Gibraltar may be Spain 'bargaining chip' in Brexit talks, warns William Hague

William Hague - PA

Spain could use the issue of sovereignty over Gibraltar to hold the UK “hostage” towards the end of Brexit negotiations, William Hague has warned.

Like Scotland, the British Overseas Territory on Spain's south coast voted to remain in the EU.

Lord Hague said transitional arrangements should be put in place to avoid a stalemate for business, adding it would be a “miracle if anything is wrapped up in the next two years”.

The former Tory leader, who also backed staying in the 28 member bloc, suggested that Madrid may use “joint sovereignty over Gibraltar” as a bargaining chip.

It reflects fears that a EU member state could use its veto to extract concessions from the Prime Minister towards the end of talks.

“The UK has to assume the negotiations will end in two years because it could be held hostage by the demands of one member state refusing to extend the negotiations,” he said.

If there were no deal with in two years, the UK would leave the EU on World Trade Organisation terms, meaning tariffs and customs checks for exporters, which Lord Hague said would leave business on a “cliff edge”.

Prime Minister Theresa May is facing pressure to seek a transitional arrangement which would span the formal conclusion of Brexit talks in 2019 and the agreement of a new trade deal, which could take considerably longer.

May has announced plans to trigger Article 50 before the end of March next year, meaning the UK would have left the EU by April 2019.