The Director of Trade and Investment for the UK Trade and Investment – Iberia, Mr. Martin Phelan, met with KITE Invest to discuss the Spain – UK economic relations, mutual benefitting sectors relations and examples of companies large and small that are exhibiting the potential that can come from engaging in both markets.

KITE Invest: The Spanish economy is currently on track to re-emerge, as made evident by the positive economic growth over the last three-quarters after a few years of negative growth. Despite the crisis’ negative effect on the perception of Spain, it must be noted that Spain is still the 4th largest economy in the Eurozone – still an economic powerhouse. Taking these points into consideration how does UK Trade and Investment see this recent positive growth and do you anticipate this to affect the relationship between Spain and the UK?

UK Trade and Investment: Spain has a projected 1% growth for this year and 1.7% for 2015. However, in order to understand this new positive growth, I think it is necessary to reflect on some of the elements that have contributed to this re-emergence.

In our discussions with Spanish and British companies in Spain, there is recognition that the crisis has made companies more cost competitive and productive. This suggests that Spanish companies are well placed to grow as the economy improves.

Secondly, the labour market reform carried out on a response to the crisis has made Spain more attractive to foreign investors. The reform has made the labour laws and regulations more flexible than they were pre-crisis, which is certainly an important step forward as far as Spain becoming a more attractive investment location.

Thirdly, the banking sector has also made strides since the onset of the crisis. Spain is seeing a gradual return to lending and is a more resilient sector than before the crisis.

Lastly, Spain’s exports are a remarkable success story, with Spanish companies having quickly internationalized to Latin America, Europe and the Middle East.

All of these factors have made a substantial contribution to Spain’s recovery and provide a good platform for Spain to emerge out of its recession and continue along its growth path. Overall, the main consensus is that Spain has returned to a level of stability and predictability from a mid-crisis point that saw discussions of a bailout as a real possibility.

As Spain emerges it is hard not to note the already existing importance held between the two countries. The importance of Spain to the UK is undeniable. For instance, Spain is the UK’s 8th largest export market with around £14 billions of UK goods & services. Spain is the 6th largest investor in the UK. For instance, Iberdrola, has recently committed major new investment of up to €4bn in renewable energy and transmission.

KITE: In terms of trade and investment between the two countries there are several key sectors, which in particular has UKTI noted for past, current and future strengths?

UKTI: The first sector that already has made great progress and shows even more potential is education. For instance, there are over 100,000 Spaniards that go to the UK for schooling. The UK is the number one destination for Spanish students. Also demand for English language learning and capability remains a huge opportunity for the UK. Especially, as Spain still, unfortunately, falls behind many of its European counterparts in terms of a high English capability level. This is very important for Spain in the field of investment and as far as Spain playing in the international market. A message for the UK companies would definitely be that education and the English still remains a massive opportunity for investments.

In the consumer sector, for example in fashion and food & drink, we have been witnessing some interesting recent developments with companies such as Primark as well as luxury brands opening new stores such as Jaguar Land Rover and Stella McCartney. In terms of statistics, 1.2 billion was traded in commercial property in 2013 with the 4th quarter accounting for 766 million. Over half of the new deals were done in the 4th quarter and retail accounted for 44%, thus giving some indication of the potential. Spain is presenting an opportunity right now with capital values down 50% and prime rentals are down 40%. The message to take away from this is it’s time to take another look at Spain.

In terms of Spanish investment in the UK the first sector is energy and renewable. Spain is properly positioned to exploit this sector and is indeed making their presence known in the UK. The automotive sector also has a great synergy between the two countries, because Spain is the second largest automotive manufacturer in Europe and the UK is the third. While Germany is the number one manufacturer it is a very hard market to enter; therefore, this allows for many crossover opportunities between Spain and the UK.

KITE: Has UKTI seen any new or unexpected markets emerge as a result of the crisis and now edging on from the crisis?

UKTI: One area in particular comes from the opportunity through reform; in the health sector, there have been advancements from not only technology, but also from the liberalization in the market. In health service provision, the growth of companies such as Sanitas, owned by the British company Bupa, and Tunstall, a British company operating in Spain has grown since the middle of the crisis.

In business and financial services, the restructuring of the banking sector in Spain has presented further opportunities for UK companies to enter the market. For instance, Kentox, a small start-up money exchange based in London, launched itself into Spain in 2011 and now has 45 employees in Spain.

KITE: UKTI has pointed out several synergies between the two countries, how does UKTI value the role of communications in terms of trade and investment?

UKTI: UKTI in the global context must factor the changing global landscape of emerging markets and ultimately, ensure that the UK is properly and well positioned within these new markets and regions. However, the markets in Europe and North America are still fundamentally important to the UK in terms of trade and investment. Our role is to properly communicate those opportunities.