Why Spain? Page of Copyright © 2013 IMA Ltd. All Rights Reserved. Generated from http://spain.doingbusinessguide.co.uk/the-guide/ Wednesday, April 25, 2018 Why Spain?  Summary Area: 505,990 km2 Population: 46.4 million Population growth rate: -0.1% (change) Population density: 92.8 people per km2 Urban population: 79.6% Capital city: Madrid (population 3.3 million) Other major cities: Barcelona (1.6 million); Valencia (814,000); Seville (703,000) Official languages: Spanish (Castilian); Basque; Catalan/Valencian/Aranese; Galician Currency: Euro (€) Nominal GDP: US $1,199.7 billion Real annual GDP Growth: 3.2% GDP per capita: US $25,843.1 Annual inflation rate: -0.5% Unemployment rate: 22.1% General government gross debt: 79.7% of GDP Fiscal balance: -5.1% of GDP Current account balance: 1.4% of GDP Current account balance: US $16.7 billion Exports of goods to UK: US $14,079 million Imports of goods from UK: US $8,910 million Inward direct investment flow: US $22.9 billion Exports + imports as share of GDP: 63.6% [Source: mostly FCO Economics Unit (Oct 2016)] International organisation participation: Spain is a member of the EU, WTO, OECD, G20, OSCE and Council of Europe. From 2015-16, it is also a non-permanent member of the UNSC [ Source: FCO (Apr 2016)]   Geography Spain is located in southwestern Europe at the western end of the Mediterranean Sea, occupying approximately 85% of the Iberian Peninsula as well as the Balearic Islands in the Mediterranean, and the Canary Islands in the Western Atlantic Ocean 108 km (67 miles) off northwest Africa. It borders France to the north along the Pyrenean mountain range, and Portugal to the south west. Its total area is 505 km2 (195 miles2), and it lies between latitudes 36° and 44° N, and longitudes 19°W and 5° E.   Government Spain is a member of the EU, WTO, OECD, G20, OSCE and Council of Europe. From 2015-16, it is also a non-permanent member of the UNSC. The Constitution of 1978 established Spain as a constitutional monarchy with a multi-party parliamentary democracy. Executive power resides with the government (elected every four years) presided over by the President (Prime Minister-equivalent), while legislative power sits with the bi-cameral Parliament, made up of the Chamber of Deputies and the Senate. The three-tier political system (comprising central, regional and local government) makes Spain one of the most decentralised states in Europe. While the centre sets the broad parameters, regions are responsible for the provision of basic public services including health, education and social services, and have significant influence over the regulatory environment for business. Over the last thirty years there has been an increase in the number of services provided by regional and local governments, although that central-regional balance has come under pressure as revenues have tightened. The municipal tier of government also plays a key role. The 50 county councils, and 8,000+ town halls account for c.13% of all spending and are responsible for delivering a wide range of public services (e.g. waste collection). The general election held in 2011 was comfortably won by Mariano Rajoy of the centre-right Partido Popular (PP). Soon after Rajoy’s appointment, the Government embarked on an ambitious programme of structural reform designed to boost competitiveness and efficiency while reducing public spending. The Government also considered reforming the quasi-federal structure including the financing arrangements for the regions, although this was eventually parked. After January 2012, successive reforms were introduced to reduce the size and cost of the public sector via cuts to health and education provision, the freezing of civil servants’ salaries, a reduction in public investment and tighter access to social benefits. The reform of the public and local administration included the removal of administrative duplications (e.g. regional ombudsmen or weather prediction services), elimination of bureaucratic procedures (e.g. simplified “express” licences for small businesses), centralised services, and pooling of resources and services among smaller local authorities. This was complemented by legislation to inject liquidity into the most cash-strapped regions and bring down regional deficits and debt levels via legal instruments such as the Budgetary Stability Law, which set legally binding spending, debt and deficit ceilings. The Government also undertook structural reforms in various areas, including some measures welcomed by British companies: new legislation obliging public administrations to pay bills within 30 days and which allow the (central) Finance Ministry to retain central-regional/local government transfers in the case of non-compliance; the €65 billion fund to clear outstanding debt to suppliers; moves to facilitate outsourcing of delivery of public services; and the Single Internal Market Law, now up and running, which aims to iron out market inconsistencies between regions and make it easier to set up and trade in Spain. Companies that encounter internal market barriers within Spain now have online access to a central government-led resolution mechanism that ensures regulation within different Spanish regions does not interfere with the domestic single market. In terms of areas for improvement, UK companies in Spain have cited improvements to the judicial system (in terms of speed and predictability of decisions), the impact of corruption on the cost of doing business in Spain, the ability for companies to get their views heard on regulation and regulatory certainty, an education system more aligned with the needs of employers, or more work to free up the labour market. Finally, on the revenue side, the previous government began attempting to fulfil its promise to reverse the 2011-2012 tax hikes. The fiscal reform announced in June 2014 kicked in in January 2015, and included across-the-board cuts in direct personal income tax; cuts in the headline rate of corporation tax for large firms from 30pc to 25pc (falling to 25pc this year); a new recapitalisation tax break to exempt up to 10pc of profits from corporation tax if the money is reinvested in the company; SMEs will be able to write off profits that are set aside in a rainy day fund. The general election held on 20th December 2015 resulted in the most fragmented Spanish parliament in its history. The result marked the transition from a two-party system to a multi-party system, and the reluctance of the two largest parties, the ruling PP and its longstanding adversary, the opposition PSOE, to form a coalition. A fresh election took place on 26thJune this year, resulting in a PP and Citizen’s Party coalition but no outright majority. Consequently another election may eventually be needed. More information on political risk, including political demonstrations, is available in the FCO Travel advice. See later in this guide and at: www.gov.uk/foreign-travel-advice/spain        Human rights Spain is signed up to the European Convention on Human Rights and the UN Universal Declaration of Human Rights. Spain is a strong supporter of gender equality and same sex marriage has been legal in Spain since 2005. The Spanish Ministry of Foreign Affairs states that their overseas priorities in the area of human rights are “the fight against the death penalty; non-discrimination on the basis of gender or sexual orientation; rights of persons with disabilities; the human right to safe drinking water and sanitation; and business and human rights. Moreover, in a cross-cutting manner, special attention is paid to human rights defenders, for whom there is a temporary shelter programme.” See: www.exteriores.gob.es/Portal/en/PoliticaExteriorCooperacion/DerechosHumanos/Paginas/inicioHR.aspx The previous government committed to reform Spain´s justice system to improve the efficiency of the courts. The reform programme included over 20 separate pieces of legislation covering all aspects of the justice system: procedural reforms to improve efficiency of investigations and take cases out of the courts; ambitious changes to the responsibilities, structure and organisation of the courts; institutional changes to key judicial bodies; and the introduction of fees and changes to the legal aid system. [Source: FCO Overseas Business Risk/gov.uk (Apr 2016)]   Economic overview Spain is the 5th largest economy in the European Union (EU) and now one of the fastest growing in the Eurozone. Contact a DIT (formerly UKTI) Spain export adviser for a free consultation if you are interested in exporting to Spain, at: www.greatbusiness.gov.uk/ukti Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies, at: www.gov.uk/government/organisations/uk-export-finance. You can also check the current UKEF cover position for Spain at: www.gov.uk/guidance/country-cover-policy-and-indicators#spain The population of Spain is about 46.4 million making it one of the biggest consumer markets in the EU. Around one million British nationals, based mostly in the coastal regions, are permanent or part-time residents. Over 16 million British tourists visit Spain every year. Over 700 UK companies operate in Spain. New UK investors include Dealz-Poundland, Stella McCartney and Jo Malone. Tunstall and Primark are increasing their investment.   