The spectacular increase in electricity prices has become the main concern of multinationals operating in Spain. This is evident from the Business Climate Barometer in Spain 2021. However, this study was published the day before the Russian invasion of Ukraine. Therefore, the mentioned concerns might change quickly.
The results were published on Wednesday by the Spanish export organisation ICEX. 730 multinationals contributed to the barometer.
The huge escalation of electricity prices in Spain has been a concern for many households in the past year. The government has adopted a series of measures to mitigate the high electricity bill. However, these do not apply to business, with industry as the biggest victim.
These are the weaknesses according to the foreign companies
According to foreign companies based in Spain, the current price of electricity is the ‘weakest link’ in the Spanish market. In fact, it is energy costs in general that create uncertainty, with gas, diesel, and petrol prices also cited as weaknesses. Thirdly, multinationals also name aspects of the regulatory environment. Examples are the speed and efficiency of the commercial courts and bureaucracy, as ‘weaknesses’. Finally, the tax aspects related to work are rated low. For example, social security contributions for employees and incentives and support for hiring.
What do the multinationals see as positive?
On the positive side, Spanish infrastructure remains the favourite of multinationals. Investors are very positive about the quality of roads, telecommunications structures and services, and the airport network. Recurring strengths are human capital, for example, the availability of skilled labour, in this case with a university degree, and quality of life, such as security or leisure and culture. The international companies rate the quality of healthcare also as very positive.
After the pandemic, investment security seems to be better. In 2020, during the low point of Covid-19, 69% of companies surveyed by ICEX said they would maintain or increase their investments in Spain. This percentage has risen to 90% in 2021. For this year, 93% of those surveyed plan to increase or maintain their activity in Spain. Multinationals are also positive in the area of employment. By 2022, 94% of companies expect to increase or maintain their workforce.
The sales outlook shows the biggest improvement among multinational companies. In 2020, 54% of companies saw sales decline; a year later, this was only 14%. This year, in 2022, 71% of companies expect their turnover to increase, 23% expect it to remain at the same level and only 6% expect it to decrease.
In terms of export volume, only 4% of foreign companies based in Spain expect their exports to decrease in 2022, compared to 26% in 2020 and 9% last year.
Little confidence in European recovery funds
Most foreign companies are indifferent to the possibility of accessing some of the European recovery funds. They have doubts about the implementation of these funds. For example, only one in four companies admits that the importance of these funds for their activity will be “great”, compared to 23% who say it will be “medium” and 52% who say it will be “small” or “very small”.
However, the Spanish Minister for Industry, Trade and Tourism, Reyes Maroto, pointed out that foreign companies ‘are positive about the fact that Spain leads in Europe in the use of European funds through the recovery plan. Spain has already received the first disbursement of €10 billion.