Spanish economy might recover by 2022
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Friday, July 17, 2009Do politicians have any idea how long it takes to build a company?
There has been a flurry of small news articles over the last couple of days announcing that new business creation is down by well over 30% pretty much all over Spain in the first six months of 2009. Well, there’s a surprise.
More than 70,000 Spanish estate agents have closed since 2007. Those in the know in the tourism sector say a similar culling is probably on the cards for small Spanish travel agencies.
90,000 small business closed in the first quarter of 2009; 1,000 every day. The unemployment forecast is currently around 5 million, perhaps by the end of this year.
Spain’s economic fabric is woven mainly of small businesses, micro-businesses and the self-employed, precisely those who find it most difficult to keep struggling on in the current circumstances and from where most of the unemployment has come.
I wonder why nobody is thinking about how long it really takes to get all of this business activity up and running again.
The newspapers seem to be full of political predictions of economic recovery in ‘a few months‘, ‘by the first quarter of 2010‘ or ‘in 2011‘. They are definitely smoking something weird.
Have any of them ever tried to create and grow a small company? It’s really, really hard and it takes a long time.
As just one example, one of my clients is a very successful small company here in Murcia. It’s a private medical clinic and has in fact been so successful recently that it would probably now be classified as a medium-sized company.
They employ about 60 people, have built up a sterling reputation for quality and seem to be doing very well indeed, despite circumstances. It probably helps that they are a subsidiary of a larger company based in Valencia.
Do you know how long it took them to build up that reputation, economic strength and those 60 jobs here in Murcia?
156 months. Thirteen years. 4745 days.
Coincidentally, do you know how long it took Spain to go from a record previous high unemployment in 1994 to a record low?
13 years. 13 years with the help of a construction and tourism boom that isn’t coming back anytime soon.
There’s no way this is going to be even remotely over by the first quarter of 2010 or 2011. Maybe by the first quarter of 2022.
Graham Hunt
17/07/2009
Interesting viewpoint but I don't agree. Spain depends on the rest of the World. I also don't agree on the 2010 prediction either. Probably sometime during 2012 as long as the States gets out of its problems first. Where the States go first the rest will follow. If demand from the States increases Spain will be one of the countries to benefit.
Europe will follow America and if Northern European economies recover then Spain will be hanging on the coattails as it is the playground of Northern Europe now.
Expect big things from the renewables sector in Spain which although not labour intensive will help in the R+D area.
However the big changes will only be made if employers and unions thrash out a deal and don't move the goalposts like the employers did last eek after meeting with the PP.
MatthewBennett
17/07/2009
Spain will definitely have to look for other sectors which could add value to the world economy and at the same time really look after tourism. It could definitely offer a lot in the renewable energy sector but that's far too small at the minute to have any noticeable effect on GDP; that will take several years.
2022 might be a bit too much but it's going to take a long time. Even to get all of these destroyed companies from zero back to the stage where they can sustain a small number of jobs is going to take ages given the current state of affairs.
Leon
17/07/2009
Interesting prediction and probably true although it's not based on standard economic measurement ratios, methods and tools… I used to teach at an investment company and my students said if analysts got 50% of their predictions right it was considered a huge success.
Incidentally, I went for a walk today and realised all the businesses in one particular street in central Madrid (near Opera) have closed and are now being rented or sold. Including a very old “pastelería” which had been there for eons.
The only business which had survived was the Chinese grocery store. Food for thought.
MatthewBennett
20/07/2009
I find watching for real-world indicators which confirm trends fascinating although I have no idea if this will really happen of course!
A couple of years before the construction crash, for example (I think it was in November 2006), a friend who works in Murcia's director's institute told me that builders had quietly stopped making orders for more bricks and key construction materials for the following two years.
Then, in January 2007, the photocopying shop where we got all of our photocopying done – and which happened to be the favourite place for lots of architects in Murcia – suddenly appeared to have a lot less work. At the same time, the sales assistant told me that sales of 'for sale' signs had increased ten-fold.
MatthewBennett
20/07/2009
I find watching for real-world indicators which confirm trends fascinating although I have no idea if this will really happen of course!
A couple of years before the construction crash, for example (I think it was in November 2006), a friend who works in Murcia's director's institute told me that builders had quietly stopped making orders for more bricks and key construction materials for the following two years.
Then, in January 2007, the photocopying shop where we got all of our photocopying done – and which happened to be the favourite place for lots of architects in Murcia – suddenly appeared to have a lot less work. At the same time, the sales assistant told me that sales of 'for sale' signs had increased ten-fold.
Gatwick airport Parking
02/11/2009
About 4 years ago I can remember standing on the beach at Fueginrola and counted 42 cranes and said then to a friend, this will all end in tears. The Brits are streaming back to the UK because the euro to the pound has destroyed their pensions. Last year over 1 million Brits stayed away from Spain and now the euro is at parity it will only get worse. In 2007, Brits accounted for 27% of tourism, however, they are now heading for Turkey, Bulgaria and Egypt. I have ran my airport parking business since 1989 and I agree entirely it takes years to establish and it can be gone in a flash. The last 10 years has been a challenge to say the least for tourism 9/11, terrorist attacks in borneo, spain and UK, SARs outbreak, Oil prices, Swine fever, bird flu and now the worst recession I can remember.
Larocadelvalles
02/08/2010
The time necessary to built and make profitable a little or medium company depends basically on the market. If the market are growing at high speed the business are doing the same, for instance: all that real state business that are closing recently had grown up in a very short period of time, making a great profit in that short period of time!
How long have token Google to become a great and profitable business??