Spanish GDP seen taking a hit from Brexit

BRITAIN'S exit from the European Union will trim 0.2-0.4 percentage points off Spain's gross domestic product growth, according to a government report published Friday by daily newspaper El Pais.

Spain's top priority in Brexit talks will be to keep workers moving freely between both countries, the report, prepared by Madrid's representation to the EU, added.

Britain and Spain have strong trade and investment links and the report said the Spanish economy would "suffer negative consequences" from Brexit.

It said Spanish exports to Britain would fall by 464 million euros ($490 million) per year under the best-case scenario which the report defined as Madrid reaching a bilateral trade agreement with London after Brexit.

But the report said the fall in exports could reach as much as one billion euros per year, with the food and auto sectors especially hard-hit.

Brexit could cause Spain's economic output to fall by two and four billion euros per year, the equivalent of a fall of between 0.2 and 0.4 percentage points in its gross domestic product, it added.

Britain is the biggest destination for Spanish investment abroad and is Spain's main source of foreign visitors.

Spanish banks such as Santander play leading roles in British finance while Spanish service providers like Telefonica and construction firm FCC have significant holdings in the country. Santander generates 12 percent of its revenues in Britain and the country accounts for 30 percent of Telefonica's earnings, according to the report.

It said there are 102,498 Spanish nationals living in Britain and 391,000 Britons living in Spain, including 105,000 pensioners who cost Spain's public health system around 250 million euros per year.

Free movement of people, which allows any citizen of an EU country to work anywhere across the 28-nation bloc, is "the most relevant detail in the (Brexit) negotiations," the report said.

"Spain is interested in maintaining the conditions of free movement," it added.

Controlling immigration was a major issue for many of the 52 percent of Britons who backed leaving the EU and British Prime Minister Theresa May has said Britain will leave Europe's single market in order to control the influx of foreigners.

May has promised to trigger divorce proceedings with the EU by the end of March.