Pressures on Spanish Small Businesses Set to Ease, Says Advoco Partner

After a dreadful year for many British-owned small businesses in Spain, 2010 promises at
least some improvement as the main pressures of the recession ease, according to Costa
del Sol-based accountant James Baker.

“Recessionary effects have been particularly severe for Spanish small businesses owned
by Brits and other foreigners. On top of the general fall in demand that businesses
worldwide have suffered, my clients have been grappling with some extra economic
problems”. Mr Baker pinpointed four main factors making this recession especially
painful for his client-base in Southern Spain:

- the fall in value of the pound against the Euro which has reduced the spending
power of many customers, whether visitors from the UK or those that live on a
fixed income from Britain
- the over-reliance on the property sector which has crashed spectacularly in Spain.
Many small businesses have been caught in the fallout even if they are not
directly affected in the same way as builders and estate agents
- problems in the mortgage market. Rising numbers of defaults and repossessions
have seen many Brits forced to pack up and head home taking their custom with
them. Those that remain are often struggling under the burden of commitments
they took on during the boom but can no longer easily afford.
- Many Brits here are not “in the system” and have earned their living informally
meaning that now they are not entitled to benefits or other state support to cushion
the blow of unemployment.

Speaking from his office near Estepona, the UK-trained chartered accountant pointed to
tentative signs of a partial improvement in the outlook for 2010. “I don’t want to be seen
as a cheerleader for a recovery that will more than likely be weak and constrained”, said
Mr Baker, “but there are cautious grounds for optimism that at least conditions will ease”.
New client enquiries for his Advoco law and accountancy practice showed some
promising trends emerging in the final quarter of 2009:

- demand for property conveyancing services increased suggesting that transaction

levels were rising in the sector even if prices were not
- new business proposals received in areas like business hospitality and internet
retailing
- new enquiries from UK residents looking to become tax resident in Spain
suggesting that the flow of people between the two countries was tipping back
towards Spain

“I don’t have a crystal ball but I am quietly confident that 2010 will be the year that sees
a partial recovery for the British business community in Spain. I am not wildly optimistic
about a rapid rebound in property prices or the wider Spanish economy [unemployment is
nearly 4 million], but some indicators can hardly fail to look better next year. Mortgage
rates reset once a year in Spain and this meant until recently many people were suffering
with high rates hanging over from 2008. This will no longer be the case. Also some of
the other effects of the property crash like lower rents and discounted property prices will
start to have a positive impact as more people are encouraged to move and settle here.”
Asked about clouds on the horizon, Mr Baker concluded saying “the missing piece in the
jigsaw is a partial recovery in sterling and I am not holding my breath waiting for that.
Also we continue to receive a lot of calls from people struggling with their mortgages so
there is clearly still plenty of pain being felt out there.” To assist businesses still
struggling to attract enough custom, Advoco suggests a review of marketing strategy and
has published a guide accordingly:

http://www.advoco.es/home/22-latest/32-30-or-so-ways-to-market-a-business-in-
spain.html

Background

James Baker’s blogpost

http://spanishinsight.blogspot.com/2009/11/green-shoots-in-spanish-property-
market.html

Advoco small business page

http://www.advoco.es/home/22-latest/31-starting-a-business-in-spain.html

About Advoco

Senior partners

Manuel Garcia Pedregosa is a qualified lawyer and accountant and member of the
Granada Colegio de Abogados. He has 23 years experience in private practice
specialising in small and medium sized businesses and property law. He is partner in
overall charge of the legal and tax departments of ADVOCO.

James Baker is a Chartered Accountant who qualified in London in 1990. He moved to

Spain in 2002 and is now registered as an accountant in Spain. He is in overall charge of
ADVOCO’s client service, administrative services and services for small business.