Guidance

Overseas Business Risk: Spain

Updated 20 June 2023

The UK and Spain are major business partners. Spain is the UK’s 8th largest trading partner (£56.8 billion in 2022), accounting for 3.3% of total UK goods trade.

The UK is the largest European investor in Spain (FDI stock) with £95.9 billion in 2021.

In 2021, the inward stock of foreign direct investment (FDI) in the UK from Spain was £41.3 billion, making the UK the number one European destination for Spanish investment.

1. Political overview

Spain is a member of the EU, WTO, OECD, OSCE and Council of Europe and permanent guest at the G20. The Constitution of 1978 established Spain as a parliamentary monarchy with a multi-party democracy. Executive power resides with the government (elected every 4 years) presided over by the Prime Minister while legislative power sits with the bi-cameral Parliament, made up of the Chamber of Deputies and the Senate.

The 3-tier political system (comprising central, regional and local government) makes Spain one of the most de-centralised states in Europe. While the centre sets the broad parameters, the country’s 19 devolved administrations 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 30 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 plus town halls account for around 13% of all spending and are responsible for delivering a wide range of public services, for example, waste collection.

The last general elections were held in November 2019, following inconclusive elections in April 2019. The centre-left Spanish Socialist Workers’ Party (PSOE) again won the most votes, but fell short of the 176 needed for an absolute majority, with 120 of the 350 seats. The PSOE established a minority coalition government, together with the left-wing party Unidas Podemos, and with parliamentary support from smaller regional parties. Following regional elections on the 28 May 2023, a snap national election has been called for 23 July 2023.

2. Economic overview

Spain is the fourth largest economy in the EU and currently one of the fastest growing in the euro area. The economy has historically been boosted by UK tourists (18 million visits in 2019 from the UK) and UK residents (over 409,000 residents registered in Spain as of June 2022), especially in coastal areas.

Spain was one of the advanced economies hit hardest by the COVID-19 crisis, with 2020 GDP falling 11.3%. The economy rebounded by 5.5% in 2021 and 5.5% in 2022, with the OECD projecting that growth will slow to 2.1% in 2023 and 1.9% in 2024.

Similar to other advanced economies recent inflation has been high, peaking at 10.8% in July 2022, but has since fallen back to 3.2% in May 2023, though core inflation (excluding energy and processed food) remains high at 6.1%.

Public finances remain under pressure as a legacy of the global financial crisis and as a result of economic support measures to combat the COVID-19 crisis and the economic impacts of Russia’s invasion of Ukraine.

The government published its economic recovery plan in October 2020 and most recently updated it in June 2023, to guide the execution of around €160 billion of Next Generation EU recovery funds. The plan commits to spending at least 37% of the funds on green and climate related projects and 33% on digital transformation.

The investment plan is complemented by a series of structural reforms agreed with the European Commission. Reforms that aim to maintain the purchasing power and sustainability of the pension system and to address high unemployment and temporality of contracts in the labour market have been passed. Further measures are expected to make adjustments to the tax system.

Previous administrations undertook deep structural reforms in various areas, including some measures that have been particularly welcomed by British companies. For instance, legislation now requires public administrations to pay bills within 30 days and private companies to pay bills within 60 days (both as yet only partly successful). There have also been moves to facilitate outsourcing of the delivery of public services.

One of the most important reforms for businesses operating in Spain has been the introduction of the Single Internal Market Law 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 at regional government level (which can differ between regions) does not interfere with the domestic single market.

The reform of the public and local administration has included the removal of administrative duplications (for example, regional ombudsmen or weather prediction services), elimination of bureaucratic procedures (for example, simplified ‘express’ licences for small businesses), centralised services, and pooling of resources and services among smaller local authorities.

Spain’s headline rate of corporation tax is 25%. From 2022 there is a new minimum corporate income tax of 15% (10% for newly created companies, whose general rate is 15%). The minimum tax applies to corporations with a net turnover of €20 million or more and those that pay tax under the consolidated tax regime, regardless of the amount of their turnover.

In 2021 the Spanish government introduced new investment screening measures for direct foreign investments. Non-EU and non-EFTA investors must be authorised before they can invest more than €1 million in specific strategic sectors when the investment would amount to at least 10% of the Spanish company’s capital or mean that the investor participates in the management of the firm.

