Reindustrialization in Spain There has been a slight improvement in the industrial sector in Spain: • Industrial production in January

increased 0.4% year-on-year (adjusted for seasonal effects and calendar), mainly thanks to the energy sector (+3.9%) and capital goods production (+1.1%) (Index of Industrial Production, INE).

• Investment in capital goods increased 10.3% year-on-year in the 4Q of 2014, reflecting a rise in confidence in the Spanish economy by Spanish and foreign businessmen.

• The Purchasing Managers Index (PMI) dropped to 54.2 (54.7 for January), but continues to be above 50, thus reflecting growth of the industrial sector. There has been an increase in new orders, the largest since the crisis began.

• In 2014 industry recovered part of its share of the labour market, increasing from 13.6% of the total employment in 2013 to 13.9% (Labour Force Survey, INE).

• In addition, of the 96,909 new members of the Social Security system between January and February, 15,097 of them were in manufacturing. It was this sector –together with construction (+26,068) and education (+16,203)– that increased the most. In this same period, half of the reduction of the number of unemployed people was in industry (-6,535).

• In January the prices of industrial exports dropped a year-on-year average of 0.50% (INE), which helps make the Spanish economy more competitive.

Shadow economy A recent survey about shadow economy in the European Union1 reveals a decline in its average effect on GDP (without taking into account illegal activities) from 22.6% in 2003 to 18.6% in 2014. In the case of Spain, it has been reduced from 22.2% to 18.5%.

In 2014, the countries with the smallest percentage of shadow economy on GDP (below 10%) were Switzerland, (6.9%), Austria (7.8%), Luxembourg (8.1%), the Netherlands (9.2%) and Great Britain (9.6%). On the other extreme are economies like Bulgaria (31%), Romania (28,1%) and Croatia (28%).

The case of the Eurozone…

1 Friedrich Schneider, Konrad Raczkowski, Bodgan Mróz (2015), “Shadow economy and tax evasion in the EU”, Journal of Money Laundering Control, Vol.18 Iss 1 pp. 34-51.

According to this report, the factors that most favor the size and presence of this shadow economy are:

• Unemployment and self-employment.

• Tax morale.

• The growth of GDP.

27.127.1

25.724.7

2423.523.3

20.818.718.5

16.114.6

13.312.9

11.810.8

9.28.17.8

0 10 20 30

LithuaniaEstoniaCyprusLatviaMalta

SloveniaGreece

ItalyPortugal

SpainBelgiumSlovakia

GermanyFinlandIrelandFrance

NetherlandsLuxembourg

Austria

Shadow economy Eurozone, 2014% GDP

Source: Emerald Insight, 2015

Así está…

March 2015

The company

1 www.circulodeempresarios.org

Commercial companies (INE) In January 8,229 commercial companies were created (-8.2% vs. January 2014), mainly in the commerce (22.8%) and construction sectors (15.2%).

The total capital subscribed increased 10.3% (to 586 million euros) and the average capital rose 20.2% (71,291 euros).

The number of companies that were dissolved rose to 2,882, some 12.3% less than in January 2014: 22.5% of them were in the commercial sector and 19% in construction. Of these firms, 78.8% were dissolved

voluntarily and 7.6% were lost through mergers.

By Autonomous Regions…

Entrepreneur permanent contract The last Randstad report regarding the entrepreneur permanent support contract reveals a year-on-year average increase until February 2015 of 17% (98,755) (SEPE, Public Civil Servants Service), reaching more than 272,000 in absolute terms since its creation in 2012.

The profile of the workers:

• 57% are men.

• 38% are aged between 30 and 45; 37% are less than 30 years old, and 25% are older than 45 years.

Ranked by Autonomous Regions, more than 50% were signed in Madrid (28.1%)

and Catalonia (22.01%), followed by Valencia (7.1%), the Canary Islands (6.5%) and Andalusia (5.8%).

Alternative sources of financing In Spain, variable-yield security –an alternative to bank financing– is less well developed than in other countries, in both stock-market capitalization and in the number

of participating companies (The money in 2033:

How we can finance and how we can save, PWC 2015).

In general, the big Spanish companies are well represented and have a bigger average capitalization than those in the rest of Europe; the SMEs are the firms that use this type of financing the least.

In general, these small firms have an insufficient level of international activity, are not very transparent, and are ignorant of the stock market processes, which prevents them from being traded publicly.

-1000 -500 0 500 1000 1500 2000

MadridCataloniaAndalusiaValencia

GaliciaCanary IslandsBalearic Isands

MurciaCastilla Leon

Castilla La ManchaBasque Country

AragonAsturias

ExtremaduraCantabria

NavarraLa Rioja

Commercial companies created and dissolved, January 2015 Dissolved Created

Source: INE

76,47859,942

19,40417,758

15,65014,435

12,78310,778

9,2346,7646,4785,5605,361

3,4413,1002,8351,575

0,000 20,000 40,000 60,000 80,000

MadridCataloniaValencia

Canary IslandsAndalusia

GaliciaCastilla Leon

Basque CountryAragon

Castilla La ManchaBalearic Islands

MurciaAsturias

ExtremaduraCantabria

NavarraLa Rioja

Entrepreneur permanent contract 2012-January 2015Total: 272,156

Source: Randstad

143

153

272

363

720

755

1.05

2

2.17

9

2.37

1

2.63

7

3.41

9

Mex

ica

n Ex

cha

nge

BME

Spa

nish

ex

cha

nge

SIX

Swiss

Ex

cha

nge

BM&

FBO

VES

PA

Deu

tsch

e Bö

rse

NA

SDA

Q N

ord

ic

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ang

e

Euro

next

Lond

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NYS

E Eu

rone

xt

(US)

NA

SDA

Q O

MX

Jap

an

Exch

ang

e G

roup

-To

kyo

Companies in international markets

Source: PWC

Así está… The company a publication of the Círculo de Empresarios produced by its Department of the Economy, contains information and opinion from reliable sources. However the Círculo de Empresarios does not guarantee its accuracy and does not take responsibility for any errors or omissions. This document is merely informative. As a result, the Círculo de Empresarios is not responsible for any uses that may be made of the publication. The opinions and estimates of the Department can be modified without any warning.

2 www.circulodeempresarios.org