Leading finance school says Brexit would be bad for Spain

The findings were outlined at a conference in Madrid organised by AFI and the British Chamber of Commerce: its title - "The impact of a possible exit by the UK from the European Union". The AFI president, Emilio Ontiveros, said that Brexit would be "bad" and "clearly negative" for Europe and for the UK itself, while it would also be "pretty bad" for Spain in economic terms.

"We would witness an increase in uncertainty, lack of confidence and a contraction in direct investment flows, which have been a chief competitive advantage and characteristic of the UK as a 'hub' investor."

Ontiveros warned that Brexit would have a significance beyond a fall in economic activity. He referred to the transfer of intangibles, the permeability of practices involving Spanish and British businesses and the platform for learning and security offered to Spanish companies which are able to operate in the most important competitive market in Europe. He added that uncertainty ahead of the referendum will affect economic activities and delay decisions on investments, while the pound will continue to fall.

The economic consequences of exit would be significant, said Ontiveros, though these would depend on relations that both sides reach afterwards. Otherwise, there will be an impact on trade, foreign direct investment, movement of people within the EU and political instability for the UK and the EU.

Spain will not be immune, given strong links with the UK through tourism, migration, and direct Spanish investment, especially in the financial and telecoms sectors. AFI fears that Brexit would lead to problems with accessing financial services in the City and with the flow of trade. This will decrease, it suggests, as will confidence and British consumer purchasing power. The UK is the fifth most important export market for Spanish goods and service, and represents 7% of the total.

AFI points out that Spanish direct investment in the UK reached 48,000 million euros in 2013, concentrated mainly in the finance, telecoms and energy supply sectors. It also says that Spain is particularly exposed to the British financial sector through the Santander and Sabadell banks. In total, there is an exposure of 362,000 million euros.

If there were to be a Brexit, the "shock" to the British economy would increase the level of defaults and banks would suffer an impact on their capital. However, Spanish banks could choose if they give support or not from the parent to their subsidiaries. In any event, in the medium term Spanish banks would have to face higher regulatory costs.

There would also be an adjustment in terms of the movement of people, as with tourism. Spain received more than 15.5 million British tourists in 2015 who spent over 14,000 million euros. For Spaniards, in a different regard, the UK is the leading destination for emigration - 14% of the total. Also, Spain would lose an ally in the Transatlantic Trade and Investment Partnership while Spanish industry would regret the loss of a market liberal member of the EU. At the political level, Brexit could reopen the debate about Catalonian independence.

Because of all this, Ontiveros said that he hoped that there will be a no to Brexit vote and that British voters will appreciate that issues of sovereignty are not what they were 20 or 30 years ago. "The traditional concept has been eroded in the face of intelligent interdependence and enrichment."

The regional vice-president of the Chamber of Commerce, Adam Austerfield, said that a survey of its members shows that 97% want the UK to remain in the EU, while 78% believe that leaving would affect the British economy. In addition, 83% consider that Brexit would make it more difficult to conduct business with Spain.

A study by the London School of Economics, added Austerfield, suggests that Brexit would have an effect of between 6.5% and 9.5% of GDP, similar to the financial crisis between 2008 and 2010, a time when there was also a drop in productivity. He pointed out that members did, nevertheless, want reforms to make the EU more competitive through a reduction in red tape and more agile decision-making.

Simon Manley, the British ambassador, said that the British government has made clear its position in favour of remaining in a reformed EU that would be stronger, safer and more prosperous. EU reform should focus on four areas: economic governance, competitiveness, sovereignty and social benefits and immigration.