ANALYSIS: Why aren’t Spanish companies preparing for Brexit?

The Local
The Local - [email protected] • 14 May, 2018 Updated Mon 14 May 2018 17:41 CEST
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How are Spanish companies facing up to the consequencies of Brexit? John Wetherell, professor of Economics at EAE Business School believes they are not.


The Spanish authorities are concerned about the apparent lack of urgency with which Spanish companies are facing up to the consequences of Brexit. 

According to the latest surveys, the fact that the EU’s second economy, its financial centre and second biggest net contributor to the EU budget is leaving is at the bottom of the list of Spanish companies’ priorities at this moment in time.

This has come as a surprise given the close relationship that unites Spain and the UK in terms of citizens living in the other country, trade, tourism and FDI.

There are probably several quite valid reasons for this situation.

The first one would be the difficulty of planning for the unknown. If we consider that often governments pass legislation which has clear implications for businesses and they fail to comply with these new laws until the very last minute or even need a period of grace before their application, it is maybe not so surprising that many businesses have made no preparations for something that has already been delayed by eighteen months and has yet to be defined.


Photo: AFP

And as businesses bide their time, it is becoming clearer that the natural majority of UK citizens that don’t want a hard Brexit – that is the close to half the population that voted Remain plus the part of the people who voted Leave but would prefer to keep different degrees of ties with the continent – are going to have their say in the final shaping of the Brexit deal. 

This will be done through Parliament and will be helped by the fact that the majority of both Houses are favourable to a soft Brexit. The House of Lords has been most active so far, even insisting that the Parliament vote on whether to remain in the Customs Union, but given the very slender Conservative majority in the Commons it is more than likely that the government will have serious difficulties passing the necessary legislation of a hard Brexit through the lower House as well.

Should they be unable to do so and the UK remains in the Customs Union or votes to join the European Economic Area then most businesses will hardly be affected by Brexit at all.

The second reason why companies might not be responding to the vision of the authorities of the importance of preparing for Brexit is that they are made up of citizens and as such share one of the principal characteristics of post-crisis Europeans – a lack of confidence in the elite.

Anti-Brexit demonstrators holding EU flags protest outside the Houses of Parliament in central London on March 29th. Photo: AFP

If there is one thing that Brexit has taught us it is that the experts that represent our institutions always get it wrong. The British government were sure they would win the referendum; the EU thought that nobody would be stupid enough to vote themselves out and the IMF predicted economic doom for the UK if they were to vote leave. 

Now the same experts tell us that if Brexit were to catch us unawares, possible tariff and administrative barriers could have a big impact on trade; a fall in the pound could force many British tourists to holiday outside Spain and the eurozone and FDI flows between the UK and the continent could be seriously disrupted. And this would obviously affect many Spanish companies.

They could, of course, be right this time but who would believe that based on their past track record? Probably not a company that has got other more immediate issues to resolve.

Finally, and maybe most importantly, the reality of the companies is being changed by globalisation. Even if the worst came to the worst and Spanish companies did lose revenues as a result of Brexit, the world is a very different place today than it was in 1986 when Spain joined the EU.

Today it is possible for many companies to sell their products and services in any country in the world. To export to Morocco, Nigeria, India or Kenya is both feasible and profitable. Behind this is the global city – whether it be Casablanca, Lagos, Mumbai or Nairobi, where there are literally millions of urban consumers with similar tastes and very used to satisfying their needs with products from all over the world.

A decline in a particular European market like the UK no longer determines the financial future of many companies. Alternatives exist. And this is ignoring the fact that this network of global cities has its own hierarchy with two cities at the top and one of them happens to be in the UK. Spanish businesses will continue to want to have a presence in London regardless of whether the UK is in the EU or not.

John Wetherell is a professor of Economics at EAE Business School which has campuses in both Madrid and Barcelona.







The Local 2018/05/14 17:41

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