Antonio Sánchez Morodo flashes his identity card at the border guards as he leaves Spain to get to work, riding his bike down Winston Churchill Avenue on the only land crossing into Gibraltar, a sliver of British-Mediterranean soil that is as wealthy as it is cramped.
Space is so short in the UK overseas territory, where everything is squeezed by the iconic hunk of limestone looming over it, that it relies on 15,400 cross-frontier commuters from Spain to double the size of its workforce on a daily basis, before they return home to sleep in Andalusia, mainland Spain’s southernmost autonomous community.
Gibraltar and the workers live in symbiosis. Without the extra labour, an economy built on the territory’s permissive low-tax regime would grind to a halt. Without Gibraltar, the workers would struggle to find a decent job in one of the poorest parts of Spain. Sánchez Morodo, who has previously cared for Gibraltarians with special needs and guarded its dockyard, says the £1,500 you can earn in a Gibraltar care home makes for a more comfortable living than Spain’s monthly minimum wage of €1,100.
“But what we really need,” he adds, “is a smooth relationship across the border.”
In principle, the UK and Spain agree. But bigger matters are at play: namely Spain’s refusal to recognise British sovereignty over what it calls “the last colony in Europe”. Because another flare-up over Gibraltar’s ownership is brewing, the threat of disruption for cross-border workers has suddenly become real.
What changed is Spanish politics. A resounding defeat for Prime Minister Pedro Sánchez in a local and regional vote in May prompted him to call a snap election on July 23 — and it could give Gibraltar an unwelcome new interlocutor in Madrid. If the polls are correct, the Socialist-led government that has lowered tensions with Gibraltar will be replaced by the conservative People’s party (PP), led by Alberto Núñez Feijóo, which is likely to be more nationalistic.
Everything looked different just weeks ago when the prospect of a new UK-Spain deal on Gibraltar’s status held out the promise of a golden age. Now, a territory that voted by 96 per cent to remain in the EU in the Brexit referendum is racked by fears of passport stamps and hours-long border queues, ending the ease of movement workers had become accustomed to. Gibraltar does not want to be the last victim of Brexit — but it is getting ready just in case.
If the PP needs the support of the hard-right Vox party to take office, as polling suggests, there will be even more belligerence. For Vox, Gibraltar is visceral. It once unfurled a huge Spanish flag near the top of the Rock and has called for the British territory to be “suffocated” into submission. In the May election campaign, Santiago Abascal, Vox’s leader, said any deal with the UK that did not recover Spanish sovereignty would be “a betrayal”.
The timing could not be worse for Gibraltar, which is in an informal limbo in which border checks are mostly cursory. Because it was left out of a post-Brexit UK-EU trade deal, Gibraltar and London have been in talks with Spain and Brussels for more than a year over a new treaty to define the territory’s relationship with the EU. The four parties suggested a deal was close — then came the electoral bombshell. Now the fear is that a PP-led government rejects both the negotiations and the status quo, leaving Gibraltar outside the EU’s Schengen free travel zone with “no deal” and a hard border.
John Isola, head of Gibraltar’s chamber of commerce, warns of “a very sudden shock to the economy” if people cannot get to work should Spain start enforcing strict border controls. Joseph Garcia, number two in the Gibraltar government and the minister in charge of its EU departure, agrees it “would make life extremely difficult”.
He notes that Gibraltar’s border is not like the Irish border, which runs for 500km and has 200 crossing points: “This is 1.7km long, with one narrow entry point for pedestrians and one narrow one for vehicles.”
His boss Fabian Picardo, Gibraltar’s chief minister, demurs when asked if he is worried. “I’m paid to be prepared,” he says.
Strategic gateway
Gibraltar’s population of almost 34,000 is roughly the same as the English seaside town of Whitstable, but it is a freakishly overdeveloped tiny place not even 3 square miles in size.
It has its own government, four political parties, a television station, a port, a UK military base, a berth for nuclear submarines used by Britain and the US, its own English-Spanish vernacular and a football team that plays in World Cup qualifiers. Its vista of thin apartment blocks make it redolent of Hong Kong, a place that Britain returned to its previous owner.
Gibraltar’s government says it has the third highest gross domestic product per capita in the world, although rankings involving small places are unreliable. The drivers of its economy are more clear. Firstly, insurance: more than 30 per cent of all UK motor policies are written in Gibraltar. Secondly, online gambling: it is a global hub boasting the headquarters of Betfred, William Hill-owner 888, and Lottoland. And thirdly, the importation of alcohol and tobacco, some of it subsequently purchased by millions of visitors — including from Spain — who enjoy the fact Gibraltar has no sales tax.
More than anything else Gibraltarians — the descendants of immigrants from Spain, Malta, Genoa, north Africa and Britain — describe themselves as hardy survivors who are proudly British. As a well-placed gateway to the Mediterranean, their home’s identity has been defined by brutal sieges. Enemies have choked it because it is a strategic point of supply, surveillance and control on a vital shipping lane — the reason why it matters as much to London today as it did in the 18th century. Oliver Dowden, UK deputy prime minister, told parliament this month that ministers “remain steadfast in their support for Gibraltar”.
Gibraltar’s misfortune compared with other rich European enclaves such as Andorra and Monaco — which also depend on foreign workers — is that its only land border is with a country affronted by its status.
UK sovereignty over this southern tip of Europe is the vestige of a battle between Britain and Spain fought more than 300 years ago with cannons and gunships. In 1713, when the British had already occupied Gibraltar for nine years, the enfeebled Spanish crown gave it up to London in the Treaty of Utrecht. But the ceder’s remorse is huge. Spain has never given up trying to get it back and says the Gibraltarian people should not get a say. At the UN this month, Spain’s ambassador said his country was the “victim of a colonial situation that seriously affects our territorial integrity”, repeating a claim based on Gibraltar’s place on a UN list of territories whose “decolonisation” is pending from the 1960s.
