According to newly-released official documents by the National Archives today, while the UK's Conservative Party ministers believed the prospect of such a sporting clash would be "unacceptable" to their own party, they did not want to pick up the bill if the football authorities were left out of pocket.
In a report from May 1982 - at the height of the Falklands War - Michael Heseltine, the then Tory Cabinet minister responsible for sport, said some footballers had expressed concern at playing in a competition with Argentina.
"One important factor could be the actual physical pressure of British teams, and supporters, in Spain. There could be provocation of British supporters, and demonstrations of anti-British feeling by Spanish spectators," he added.
But Heseltine - now Lord Heseltine - said withdrawal of UK teams would be greeted as a "moral victory" for Argentina and urged against a boycott.
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However, he said the position should be reviewed "in the event of a worsening of the situation in the South Atlantic between now and June 3" - when the tournament was due to start.
"The Scottish and Northern Ireland Football Associations could be bankrupted," he wrote.
In conclusion he said: "My present view is that HMG (Her Majesty's Government) should not yet suggest withdrawal to the football authorities, but that we should be ready to adopt that course, at short notice if the situation worsens and in the light of public opinion.