FILE PHOTO: Spain’s Prime Minister Pedro Sanchez applauds at the end of an event marking the first 100 days of his government in Madrid, Spain, September 17, 2018. REUTERS/Sergio Perez

MADRID (Reuters) - Spain hopes to reach a framework deal with Britain by October on the status of Gibraltar after Britain’s exit from the European Union, Spanish Prime Minister Pedro Sanchez said on Thursday.

Spain also needed a transitional period alongside Britain to reach agreements on matters relating to environmental, fiscal and tobacco trading laws on the British territory, he said.

“We need to have an agreement on Gibraltar by October,” he told reporters at an EU summit in the Austrian city of Salzburg.

Gibraltar, which lies on the southern coast of Spain, will leave the EU along with the United Kingdom on March 29 next year. It is not part of the EU customs union but businesses fear regulation of the border could become more rigid following Brexit in March next year.

This could also have detrimental effects for the thriving economy of the tiny territory, which relies on workers crossing the border from Spain.

Bilateral talks between London and Madrid on Gibraltar have been underway since the beginning of the year, with civil servants holding six meetings so far in both countries.

“We have some differences on judicial and police cooperation and the free movement (of people),” Sanchez said at the summit, when EU leaders asked Prime Minister Theresa May for guarantees on another land border of British territory with the EU, between Northern Ireland and Ireland.

“I think that the willingness of the British government and the Spanish government is to reach an agreement by mid-October,” Sanchez said, adding the British approach on Gibraltar had been very constructive.

Talks have touched on a possible joint use of Gibraltar airport and more comprehensive sharing of fiscal data between Britain and Spain for Gibraltar residents to prevent tax avoidance.