Costa Collapse?

Small businesses are disappearing at a rate of knots across the Costa Blanca. The vast majority are foreign owned and run, although many Spanish businesses are also being affected. But traditionally business here has been handed down through family members along with premises or land, so a support network exists for Spaniards during times of recession. The Spanish character is also used to times of boom and bust, economies are made, some layoffs are seen as inevitable, the financial storm is simply to be weathered.

Foreign businesses on the Costas generally pay higher rents (often subletting premises) and have substantially higher start up costs, especially businesses that import stock from their country of origin. Their client network grows more slowly as they build brand new supplier and customer relationships. If an average business takes two years to turn a profit, foreign business can take twice as long, and have attendant capital loans/charges which may eat into potential profit if the original business plan was over optimistic.
The banking system in Spain is no friend to small business either, although the inflexible nature of Spanish banks has protected them from some of the excessive debts of the current financial downturn. Zapatero could reinvigorate the economy by encouraging banks to offer small business loans at lower interest rates, with longer loan periods in booming sectors of the economy such as computing and internet business, or green energy technologies.

With no social security safety net, many self-employed immigrants to Spain will be returning to their country of origin. The loss of this mini-invasion of entrepreneurs will be to Spain’s detriment, along with the dropping tourist figures, but it will see the Costas returning to a more Spanish flavour of business.