A Union flag flies at Europa Point in front of the Rock (rear), a monolithic limestone promontory. | REUTERS/Jon Nazca

Gibraltar's finance sector will likely be locked out of the European Union but logjams at the Spanish border would be far more of a blow to the economy, the British territory's financial services minister said yesterday.

Albert Isola said that just 8% of Gibraltar's 2.35 billion pound ($3.04 billion) financial sector is business with the EU, the rest derived from Britain where one in four motorists are covered by insurers based on 'The Rock'.

"We are 32,000 people, and just with the UK there is more than enough business," Isola told Reuters.

While financial firms in the City of London have spent millions of pounds on EU hubs and relocating thousands of staff, Brexit fallout on Gibraltar, a 2.25 square mile UK enclave on the Mediterranean, has been far less dramatic so far.

Agreement with Britain for continued unfettered access to the UK market has eased concerns, along with no 'significant exit' of financial firms or jobs, Isola said.

"That gives us an opportunity to carry on as we are and potentially grow," he said, referring to a growing focus on new areas like blockchain.

This contrasts with 15 online gaming firms in Gibraltar, which account for 75% to 80% of Britain's online gaming market, who have had to open hubs in Malta and other EU states to avoid disruption to clients in the bloc.

After a post-Brexit transition period ends in December, Britain may get some direct access to EU financial markets under the bloc's 'equivalence' system. But it is unclear if Gibraltar would benefit given that Spain could veto its access to the bloc.

"We need to see how this pans out. We are fully aware that any UK-EU deal will have a Spanish input in so far as it affects Gibraltar and we have to see how that goes," Isola said.

Gibraltar's prospects for direct access to the EU are 'not high' and it was far more critical to maintain 'fluidity at the frontier' for a financial sector that accounts for a fifth of economic output.

About 15,000 people commute daily from Spain to work in Gibraltar and they are already subject to checks.

Isola said much hinges on whether Spain resorts to what one former Spanish minister called 'punitive politics' that would create border bottlenecks.

"In January 2021 there should be zero change at the border. Unless we have 'punitive politics', we will be absolutely fine, but that is a risk," Isola said.