10 Mar 2017

When Brexit Strikes

Spain fears major economic loses


The Spanish government estimates a loss between €2 and €4 billion on the country’s GDP when the UK departures from the EU. The information comes for the Madrid’s newspaper El País, which published an internal government report on the topic.

Spain, which is the European country with most British expats (over 300,000) fears that the Brexit impact on its economy will be much bigger than that which will be felt other EU members. According to the government report, the food industry, pharmaceuticals, tourism and even football will be deeply affected by the “divorce”.  Industries like agriculture, fishing and the automotive industry, which are the core of the current revenues from Spanish exports to the UK are expected to lose between €460 million and €1 billion in a worst-case scenario. Additionally, some big Spanish corporations like Banco Santander, Telefonica and Electricity Utility Iberdrola which receive between 12% and 30% of their incomes from the UK, also are threatened by losses with unpredictable effects. The government’s fear stems from the fact that these 3 companies alone make up for one-third of the Ibex3- the country’s stock exchange index. A tremble in their profits could shake the whole country’s economic status.

The report, prepared by the Permanent Representation of Spain (PRS) with the help of the UK Embassy and Spanish EU representative, covers not only the economic consequences but the impact on migration as well. Brexit will have significant influence 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”, it says. In addition, the impact could be so big it even influences the British and Spanish footballers playing in both countries.

However, the Spanish Prime Minister Mariano Rajoy didn’t express any concern when asked about the report.  “There’s no need to dramatise things,” he said calmly to journalists. Mr. Rajoy is currently attending the European Council summit in Brussels together with the other 27 head of EU states. His additional comment to the reporters was: “What we need to do is negotiate well.”

Still, the concerns expressed in the PRS report are not the only case. Last week, ratings agency Moody’s warned that Ireland is facing some difficult times once the UK is out of the Union. Lower export growth, disorder in well-established trade chains, possible disorders on the border and decreased British investments are among the agency’s major worries. Italy and Poland also are among the countries where social security, free movement of people and tourism could be deeply affected by the British farewell to the EU.

Ironically, the Spanish report came just after the announcement of a renewed royal friendship of the two kingdoms. In yesterday’s news, it was said that after more than 30 years, a Spanish monarch will make an official visit to the UK expressing the will of his people for a “long and deep royal and historic ties between our two countries, but also our strong relationship as partners bilaterally, within Europe and on the global stage”.