Frictions over Gibraltar have long been transmitted like an electric shock through frontier controls. In 1969, two years after 99 per cent of Gibraltarians voted against a Spanish push to assume sovereignty, the Franco regime responded by slamming the border shut. Gibraltarians recall how parents would take newborn babies to the border fence to meet relatives on the other side.
By 1985, Madrid was forced to fully reopen the frontier as the price of Spain’s entry into the EU. Another crisis exploded under a PP government in 2013 when Spain was accused of deliberately causing congestion at the border in retaliation for Gibraltar’s construction of an artificial offshore reef in waters Spain claims as its own.
Even at the best of times, the frontier bottleneck causes delays. “When you’re trying to leave by car and you’re in the border queue for two or three hours, it sort of reinforces your identity as not Spanish,” says Neil Costa, a lawyer and former Gibraltarian justice minister.
Optimists hoped the UK-Spain treaty talks would end the torture for good. The idea was that the two sides would tear down the border fence and create a zone of common prosperity. Gibraltar would in effect become part of the Schengen area, allowing freedom of movement for workers with entry checks only carried out at its port and airport.
At the same time, Gibraltar would become closer to the EU’s customs union — which it was not in before Brexit — opening up new commercial opportunities. Gibraltar, in essence, would get the benefits of EU membership without being in the EU. That special status is precisely what infuriates some Spanish people about the place.
‘The poor feeding the rich’
José Ignacio Landaluce is the mayor of Algeciras, a port city facing the Rock with a jobless rate of 27 per cent, and one of Gibraltar’s enemies.
To him, the territory is a hub of tax dodging and unfair competition that takes advantage of Spain. “Gibraltar gets to eat toast buttered on both sides. And who provides the bread, the butter and the coffee to go with it? Spain does,” he says. “How can it be that the poor are feeding the rich?”
Gibraltar firmly rejects Landaluce’s depiction and says it is a big contributor to Andalusia’s economy. For most Spanish people, Gibraltar’s status is not a priority issue. But the PP mayor’s vision is shared by fervent adherents in three powerful places: Spain’s foreign ministry, its finance ministry and the hardline wing of his party.
The PP likes to point out that Gibraltar was last year put on a “grey list” of places not doing enough to combat money laundering by the Financial Action Task Force, an international watchdog. This month, the task force said Gibraltar must address “strategic deficiencies” as soon as possible. But critics have a longer list of complaints.
Cross-border workers, they say, get less generous retirement benefits than their Gibraltarian peers, who receive extra support from a community-based charity on top of a state pension. Most also pay their income tax in Gibraltar, yet they use Spain’s hospitals, schools and housing. “Gibraltar couldn’t find a better set of workers,” Landaluce says.
On the flip side are well-off Gibraltar residents, who benefit from a favourable tax regime including a £118,000 cap on taxable income for people with assets of more than £2mn. Many own houses in Sotogrande, an expensive Andalusian resort favoured by Spanish bankers and aristocrats, and relax on nearby beaches and golf courses. Lisardo Capote, head of Spain’s customs agency in the region neighbouring Gibraltar, says the British territory does not want full border checks because that would create a paper trail showing how much time those people spend in Spain. “It’s going to be: hey, you’re in Gibraltar three days a week. You live in Spain. You need to pay taxes here.”
Capote grumbles about the magnet effect of Gibraltar’s 12.5 per cent corporate tax rate, saying it impoverishes business formation over the border, where the rate is 25 per cent. And he is incensed over tobacco. One-third of Gibraltar’s budget is funded by import duty on cigarettes, he reckons, but most of them end up being smuggled into Spain by criminal gangs, denying the country some €400mn in potential tax revenue. Gibraltar says his duty figures are a “gross overestimate”.
The final insult is that Gibraltar pumps its raw sewage into the sea because it does not have a treatment plant. “It’s barbaric,” says Landaluce, the mayor, although there is no evidence of this pollution washing up on Spanish beaches. “You cannot chuck your rubbish at your neighbours.”
Threat of no deal
By putting the UK in the position of supplicant, Brexit has handed Spain a once-in-generation chance to claw back some control.
A treaty was not agreed earlier because the Sánchez government set off sovereignty alarm bells by seeking a foothold at Gibraltar airport for Spain’s border police and aviation regulator, two officials said. A PP-Vox government could kill the talks entirely by demanding more.
Gibraltar’s preparations for no deal include asking businesses to change shift patterns to avoid peak crossing times and backing property developments to accommodate stranded workers. Spanish employees could do more work from home, as they did in the pandemic, but Nigel Birrell, chief executive of Lottoland, asks whether Spain’s tax authorities would then “try to impute” that their employers had become Spanish entities.
Picardo says Gibraltar is ready to switch to a new economic model that includes bringing in workers from outside the EU, but won’t go into detail because “you don’t want to help those seeking to do damage to you”.
Although the PP is a devotee of the UN’s decolonisation framework, Gibraltarians trying to be hopeful say party leader Feijóo — a self-described moderate and pro-European — would find it hard to tear up what Spain has, in lockstep with Brussels, negotiated with the UK so far. Picardo himself is still optimistic that a treaty can be sealed.
But there are red lines Gibraltar will not cross whatever the economic cost. Picardo says the sacrifices his parents’ generation made to withstand Franco’s border closure must not have been in vain: “If anybody in any political party on the left, the right or the centre in Spain thinks that they’re going to subject the people of Gibraltar to any concession or compromise on sovereignty whilst I am chief minister, they’ve got another thing coming.”
Additional reporting by Lucy Fisher in London