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Updated: 24-07-2014

National and Local Efforts Make Tenerife the Best Business to Buy In

One after another, the Government austerity measures set in place to improve the Spanish economy are bouncing back with positive results, resulting in a mass consensus between 45% of business owners that Spain's economy will be fully recovered within 12 months. This means that Spain is the second-most optimistic large economy in the Eurozone with only Germany in the lead, according to the survey conducted by Grant Thornton.

We wrote about some of these new employment changes, legal alterations, and taxation reforms a few months ago, and explained how they can make buying a business in Tenerife easier and help to restore the economy. Spain is certainly on the mend; in March 9,516 companies were created, 14.1% more than in the same month last year, and economic sectors across the board seem to be also improving as a result.

According to the Director of Infoempleo, Jorge Guelbenzu, Spain has 'finally broken the downwards trend of the past seven years'. We here at Frina Tenerife were always optimistic about all the new changes put in place by the local and central Governments – but have the results in Tenerife been as good as they were in the rest of Spain?


Tourism Puts Tenerife Business on Top


In March alone, 344 new businesses were created in the Canaries, according to the National institute of Statistics (INE); this is a staggering rate of over 11 businesses started every day, and a rise of 7.8% since last 2013. While this rise isn't quite as high as some of the rest of Spain, it does mean that Tenerife can provide an untapped opportunity to begin a new business. It won't be untapped for long, though; compare this March's 344 businesses to last year's 315 business creations, or March 2012's count of 316.

What the Canaries did triumph the rest of Spain in, which in terms of signifying an economic recovery is more important, was the largest drop in business dissolutions. This was a whopping 32.3% less than the same time last year – meaning only 65 businesses actually failed in the whole Canary Islands!

What sets the Canary Islands apart from the rest of Spain is the way the Local Government and Tourist Board have been addressing the problems with the local economies. For years now, the Canary Islands, and particularly Tenerife, have been working towards modifying the local economy's revenue streams away from package holidays to attract a luxury clientele with more spending power. Not only has this effort accelerated our recovery, but it has stabilised our local economy more than other Spanish regions; if we compare those same results with the Balearic Islands (a relatively similar region in terms of revenue), we can see that even though they have a larger increase in business creations, they have 25.4% more business failures than last year, as opposed to our figure of 32.3% less, making the Balearic Islands a far riskier place to invest in.


March 2014
Region Businesses Created Businesses Dissolved
  Number Annual Variation Number Annual Variation
Balearic Islands 335 32.9% 74 25.4%
Canary Islands 344 7.8% 65 -32.3%



National Austerity Measures lead to Massive Business Growth


The numbers are only going to continue to improve thanks to some of the Spanish Government's new austerity measures aimed at battling the large-scale youth unemployment and lack of foreign business investment Spain was under at the start of the year. For instance, some of the social security deductions and bonuses for young Autonomos we mentioned in February's article 'Buying a Tenerife Business in the New Spanish Economy', have provided unique opportunities for people to start a new business.

Thanks to the reforms aimed at promoting foreign business and investment creation such as easier visa applications, almost 41% of the businesses created in March (141 according to ATA) were created by foreigners. Other good examples aimed at increasing youth employment include the possibility of new Autonomos under 30 being able to continue to enjoy unemployment benefits for up to 270 days, provided they do not have employees working for them; and the 'capitalisation' of Paro: the Spanish equivalent to unemployment benefits, which contains a limited amount of funds per person. This means that unemployed people under 30 can receive their entire Paro in one lump sum in order to invest into a new business.

In a survey conducted by INE in March, 49.7% of new business owners stated that the macroeconomic environment was highly important to the creation of their business, with only 15.2% of respondents feeling the macroeconomic effect was small. Considering that at the same time last year 58.9% of respondents felt the macroeconomic environment had a disfavourable impact on their business, this years' results leave no doubt that the Government's austerity measures have been crucial for the recent surge of business creation in Spain.


Employment figures break downward cycle


However, most of these new businesses were not created in order to escape Paro; they are actually thriving and creating new employment opportunities for the rest of the population. Employment offers have risen 4.2% at a rate of 193 people being employed every single day, as opposed to the previous negative trend of the past few years, officially breaking the downwards cycle. People are being kept in employment, too – layoffs have fallen by a massive 57.7%, cementing the idea that the Spanish Economy is truly in recovery. The Secretary of State has celebrated these results, claiming them to reflect the evolution of the labour market in Spain, and announced, 'Finally, employment has recovered.'

In the same report by Adecco, Jorge Guelbenzu, the Director General of Infoempleo, added that 'in the current economic context, training is the key to successfully accessing the labour market'. Luckily, the austerity programme includes measures to combat this within its incentives for companies to hire unemployed young people. One of the measures, 'part-time contracts with a formative link', particularly stipulates the need to combine training with work in order for the business to receive the 75% reduction or 100% contribution in social security.

We can see the effect of these austerity measures, which mainly target under 30's, if we look at the ratio between jobs available and employment offers per age group. In the survey by Adecco, the age group with the best employment statistics are between 25-34, showing that youth incentives, whichever they may be, are working.

The Government plans to keep all bonuses, deductions, and incentives available up until unemployment rates fall below 15%. With national unemployment rates at 25.93% in January, there will still be plenty of time to take advantage of them if you cash in now.

By Emelia Beeson

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