The low investment of companies in equipment is one of the main elements of concern about the evolution of the economy in Spain. The GDP (gross domestic product) is increasing, unemployment is decreasing and there are more members of social security. But if you compare what companies invest in Spain with the average of the last three decades or with other European countries, the trend is unfavorable. Discounting residential investment, businesses are spending less on equipment (machinery, vehicles or other goods) than before the pandemic. And its growth is lower than that of GDP, corporate profits or liquidity.
The governor of the Bank of Spain, Pablo Hernández de Cos, in one of his latest interventions, placed low private investment as one of the main risks of the economy in the medium and long term. Why is it important for business investment to remain dynamic? "Productive investment is what sustains future growth. It is essential to achieve productivity gains", answers Sofía Rodríguez, chief economist of Banco Sabadell. "Investment gives quality in growth", he adds. María Jesús Fernández, senior analyst at Funcas, adds that "if investment remains weak for a long time, it will not improve and the economy will slow down". Miguel Cardoso, chief economist for Spain at BBVA Research, uses the simile of iPhones: "It's not the same to work with the iPhone 1 as with the iPhone 15, even if both serve the same purpose." According to the BBVA economist, investment is a key factor in achieving productivity improvements.
As can be seen in the graphs, in all of them the investment is below the average of other indicators: GDP, business profits or liquidity. Sofía Rodríguez assures that there can be several reasons that explain why less is invested. "We are now in a moment of economic and geopolitical uncertainty that may be holding back investment decisions," he says. The evolution of the war in Ukraine and Gaza raises doubts about the impact on European economies such as the Spanish one. The effects range from a reorientation of public spending to defence, which ends up affecting the economy as a whole, to harm to businesses in supply chains or energy costs, as see with the outbreak of the conflict.
In the case of public investment, the latter acts as a tractor for private activity, as it encourages companies to spend more. And in this parameter the trend is not good, either. Public investment in Spain is close to 2.5% of GDP, below that of the euro zone, excluding housing. Spain is spending more on current spending than investment.
The public sector may also be affecting private investment with the deployment of European Next Generation recovery funds. Some economists claim that there may be companies that, instead of investing with their own resources, may be waiting to finance projects with European funds, which delays the start-up of the aforementioned investments. Miguel Cardoso believes that "the Next Generation funds are not causing the tractor effect that was expected" and adds that "it is possible that there is a certain inefficiency in the deployment of the aid".
María Jesús Fernández believes that the increase in interest rates that makes the borrowing of companies necessary to finance investments more expensive may also be one of the reasons for the relative poor performance. But this is an element that affects all of Europe and, on the other hand, companies in the countries around us are not evolving so badly. Between the last quarter of 2019 and the last quarter of 2024, investment in equipment grew by 3.2% in Europe and fell by 9.5% in Spain. In this same period, GDP growth has been almost identical: 3% in Europe and 2.9% in Spain. "It is worrying that Spain is not growing", says Fernández.
Regulation is another of the elements that can weigh on the minds of entrepreneurs. Some companies such as energy companies claim that temporary taxes in the sector take away investments. Automobile companies have been warning for months that a strict and differential regulation with respect to other territories such as the United States could put at risk investments to comply with decarbonization plans.
Precisely, the statistics show that the investment in transport is the one that is the most below compared to the situation at the end of 2019. While the investment in transport in the fourth quarter of 2023 is 24.2% below, that of " another equipment investment” was 2.9%. Businesses may be delaying purchasing decisions as they wait for new electrical technologies to become more mature. "Fleets are not being renewed because there is still uncertainty about the electric vehicle", according to Miguel Cardoso.
