Foreign Companies Bullish on Spain

Barometer of the Business Climate in Spain 2014

16/06/2014 Barcelona

IESE Business School

Spain is a good country for foreign companies to invest in. The last edition of the "Barometer of the Business Climate in Spain" – a survey of more than 230 firms based abroad carried out by IESE's International Center for Competitiveness, – reveals that the outlook on revenues, investment and employment creation are much more optimistic than they were in 2012. However, six other areas, fluency in languages and the cost of electricity among them, still require special attention.

88 percent of foreign companies believe they will increase or maintain their level of investment in Spain – which in 2013 totaled €15.8 billion. Moreover, 87 percent expect their staff to grow or remain stable this year. In both cases, the 2014 figures are 17 percent higher than those seen two years ago.

Foreign companies have also given Spain’s current business climate a positive rating: 2,7 out of 5 overall. This halts a downward trend seen in recent years as the economic crisis took its toll, and puts Spain in 13th place in the world in terms of foreign investment flows, ahead of Germany, France and Italy.

Nine out of every 10 companies surveyed expect to increase or at least maintain their revenues from Spain in the year ahead, an increase of 25% compared to two years ago, when just over one in three (37%) were expecting revenues to fall.

Spanish Market Strengths

Infrastructure, human capital, quality of life and the size of the Spanish market are the features most prized by foreign investors.

Spain's high-speed railways and airports are singled out for praise, boosting the score for infrastructure.

Despite high marks for human capital overall – an area deemed very important to those surveyed – the results indicate that foreign companies would like Spaniards to improve their language, speaking and literacy skills, as well as showing more willingness to assume responsibilities and goals, and better their learning abilities. There is also a demand for more skilled labor.

Areas to Improve

Financing is the area with the lowest scores on the barometer, although some improvement is seen in the cost of financing from commercial banks, compared to 2012.

As for Spain's regulatory issues, foreign investors seek greater stability. They also want to see less bureaucratic red tape and speedier and more efficient commercial courts.

On the bright side for companies, nearly 70 percent of the firms polled feel that recent labor market reforms make the market more flexible, and 60 percent give the thumbs up to changes in the way collective bargaining agreements are reached.

Regarding taxation, foreign companies feel Spain can make progress on corporate taxes, value-added tax (VAT) and employers' contributions to the social security system for their workers.

For more information, see IESE Insight