FOR BETTER OR FOR WORSE?

News

Sally Bengtsson / 2010-02-21 07:58:16

For better or for worse

For the average British person it is virtually impossible to travel, go shopping or carry out a bank transaction without at least one Spanish business benefitting.

In the same way, a Spanish consumer cannot smoke a cigarette, speak by mobile phone or contract private health care without enriching ‘the coffers’ of a British company.

The economic interdependence between the UK and Spain started to become a reality at the beginning of this century, ten years ago, but the rate it at which it has grown has surprised even those who are experts on this kind of thing.

Spanish investment in the UK is more than Spanish investment in the whole of Latin America, an area twice the size of Europe, which was colonised by the Spanish and where Spanish is the native language. On the other hand, Brits export twice as much produce to Spain as they do to China, and three times more than to it’s former colony of India.

However, the honeymoon period now seems to have come to an abrupt end. The international crisis seems to have taken its toll on both countries in a very problematical way.

Both countries once boasted the most dynamic economies in Europe, a situation which seems to have reversed recently, with their real estate bubbles bursting. They now both find themselves at the bottom of the heap in terms of regenerating their economies.

The number of British visitors to Spain, which used to represent an important source of income to tour operators and the tourist industry in both countries, went down from 17 million in 2008 to 11 million in 2009. And the British investment in Spain fell dramatically after reaching a peak of 13.5 million euros in 2008, when British Tobacco bought Altadis, a Spanish company.

Despite this, the UK is still the leading foreign investor in Spain, responsible for a third of all foreign investment. There are 320 businesses in Spain, each with British headquarters, the most well known being Lloyds TSB, Barclays, Vodafone, Alliance Healthcare, Nano, BT, Shell and GlaxoSmithKline, who have generated 116,000 jobs in Spain alone.
Spanish investment in the UK fell dramatically between 2007 and 2008, by 84.5% to be precise. Spanish companies such as Banco Santander, Ferrovial, Iberdrola, FCC, Abertis, Telefonica and Inditex have a total of 42,819 million euros invested in the UK.

The question is, will the good times return? British and Spanish businessmen and women met last week in the British Parliament, to explore ways of getting out of the crisis. Karen Stock, the President of the British Chamber of Commerce, said, “We can´t just wait for the storm to pass, businesses and governments must work together to get out of the crisis.”

Many British companies complained about the scarce flexibility within the Spanish labour market, the inadequacy of Spanish university education to the needs of businesses, the insufficient investment, and above all, the high level of unemployment.
John M Scout, the president of KPMG in Spain believes that the key to encourage businesses to invest in Spain is a stable economy.

He goes on to say, “The government and the autonomous communities should avoid measures which may be popular but are obstacles for businesses.”

British businesses are also interested in collaborating with Spanish companies and investing in Latin America, where Spain has already established some good markets.

Spanish businesses in the UK are closely watching the ups and downs of the pound, in the lead up to the elections. Juan Maria Nin, who works for La Caixa in London, said that the future of the Spanish economy is in Europe and not in Latin America.

The UK is still an attractive market for Spanish companies. It is the sixth largest world economy, and has a population of 62 million people, most of whom have buying power. The average income per capita is 36,300 dollars, compared to 31,000 dollars in Spain.

The British labour market is much more flexible, and unemployment is 8% compared to Spain´s 19%. Grupo Santander already has 300 offices in the UK, since the subsidiary branches Abbey, Alliance and Leicester and Bradford and Bingley adopted the group name. By the end of this year Grupo Santander will have 1,300 branches on British soil.