Businesses Flee Catalonia, Foreign Investment Plunges, as Confrontation with Spain Comes to a Boil

Jon Blogosphere, Economy, Government, Market Commentary, Politics

And now that the wrecking ball is in motion…
As the countdown begins to Catalonia’s plebiscite-style elections, scheduled for September 27, cracks are already beginning to show in Spain’s most important economic region (at least pound for pound).
A few days ago, a study by Axesor showed that since the region’s pro-independence premier, Artur Mas, took office in 2011, 3,800 companies have upped sticks and left Catalonia for other regions of Spain. By contrast, just 2,547 companies have relocated from other regions to Catalonia during the same period.
Of the 3,839 companies that abandoned Catalonia, almost half ended up relocating to Madrid. Indeed, during the same period Madrid has seen a net inflow of 1,766 companies while Spain’s third largest city Valencia registered a net influx of 361 companies.
While some of those companies were lured away from Catalonia by the prospect of lower taxes – Catalonia is currently the highest-taxed region of Spain – fears are growing that more and more local companies are voting with their feet against Catalonian independence. These fears were compounded by recent tweaks Rajoy’s government made in Spain’s corporate governance law to make it much easier for the country’s biggest publicly listed companies to move the location of their headquarters.
It’s not just local companies that are getting the jitters. In March of this year Spain’s Ministry of Economy released data showing that in 2014 foreign direct investment in Catalonia plunged 16%, while in Spain as a whole it increased 9.2%. In Catalonia’s neighboring province, Valencia, overseas investment grew by a staggering 300% in the space of just one year.
‘With foreign investment falling in Catalonia by 15% and surging in Valencia by more than 300%, it’s pretty obvious that foreign investors are beginning to have serious doubts about the political and economic future of Catalonia,’ said the president of Catalonia’s Business Association Josep Bou:

This post was published at Wolf Street on August 3, 2015.