Benefits for UK businesses Benefits for UK businesses exporting to Spain include: - entry route to Latin America - size of the market - English accepted as a business language - familiarity with British products and openness to them - proximity and availability of flights, including low cost airlines   Strengths of the Spanish market Strengths of the Spanish market include: - competitive cost of transport of goods - highly efficient transportation systems - quality and availability of qualified suppliers - advanced ICT network   Growth potential Spain’s Gross Domestic Product (GDP) grew 1.4% in 2014. Growth has since continued, with 3% growth in 2015 and currently 3.2% to October 2016. Growth is expected due to: - increased household disposable income - record employment growth - 2015 tax reform which has left more money in people’s pockets - increased investment in machinery and equipment Spain is now investing in its research and development (R&D) capabilities and aims to spend 2% of GDP on research by 2020. The ‘Science, Technology and Innovation Strategy’ set out a vision to 2020 which focuses on: - increasing international collaboration - promoting more private participation and involvement in R&D - more emphasis on technology and knowledge transfer   Gateway to Central and South America Combined, the Latin American countries are Spain’s second-largest export market. Spain is also the second most important investor in Latin America. Many Spanish companies have large distribution capabilities in the region. Collaboration with Spanish companies can help UK companies gain access to opportunities in Latin America. Read the practical guide to doing business in Europe at: www.europa.eu/youreurope/business/index_en.htm   In addition: - In 2015 Spain was ranked 36th out of 167 countries in Transparency International's latest corruption perception index (the UK ranked 10th): www.transparency.org/cpi2015/#results-table - Spain is ranked 33rd out of 189 in the World Bank’s 2015 Ease of Doing Business index (the UK ranked 6th): www.doingbusiness.org/rankings - The World Economic Forum’s Global Competitiveness report 2016-17 ranks Spain 32nd out of 138 (the UK is ranked 7th): www3.weforum.org/docs/GCR2016-2017/05FullReport/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf Contact a DIT (formerly UKTI) export adviser at: www.greatbusiness.gov.uk/ukti for a free consultation if you are interested in exporting to Spain. Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Spain. See: www.gov.uk/guidance/country-cover-policy-and-indicators#spain   Trade between the UK and Spain Spain and the UK are major trading partners. Spain is the UK’s 8th largest export market (9th for goods) with bilateral trade over. £40 billion annually Bilateral trade in goods is wide-ranging, but leading sectors are: - automotive and auto parts - aircraft and associated equipment - medical and pharmaceutical products - inorganic chemicals - alcoholic beverages - vegetables and fruit Spain’s share of UK exports (2.6%) is higher than India’s and Brazil’s combined. UK goods exports grew 3.5% year-on-year in value in 2014. 21% of all Foreign Direct Investment (FDI) in Spain since 1993 has come from the UK, and the UK is now the 5th largest investor in Spain. Over 400 Spanish companies are registered in the UK, including household names such as Santander and Zara. FCC, Ferrovial and Iberdrola are investing in UK infrastructure and services. [Source: DIT/UKEF/gov.uk (Apr 2016)]   Free Trade Agreements (FTAs) Spain is a member of the European Union (EU), the World Trade Organization (WTO) and other international bodies. Goods manufactured in the UK are exempt from import duties. SOLVIT is a free service provided by the national administration in each EU country and in Iceland, Liechtenstein and Norway, providing solutions to problems with your EU rights. Contact the SOLVIT team at: www.ec.europa.eu/solvit/index_en.htm if you have market access issues relating to the operation of the Single Market. [Source: DIT/gov.uk (Apr 2016)]   Sponsored By:  Regional Investment City Investment  Technology Services Law / Legal Services Financial Services  International Project Management & Construction Consultants Accountancy / Professional Business Services  Education / School Services Hotels / Corporate Lodging Real Estate / Property Services ICT / Telecommunications Chamber of Commerce ; Contact IMA International Market Advisor IMA House 41A Spring Gardens Buxton Derbyshire SK17 6BJ United Kingdom Email: info@ima.uk.com General enquiries switchboard:+44 (0) 1298 79562 Website: www.DoingBusinessGuide.co.uk