MADRID has been warned that Gibraltar will not be excluded from the negotiations on the UK's future relationship with the EU.

Theresa May told the Commons that she was negotiating a deal that "works for the whole UK family and that includes Gibraltar".

The comments come after Pedro Sanchez, the Spanish Prime Minister, said he would reject the draft Brexit withdrawal deal without a clarification of the text on future talks on the status of Gibraltar.

Spain maintains a claim to the peninsula, ceded to Britain under the 1713 Treaty of Utrecht, and Spanish ministers want to ensure that future EU talks with the UK do not cover Gibraltar.

However Mrs May remained resolute and told MPs, in response to a backbench question, that "Gibraltar is covered by our exit negotiations".

She said: "We are absolutely steadfast as he is in our support for Gibraltar, its people and its economy and we've always been clear that Gibraltar is covered by our exit negotiations and we've been committed to fully involve them as we exit the European Union.

"We are seeking a deal that works for the whole UK family and that deal must work for Gibraltar too.”

The PM said she was pleased that the UK had agreed a protocol on Gibraltar that would form part of a wider package of agreements between the UK, Spain and the Government of Gibraltar setting out the parties commitment to co-operation.

"We will not exclude Gibraltar from our negotiations on the future relationship; we want a deal that works for the whole UK family and that includes Gibraltar," declared Mrs May.

Later during Prime Minister’s Questions, Sir Vince Cable, the Liberal Democrat leader, raised concerns over the Brexit arbitration panel, which would settle any dispute arising from the withdrawal agreement.

He said: "On the arbitration panel, on a dispute on any aspect of the treaty, the chair, who has the decisive vote, will be chosen by lots.

"Now I know the Government is close to the gambling industry but isn't it rather reckless to leave crucial decisions of national importance under the withdrawal agreement to the toss of a coin?"

Mrs May responded: "We have put in place arbitration arrangements which mirror arbitration arrangements which exist in other international treaties."