Gibraltar’s bustling Main Street. Marcos Moreno

Every morning, Monday to Friday, some 10,000 people cross over from Spain into Gibraltar to work in the British Overseas Territory’s flourishing gambling and financial services industries. But if the UK votes in favor of an exit from the European Union, or even to substantially change the nature of its membership in a referendum slated for 2017, Gibraltar’s economy would be hard hit.

The arrival today of a cruise ship with some 3,000 passengers aboard has made it virtually impossible to walk down Main Street on the Rock. Local shopkeepers cannot keep up with demand. They sell jewels, tobacco, and all kinds of products free of sales tax.

The referendum is an “existential threat” to Gibraltar, says its First Minister, Fabián Picardo

“Everything will depend on what happens with the border crossing and if tourists and Spanish workers continue to arrive,” says Suresh Basantini, who owns three stores. Up to seven million tourists pass through Gibraltar each year, and there are peak days when up to 30,000 arrive, doubling the local population.

But a Brexit would mean Gibraltar losing its privileged links to a market of half-a-billion people, which would be a blow for any country, and would sink the economy here, say locals. “It would be serious for Gibraltar if the UK decides to leave the single market, but if it decides to leave the EU but remain in the single market, then that wouldn’t be so bad,” says Gibraltar’s First Minister, Fabián Picardo from his office in 6 Covent Place. Picardo says that the referendum is an “existential threat” to Gibraltar, whose GDP grew by 17 percent this year and has virtually zero unemployment.

Gibraltar’s tax advantages are threatened by skepticism in the UK about European integration

Financial services, insurance and online gambling, along with maritime crewing are, along with tourism, the pillars of the Gibraltarian economy. Being part of the EU and at the same time a financial center with notable tax advantages – no sales tax and just 10 percent company tax – are privileges Gibraltar wants to hold onto, but that are now threatened by growing skepticism in the UK about the benefits of greater European integration.

The financial services and insurance sectors would be the first victims of a Brexit. All kinds of investment funds are managed from here. There are also 63 insurance companies that take advantage of the territory’s EU membership to provide services to other EU states, as well as competing with them. Some 15 percent of British car insurance comes from Gibraltar-based companies.

Some 15 percent of British car insurance comes from Gibraltar-based companies

“This is a society built on trade,” says Edward Macquisten, the head of Gibraltar’s Chamber of Commerce. “Gibraltar has always depended on foreign markets and this could have a very negative effect on our economy.” For the moment, he explains, there are companies that have created legal and financial teams to look at possible scenarios. “It isn’t clear on what basis a referendum would be held, or how long the process would take. This is creating uncertainty.” He also warns that the impact of a UK exit from the EU would be felt in the Spanish towns across the border where huge numbers of employed in Gibraltar-based companies work.

Nick Cruz is a well-known lawyer in Gibraltar and the non-executive director of Enterprise Holdings, an insurance company that operates mainly in Greece and France. He says that in the event of a Brexit, his company couldn’t operate in France unless it set up offices there. “Our business model is increasingly dependent on relationships with other European countries. The impact of an EU exit would be huge.”

Leaving the EU would greatly help those who want to create problems for us. It’s only EU rules that prevents Spain from closing the border”

Roulette, poker, bingo, the Champions League final, tennis... the internet has allowed Gibraltar to grow way beyond the six square kilometers it covers, two-thirds of which are occupied by the Rock itself, and that has seen its gambling industry enjoy a decade-long boom. Online gaming employs some 3,500 people here, half of whom are not from Gibraltar or Britain. The sector contributes around 20 percent of the territory’s GDP, and is shared out between 30 companies.

“They locate here for financial reasons,” explains Phill Brear, the Gibraltarian government’s gaming commissioner. He says that exit from the single market would not directly impact on the sector, but would have repercussions, given that young people from all over Europe work here, entering and leaving each day: they might not be prepared to pay the political price of isolation. One of the companies operating in the online gaming sector is called 32 Red. Rows of workers wearing earpieces answer calls from people betting on Nadal to beat Tomic, or playing Black Jack.

Our business model is dependent on relationships with EU countries. The impact of an exit would be huge”

“A No vote would be very worrying for us,” says Ed Ware, the company’s director. “It is much easier for us to operate in European countries,” says the manager of another company that employs 200 workers specializing in online poker – which is very popular in Spain – who asks not to be named. Around half of its workforce live in Spain and cross into Gibraltar to work each day. Those who live in Gibraltar tend to eat and go out across the border, where prices are lower. The appeal of Gibraltar diminishes significantly if it becomes cut off from the rest of the EU.

And it’s not only Gibraltar’s economy that would be in trouble in the event of Brexit. Without the EU, the authorities here are fearful of a border controlled by Spain. “The treaties would no longer apply” says Picardo. “Leaving the EU would greatly help those who want to create problems for us. It’s only EU rules that prevents Spain from closing the border.”

So while London gears up for the 2017 referendum, Picardo is already looking into whether Gibraltar could join the Schengen zone. “Gibraltar wants more Europe, but a Europe that is reformed and better.”