The future of Gibraltar has become the first major dispute of Brexit negotiations since Prime Minister Theresa May triggered Article 50 on 29 March. Residents of the Rock voted overwhelmingly, in June's 2016 referendum to remain in the EU, but Britain's decision to leave potentially means Gibraltar will have to leave, too.

An EU draft position says any agreement on the future of Gibraltar has to be agreed between Britain and Spain, which has long claimed sovereignty over the enclave. The rocky 2.6 square mile enclave, at the tip of the Iberian peninsula, has been a British territory –€ and the cause of friction between the UK and Spain –€ since it was captured by Britain in 1704 and ceded in the 1713 Treaty of Utrecht.

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The Gibraltar Rock is pictured from La Linea de la Concepcion near ther southern Spanish city of CadizJorge Guerrero/AFP

In a 2002 referendum, Gibraltarians rejected by 98% a proposal for joint British-Spanish sovereignty. Once a major British military base, the territory of 33,000 people is now an offshore financial centre – drawing funds and insurance companies with its attractive tax and regulatory regime. It has a strong flavour of Britishness, with Union flags, red telephone boxes and pubs with names like The Gibraltar Arms and The Angry Friar.

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Flags of the United Kingdom, Gibraltar and the European Union are flown at the Spain-Gibraltar borderPablo Blazquez Dominguez/Getty Images
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A man cleans a telephone box in GibraltarJorge Guerrero/AFP
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A woman stands by a double-decker bus next to a bus stopPablo Blazquez Dominguez/Getty Images
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A man walks his dog past a post boxPablo Blazquez Dominguez/Getty Images
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People walk past a restaurant board advertising a Sunday roastPablo Blazquez Dominguez/Getty Images
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A man place tables together outside a fish and chip shopPablo Blazquez Dominguez/Getty Images
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People sit at a pub on Main Street, the main pedestrian shopping street in the old city centreSean Gallup/Getty Image
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A member of the British army marches into the centre of GibraltarJorge Guerrero/AFP
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British and Gibraltar flags are on display in a shopPablo Blazquez Dominguez/Getty Images
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Souvenirs on display at a shop in GibraltarPablo Blazquez Dominguez/Getty Images
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Two men wearing Union Jack waistcoats celebrate Gibraltar's National Day at Casemates SquareJorge Guerrero/AFP

Former Conservative Party leader Michael Howard suggested Britain would be ready to go to war with Spain to defend the outpost – a display of sabre-rattling that evoked memories of the 1982 war with Argentina over the Falklands, which started exactly 35 years earlier. He said Theresa May would defend Gibraltar as her predecessor Margaret Thatcher did the Falklands. Howard told the BBC that in 1982, "another woman prime minister sent a task force halfway across the world to protect another small group of British people against another Spanish-speaking country. And I'm absolutely clear that our current woman prime minister will show the same resolve in relation to Gibraltar as her predecessor did."

Lord Howard makes Falklands Comparisons over Gibraltar ITN

Howard spoke on the 35th anniversary of Argentina's invasion of the Falklands, a South Atlantic archipelago that has been British since 1833. Britain retook the islands –€ known as Isla Malvinas to the Argentines –€ in a brief war that killed 649 Argentine troops, 255 British soldiers and three islanders.

The EU's chief Brexit negotiator Michel Barnier insisted that his team are ready to start divorce talks with the UK, calling for the parties to "keep calm and negotiate" after a row broke out over the fate of the rocky outcrop of Gibraltar.

Keep Calm and Carry On
Leon Neal/AFP

Residents of the Rock also adopt a typically British stance about the whole thing; keep calm and carry on. Brian Reyes, a columnist for the Gibraltar Chronicle, said Howard's words helped no one. "This is a time for firm but measured diplomacy, not war rhetoric," Reyes wrote. "What we need is a Rock-solid commitment from the UK that it will include Gibraltar in any future trade deal with the EU."