British Brexit negotiators have made no proposal on the status of Gibraltar once Britain has left the European Union, according to reports.

The British overseas territory faces the “existential threat” crashing out of the single market and being excluded from a transition deal.

LONDON – Gibraltar is reportedly facing the “existential threat” of crashing out of the single market in March 2019 and not being included in any transition deal between Britain and the European Union that follows.

A source within Spanish government has told the Guardian that the UK is yet to make a proposal to EU negotiators on what the status of the British overseas territory should be after Britain leaves the EU.

Gibraltar is on the southern coast of Spain with a population of around 30,000. It has been a British territory for over three centuries and voted overwhelmingly to stay in the European Union, with 96% of voters backing Remain.

However, to the UK’s surprise, the EU’s negotiating guidelines published earlier this year backed Spain in the long-standing dispute over the Rock, insisting it would be outside any future trade arrangement unless an agreement is reached between London and Madrid. This includes any transition deal, the Spanish government source claimed.

“I think the situation with Gibraltar is crystal clear,” the source cited by the Guardian said.

“Gibraltar became associated with the EU project because of their dependence in the UK. This is going to stay until March 2019. In 2019 when the UK leaves the EU, Gibraltar will leave with the UK.”

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“This is what we are telling the Gibraltarians. If you want to have your existing status, you will have to talk with us. And I cannot understand why Picardo has refused to do so. I think in the past he has played very hard on the other side. But reality arrives.”

Gibraltar’s Prime Minister, Fabian Picardo, has previously claimed that a hard Brexit – ie leaving the single market with no transitional apparatus in place – would pose an “existential threat” to the territory because of its economic dependency on Britain’s membership of the EU’s internal market.

Prime Minister Theresa May has vowed to secure a Brexit deal that “works for Gibraltar as well as the United Kingdom” amid concerns that she’d be prepared to sacrifice Britain’s control over the territory to secure favourable trade arrangements with the EU.

The overwhelming majority of Gibraltans want to remain controlled by Britain. Spain is yet to fully abandon its hope of regaining at least some control over the territory which it lost to British-Dutch forces in the early 18th century.

Speaking after the June Brexit vote, Spain’s former foreign minister Jose Manuel Garcia-Margallo said he hoped that to seeing the “Spanish flag on the rock [Gilbraltar]” was “much closer” to becoming reality.

Both the British and Gibraltar governments have consistently rejected both the possibility of Gibraltar being shared between Britain and Spain and the unlikelier prospect of it returning to total Spanish control.