Nestled on the southern tip of Spain, the tiny British overseas territory is eyeing the upcoming June 23rd referendum on whether Britain should leave the EU with alarm.

At stake is a thriving services-based economy that relies in large part on access to the EU's single market, and a sovereignty spat with Spain it believes threatens its only land access to the continent.

José Manuel García-Margallo told Spanish radio that if Britons voted to leave the EU, “it is obvious that Gibraltar also leaves the European Union, and won't therefore have access to the single market”.

Margallo, who is a strident supporter of the Rock coming back under Spanish control centuries after it was ceded to Britain in 1713, said solutions would have to be found to “allow Gibraltar to have a link with the European Union.”

He raised the possibility of “shared sovereignty during an extended period of time,” reviving a joint-sovereignty proposal etched out between the two countries in 2001 and 2002.

The proposal was binned after Gibraltarians rejected it en masse in a November 2002 referendum.

Gibraltar's leader Fabian Picardo has warned that Britain leaving the EU would be a “disaster” for the tiny territory.

Earlier this year, he told The Local that he was concerned  Gibraltar “might become prey to pragmatism and horse-trading” in the result of a Brexit.

READ MORE: “Gibraltar is passionately British. That is why we reject Brexit”

Picardo said he was also worried Spain may seize the opportunity to threaten the land border between the two – a long-time flashpoint in the sovereignty row between London and Madrid.

Spain's dictator Francisco Franco went as far as closing the crossing in 1969, all but stranding inhabitants who had to rely on air and boat links until it was fully re-opened in 1985.

Relations have ebbed and flowed since, but the past four years have seen tension resurface under Spain's acting conservative government.

Apart from sovereignty claims, the ruling Popular Party also bristles at tobacco smuggling across the border and accuses Gibraltar of being a corporate tax haven.

In one particularly belligerent row over disputed waters, Spanish authorities upped border checks in 2013, creating hours-long logjams and forcing the European Commission to wade in and ease the crisis.