Three out of 10 UK firms plan to cut back investment in Spain

The Barometer on Climate and Outlook for British Investment in Spain, drawn up between July and September, says UK businesses looking for a post-Brexit survival strategy could reduce their exposure to Spain by an average 10% or more.

But 60% said they will maintain current investment levels, while 8% reported that they are planning to increase them.

The 10-month lack of government in Spain did not hurt British investment

Despite Britain’s decision in June to leave the European Union, these companies feel it is possible in the mid-term to establish “a new framework for economic relations that will maintain investment flows to Spain,” says the report, released on Thursday.

The study finds that the UK has the third-highest foreign direct investment (FDI) stock in Spain, accounting for 11% of the total. As of 2014, British investment had created 161,353 direct and indirect jobs, especially in telecommunications (€14.3 billion), tobacco (€6.2 billion) and wholesale trade (€2.1 billion).

It also contributes to state revenues with annual €6.1 billion paid out in taxes and social insurance contributions.

In 2014, British FDI stock in Spain was €37.6 billion, €7.3 billion more than the previous year, but down from the highs of 2008, when it reached €46 billion.

The report finds that the political uncertainty in Spain over the 10-month lack of government during 2016 did not hurt British investment, which grew in the first half of the year compared with the same period in 2015.

However, FDI into Catalonia did show a decline.

The UK has the third highest foreign direct investment (FDI) stock in Spain

“This could reflect greater caution by British investors over the political instability in the region in recent times, although the downward trend seems to have reverted in the last few quarters,” reads the report.

Respondents said that the business climate in Spain is acceptable and has even improved over the last two or three years.

But they also added that the Spanish economy should accelerate its digitization process and that government agencies should invest more in R&D&i and reduce the bureaucratic burden on business.

The research for the study was conducted by Analistas Financieros Internacionales (AFI).

English version by Susana Urra.