Between a rock and a hard placeBy Andrew Tottenham, Managing Director, Tottenham & CoFebruary 20, 2019 at 2:45 amWhat will happen to Gibraltar, post-Brexit? In 1713, by the Treaty of Utrecht, the Spanish ceded the sovereignty of Gibraltar, nicknamed “the Rock”, to the British Crown, and it has remained a British territory ever since. Why did the Spanish cede sovereignty? It was all to do with the incestuous royal families of Europe. Charles II of Spain, who had died childless, had named Philip, grandson of French King Louis XIV, to be his successor. The other powers of Europe would have none of this, worrying that Philip (now Philip V of Spain) would eventually combine the powers of France and Spain. They went to war, trying to install another candidate on the Spanish throne.That war ended with the Treaty of Utrecht. Philip V agreed to give up his claim to the French throne, and the British insisted that part of the price to get their agreement to the treaty was for the Spanish to yield the sovereignty of Gibraltar, a strategic port which controlled who came into and left the Mediterranean Sea. Fourteen years later, a Spanish army besieged Gibralter, asserting that the British had lost the legal right to hold the territory. Ever since, Spain has been disputing British control, with the strength and volume of the claim depending heavily on the political climate in Madrid. Today, Gibraltar is thriving, with online gaming being an important part of the economy – many UK companies have moved their online gambling operations there. Duty-free petrol, alcohol, and cigarettes are other major sources of revenue, along with financial services.There are only about 34,000 inhabitants of the “Rock”, but an additional 13,000 Spanish workers cross the border to work there, and many Gibraltarian businesses are dependent upon them. Brexit could throw a large spanner in the works.Gibraltar is highly dependent on free access to Spain for goods, services, and, most importantly, people. With Gibraltar being an “Overseas Territory”, the UK government has responsibility for its defence and foreign policy, the latter including Brexit. Even though the population of Gibraltar voted 91 percent to remain in the EU, it is the UK Government that is negotiating the terms of their leaving the EU.Gibraltar has passport checks at its border, because it has not been part of the Schengen Agreement, by which most European countries have agreed to remove their border controls and allow people to move freely across. Each day, some 10,000 people cross the border into Gibraltar to work. Under Brexit, border crossing controls become mandatory – no change there for Gibraltar. But one of the burning questions is whether EU citizens would continue to have the right to live and work in Gibraltar post-Brexit – which could be as soon as the end of March.Spain saw the Brexit negotiations as an opportunity to put joint Spanish and British control of Gibraltar back on the agenda, although this was immediately rejected by the British Government. It was also rejected by some of the major EU countries; France in particular worried about the implications for some of its overseas territories. Spain has insisted that it would have a veto over any agreement governing the future relationship of the EU 27 and Gibraltar.Regardless of the fact that the UK currently cannot find agreement with the EU over the terms of the UK’s withdrawal, it looks as if they have agreed what will happen to the Rock. Gibraltar will continue to allow EU citizens free access to the labour market, and they will continue to have the same employment rights as Gibraltarian workers. However, taxes on alcohol and petrol are certain to rise, because the UK Government has committed to prevent smuggling of these products. Cigarettes and other tobacco will have to have a traceability system and security measures to stop the smuggling of these goods from Gibraltar into the EU.Ultimately, it looks as if Gibraltar has come off lightly. In fact, Brexit may even bring a net positive for it, if firms decide to move there from the British Isle. As for the larger picture, let’s hope that if the UK does leave the EU on March 29th, we do so with an agreement that doesn’t decimate our economy.