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Spain is one of the EU countries that maintain closer ties with the UK, so as time passed and all attempts to reach a withdrawal agreement were fading, the Spanish Government began preparing for the worst scenario: a no-deal Brexit. Now that the Labour Party’s plan to implement a ‘soft’ Brexit has failed and the possibility of an extension of Article 50 and a second referendum have been brought to the table, uncertainty prevails again. This is why next Friday the Spanish council of ministers will approve a Contingency Plan to face a possible Brexit without agreement.
Last Wednesday the President of the Government, Pedro Sánchez, responded to the announcement of the British Prime Minister, Theresa May, about a possible extension of Article 50. Although Sánchez has always positioned himself in favor of a withdrawal agreement, in this case, the President pointed out that “prolonging the uncertainty by postponing deadlines is not a reasonable or desirable alternative.” A few hours later, the British Parliament rejected the Brexit alternative plan presented by the Labour Party and, therefore, the opposition leader, Jeremy Corbyn, would support a second referendum as he announced earlier this week.
In this context of uncertainty surrounding Brexit, the Spanish Government has opted for the old saying, ‘prevention is better than cure’. It was a few days before the British Parliament rejected the agreement reached between the EU and the UK that Sánchez confirmed that a contingency plan was being prepared. So, after Westminster’ vote on January 15, the Government met with members of the opposition to establish a line of dialogue on the measures that should be taken after Brexit.
Ever since, the Spanish Executive has been working on a decree-law of contingency measures that will finally be approved on Friday, March 1, in the council of ministers. During his appearance before the Congress last Wednesday, Sánchez stressed that this is a regulation to facilitate the “transition to a new situation” and, therefore, it will be temporary. The main objective of the contingency plan is, in the first place, preserving the rights of Spanish and British citizens living in both countries and, secondly, preserving the existing economic relations.
In addition, the Spanish Government pretends to provide citizens and companies with all the necessary information on the implications of ‘Brexit’, for which a special website has been created. “Given that an agreed withdrawal is the best option, the Government of Spain has been working from day one at both European and domestic levels in all areas to ensure the least possible impact from the withdrawal by the United Kingdom,” is published in the website, which includes sections on ‘what is Brexit’, ‘the current situation’, ‘how to get ready’, and ‘related news’.
Regarding the citizenship rights, the Government is working in establishing bilateral agreements with the UK to maintain the current protection in issues related with residence, social security, health care, and the recognition of academic and professional degrees. Spain is the country of residence of the largest community of British citizens in Europe, 240,000 people according to the Spanish National Institute of Statistics (INE). Spain, for its part, has also a significant number of citizens living in the UK, 128,000 people according to the same source, so it is only natural that both sides would reach an agreement when the time comes, if necessary.
As for economic relations, the contingency plan aims to address regulations in the financial and customs area and creating agreements regarding the industry, commerce, and tourism. However, there is a sector that stands out concerning the economic ties with the UK, and that is the investment. On February 26, the Chamber of Commerce of Spain in London published the ‘I Barometer on the Climate and Outlook for Spanish Investment in the UK’, which indicates that the Spanish companies had €77,000 million ( $87,54 billion) invested in the British market at the end of 2016, the vast majority coming from ‘Ibex 35 groups’ such as Banco Santander, Telefónica, Iberdrola, Sabadell, Ferrovial, and IAG.
This figure situates the UK as the second largest destination for international investment, slightly behind the United States, but it may not remain this way after Brexit. The report shows that 74% of the surveyed companies consider that the business environment in the UK has worsened in the last year, especially due to the increase in political risk, and 68% of them believe that there is not enough institutional stability in the country. As a result, only one in four Spanish companies expects to increase their investment in the British market this year.
The Government is aware of the uncertainties that Brexit entails for the Spanish companies and some measures have already been adopted in this regard. For example, the Spanish Institute for Foreign Trade (ICEX) has recently launched the “Brexit cheque”, which provides a discount for those companies whose business has been affected by Brexit of between 60% and 80% to use the Customised Services provided by the economic affairs and trade offices of Spain overseas. The aim is to support companies so they can better deal with the possible changes in terms of access to the UK or to facilitate their diversification to markets in other countries around the world.
Finally, it is important to note that, despite all the prevention measures announced, Spain has always been favorable to a ‘friendly exit’ of the UK. Even on Wednesday, when Sánchez announced the Contingency Plan, the President admitted that Spain will not oppose to an eventual extension of Article 50 if it entails a “certain perspective of resolution.”