Summary of conclusions and recommendations
The economic implications
1.The EU Single Market has played an important role in helping Gibraltar to develop its vibrant, service-based economy over recent decades. We note the view of our witnesses that the economy is highly resilient. Nevertheless, a loss of Gibraltar’s access to the Single Market in services would unavoidably have negative consequences for Gibraltar’s economy, at least in the short term. (Paragraph 40)
2.A common theme in the evidence we heard on the economic impact of Brexit for Gibraltar has been its reliance upon the free movement of frontier workers, who make up some 40% of the total Gibraltar workforce. If Brexit leads to restrictions being imposed on the daily movement of labour across the land border, this will seriously damage several key sectors of its economy, including the port, tourism, financial services and aviation. (Paragraph 41)
3.The economy of the Campo de Gibraltar region of Spain benefits substantially from the employment opportunities offered by Gibraltar and would also be significantly affected by any restriction of the movement of goods and people over the frontier. (Paragraph 42)
4.EU funding has played an important role in Gibraltar’s economic development and in supporting regional cooperation. We welcome Mr Walker’s confirmation that EU-funded projects in Gibraltar will be covered by HM Treasury guarantees, but note that, as in the UK, funding is uncertain beyond 2020. It is also possible that projects in Gibraltar may not be deemed to fulfil the criteria of fitting with UK Government strategic priorities. We call on the UK Government to clarify what future UK-based funding will be available to Gibraltar if it cannot access EU programmes after Brexit. (Paragraph 43)
5.Gibraltar’s most significant economic relationship is with the UK itself, and it will be important for Gibraltar to maintain and enhance its access to UK markets to compensate for any loss in access to the Single Market. The UK also has a responsibility to support Gibraltar in benefiting from any opportunities that arise following Brexit, including by participating in any new international trade deals. (Paragraph 44)
The frontier with Spain
6.It will be in the mutual interest of Gibraltar and Spain to maintain as free-flowing a frontier as possible following Brexit. We urge all parties involved to work together in good faith to reach an agreement that supports ongoing regional cooperation and trade, and avoids undue disruption to the lives of thousands of border residents who cross the frontier daily. We agree with the Chief Minister of Gibraltar that the Local Border Traffic Regulation (EC/1931/2006) could be used as a future basis for movement of labour between Spain and Gibraltar, but note that any agreement will require both sides’ commitment to sustain it. (Paragraph 70)
7.Common membership of the EU has greatly facilitated cross-border cooperation between authorities in Spain and Gibraltar, including in the area of police and judicial cooperation. In particular, we note the importance of the European Arrest Warrant in preventing those wanted for crimes from evading justice by crossing the EU’s external border, in either direction. In a recent report we highlighted the importance of police and judicial cooperation post-Brexit across the Irish land border. It will be equally vital for Gibraltar to continue to cooperate with Spain in this area, and we urge the UK Government, as part of its wider commitment to continuing cooperation on security and policing, to prioritise supporting a new and stable relationship between Gibraltar and Spain. (Paragraph 71)
8.The European institutions, including the Commission, have played an important part in promoting dialogue between Gibraltar and Spain. Following Gibraltar’s withdrawal from the EU, continued cooperation will be just as important, and we urge the UK Government to provide support for this, working both with the Spanish Government and, where possible, with the EU. (Paragraph 72)
Implications for the sovereignty dispute
9.We welcome the Government’s intention to engage positively and pragmatically with Spain, to try to secure an agreement that reflects the mutual importance of the economic relationship between the UK and Spain, and between Gibraltar and Andalusia. (Paragraph 87)
10.We fully endorse the UK Government’s commitment never to enter into sovereignty discussions against the will of the Gibraltarian people. At the same time, we note the risk that Spain will seek to involve the sovereignty dispute either in the negotiations under Article 50 or in future negotiations on a UK-EU free trade agreement. The Government must be vigilant to resist any such attempt. (Paragraph 88)
11.We also urge the UK Government to remain alert in the longer term to any attempts by Spain to advance its territorial claims over Gibraltar through the medium of EU laws or policies, when the UK is ‘out of the room’ after Brexit. The Government should use whatever means are available under international law to resist encroachment upon Gibraltar’s sovereignty under such circumstances. (Paragraph 89)
An uncertain future
12.Gibraltar faces potentially significant economic consequences as a result of the UK’s decision to leave the EU. The extent to which these consequences will be realised hinges both on the outcome of the UK’s negotiations with the EU, and on the reaction of Spain during and after withdrawal. (Paragraph 107)
13.We agree with the Chief Minister of Gibraltar that Gibraltar and the UK should be considered, for the purposes of withdrawal negotiations, as a single State. Gibraltar is part of the EU, and its withdrawal is a matter for the UK and the EU collectively, not for a separate, bilateral negotiation between the UK and Spain. Aspects of the agreement on the future UK-EU relationship could nevertheless include specific bilateral arrangements between Spain and Gibraltar, for example in relation to local border traffic management. (Paragraph 108)
14.A dedicated Joint Ministerial Council has been established to facilitate Gibraltar’s involvement in the wider Brexit process, and we note that the Government of Gibraltar appears satisfied with the level of contact it has had with UK ministers and officials to date. (Paragraph 109)
15.The Government of Gibraltar has placed its trust in the UK to negotiate on its behalf and secure a Brexit that meets Gibraltar’s needs. However, it remains the case that, in leaving the EU, Gibraltar finds itself in a situation that 96% of its voters did not support. Negotiating on their behalf, the UK Government has a moral responsibility to ensure Gibraltar’s voice is heard, and its interests respected, throughout the Brexit process. (Paragraph 110)
16.At this stage, it is unclear what level of Single Market access the UK will be able to negotiate after Brexit, in particular with regard to services. It therefore remains to be seen whether Gibraltar will feel compelled to seek a differentiated future relationship with the EU. We note, however, that Spanish opposition may present an insuperable barrier to any perceived special treatment for Gibraltar. (Paragraph 111)
17.Moreover, a microstate-style status would need the agreement of the EU institutions and the other 27 Member States. It is not clear that the EU would prioritise special arrangements for a dependent territory of a State which is leaving, not joining, the EU. At the same time, we note that the EU itself has a continuing interest in promoting the economic well-being of Gibraltar, as a neighbouring territory, in developing good relations between Gibraltar and Spain, and in protecting the welfare of EU national border residents. (Paragraph 112)
18.It is essential that Spain, the UK and Gibraltar, once they lose the common forum provided by shared EU membership, redouble their efforts to find a structure through which open lines of communication can be maintained, promoting cooperation and good relations. We call on the Government to give early thought to how such a structure might be established, and what, if any, role the EU might play in it. Agreement on this should be sought in tandem with Brexit negotiations. (Paragraph 113)