians of a certain age. In June 1969, Spanish dictator Francisco Franco closed the border gate between Gibraltar and La Línea de la Concepción, cutting the tiny overseas territory off from the world, separating Spanish-British families and forcing Gibraltar to source food from elsewhere on the planet. 

It was eventually reopened in December in 1982 but those 13 years have taken deep root in Gibraltar’s historical memory and is now embedded into the Llanito collective imagination and identity.

For many on ‘The Rock’, the idea of Spanish border guards on British soil, whether it be in the airport or elsewhere, is simply unacceptable under any circumstances. 

Tax could also prove to be a sticking point. Gibraltar has no VAT, but Madrid has argued that if it wants to benefit from fluid border movement, its tax rules must be brought into line with EU rules.

Of course, there’s also both the domestic and international geopolitical contexts to consider here too. All parties – Spain, the UK, Gibraltar and the EU – have been distracted by other events in recent years.

Spain has been preoccupied by political tension, snap elections and the Catalan amnesty, while Britain suffered the almost cartoonish political instability of the outgoing Conservative government and treaty talks were postponed after the general election in July.

Added to this is the fact that the mediating party, the EU, has had its hands full with the war in Ukraine and surging far-right parties across member states, a trend that interestingly both the UK and Spain buck as the only major European states with centre-left governments.

Talks resume on Thursday September 19th, over 8 years since the Brexit referendum.

In British politics, the UK’s exit from the EU now seems strangely absent from debate, as though the issue is over and the country has finally begun to move on — but for Gibraltarians and the thousands of Spaniards who cross the border and work there everyday, Brexit is still an open-ended question.

READ ALSO: ‘Starting now’: New UK govt wastes no time in Gibraltar post-Brexit talks with Spain

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