Saul Niguez and Rodrigo scored as Spain came from behind to win 2-1 at Wembley Stadium at the start of their UEFA Nations League campaign.
But Spain, featuring only five of the players that started their last-16 World Cup penalty shootout defeat by Russian Federation, stormed back before halftime through Saul Niguez and Rodrigo.
Southgate said he was unsure whether his side could close the gap to the top teams before the next European Championship, in which the semi-finals and final will be played at Wembley.
The truth is it could get worse before it gets better, even if it would be grossly unfair to label a man who so excelled at the World Cup as the first manager to be relegated with his country as well as a club.
"It was a really tough game", said Southgate.
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'I want to be in games that matter, I believe I've been through an experience that is as pressured as you're ever going to face at any club or global team in getting through a World Cup. At times his previous goals have come outside the box and we know he can hit the ball.
"But I'm proud of the way we finished the game".
But the 20-year-old wasted two glorious chances to complete a hat-trick in the second half, a header and a shot saved by United team-mate David de Gea. "I've seen teams fold in similar circumstances". He is one of the best goalkeepers in the world and has proven it in the Premier League week in, week out. I think in the end it's not something that's right to discuss publicly.
Substitute Danny Welbeck saw a stoppage-time leveller controversially ruled out, meaning England head into Tuesday's friendly against Switzerland reeling from three successive defeats in all competitions for the first time since 1988.
It sounded as if Southgate, who has made it clear he does not want to keep harking back to the adventures of the World Cup, felt England's defeat by Spain was a reality check. We are looking at a new Spain, a more direct team, just like Luis Enrique outlined when he was chosen as coach. "We know there's a distance to go until the very top teams".