In terms of areas for improvement, UK companies in Spain have cited the need for improvements to the judicial system (in terms of speed and predictability of decisions), regulatory burden, and research and development incentives. Political uncertainty at a national and regional level is also cited as an area of concern by UK businesses.

3. Business and 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 4 human rights pillars in Spain’s external action strategy 2021 to 2024 are:

• people
• feminism
• diversity
• human trafficking

In addition to these, the Spanish Ministry of Foreign Affairs states that other priorities are:

• fight against the death penalty (the Secretariat of the International Commission against the Death Penalty has its headquarters in Madrid); non-discrimination on the basis of gender or sexual orientation
• rights of persons with disabilities
• human right to safe drinking water and sanitation
• business and human rights

Spain is also a member of the Media Freedom Coalition and special attention is paid to human rights defenders, for whom there is a temporary shelter programme.

Moreover, in a cross-cutting manner, Spain is currently in the process of joining the Global Media Freedom Coalition and special attention is paid to human rights defenders, for whom there is a temporary shelter programme.

4. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere

For more information see Transparency Index’s Corruption Perception Index.

5. UK export finance (UKEF)

The direct potential of the Spanish market for UKEF services is relatively small. However, like elsewhere in Europe, there is increasing interest from Spanish contractors doing business in third markets to include UKEF in their structured finance arrangements (often with the Spanish export credit agency CESCE), providing an opportunity for British firms to contribute to their international projects.

Such opportunities are focussed in Latin America and the Caribbean (LATAC), where smaller economies like Central America, Guyana or Paraguay attract greater interest and potential for work with export credit agencies, and some African markets too.

The larger contractors have generally scaled back their presence in LATAC due to a perception of increased risk (from financial instability and corruption) and greater competition from Chinese Engineering, Procurement and Construction (EPC) contractors, but medium-sized construction, engineering and industrial firms present a significant opportunity.

Contact the DBT team at British Embassy Madrid for additional information on UKEF and Spanish contractors.

6. Cybersecurity

According to a recent Helsinki Aalto university report, Spain ranks amongst the top European countries in terms of cyber threats and risks awareness and boasts a highly developed and professional cybersecurity sector.

According to official data from the Spanish National Cybersecurity Institute and the CERT responsible for the Spanish business community INCIBE, over 50% of the companies suffered a cyberattack over the last 12 months.

Different parts of government and the public sector like the judiciary, the public health system, the Treasury and a large number of municipalities across the country, were targeted by malicious actors (including a ransomware attack on a large Barcelona hospital). Such activity increased by 89% year-on-year in 2022 and revealed a lack of professionals (in excess of 61,000 jobs on offer at the end of 2022, estimated to grow to 83,000 by 2024).

The main incumbent suppliers of cybersecurity services are Telefónica and Indra. Fujitsu and Gesein are also among the beneficiaries of the €227 million worth of public funds spent in cybersecurity in 2022. British firms, specialising mainly in the banking and financial services sector, are slowly increasing their market share.

7. Terrorism threat

For the latest terrorism update see our travel advice.

8.  Protective security advice

The travel advice also contains the latest protective security advice.

9.  Intellectual property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, you should consider registering your IP rights in your export markets.

For information on registering your trademark in Spain, you should contact:

Office for Harmonisation in the Internal Market
Avenida de Europa
4 03008 Alicante
Spain
Telephone: +34 96 513 9100
Fax: +34 96 513 1344

Email: information@euipo.europa.eu

The European Union Intellectual Property Office

For information on obtaining a patent in Spain, contact the Spanish Patent Office: Oficina Española de Patentes y Marcas

Refer also to the website of the World Intellectual Property Organisation (WIPO), and the Madrid Protocol for the international registration of marks.

Read the information provided on our intellectual property page.

10. Organised crime

As in many other major European countries, international organised criminal activity takes place in parts of Spain, in particular linked to drugs and firearms trafficking and organised immigration crime. There has been government action to tackle these issues and the UK and Spain work closely together in this area.

There have been complaints about scams, often related to lottery prizes and inheritances, in which a person receives what appears to be an official notification from a Spanish government department or lawyer and are required to make advanced payments or deposit sums in a bank account.

Read the information on our organised crime page.

11. Useful links

The Spain Trade and Investment Factsheet (PDF, 653 KB) contains further statistical information on the UK’s commercial relationship with Spain.

12. Contact

Contact the DBT team in Spain for more information and advice on opportunities for doing business in Spain.