BE-EIB conference in Madrid: Investment and Investment Finance – the Spanish case

As part of a series of events organised to debate current trends in investment in different EU Member States, the European Investment Bank (EIB) and Banco de España hosted a conference entitled “Investment and Investment Finance: the Spanish case” today in Madrid.

Governor of Banco de España Luis M. Linde and EIB Vice President Román Escolano opened the event that also involved the participation of economists, policymakers and representatives from financial institutions and the business community.

At the event, a representative from the EIB presented the results of the annual EIB Investment Survey (EIBIS) which, together with the EIB annual report on “Investment and Investment Finance in Europe”, provides an overview of the cyclical and structural dynamics behind investment and investment financing in Europe, thereby facilitating an in-depth understanding of the investment situation in each EU economy.

The last EIB annual report on “Investment and Investment Finance in Europe” offered a detailed analysis of the slow investment recovery in the EU and discovered that public infrastructure investment is significantly below long-term trends, as government gross fixed capital formation has been negatively affected by the fiscal consolidation policies implemented in several Member States. Understanding the reasons behind the tepid recovery in investment is key to defining appropriate intervention policies.

In this context, in 2016 the EIB launched the EIBIS, a new initiative that surveys 12 500 firms with at least five employees from all the EU Member States. The questions are the same for all the companies and relate to firm characteristics and performance, past investment activities and future plans, sources of finance, and challenges that businesses face.

Overall, the survey results provide interesting information not available through quantity-based statistics (so-called hard data), such as details on investment plans, perceived gaps, the quality of the capital stock, the nature of the investment, financing conditions and the issues impeding investment. The results of the 2017 round of the EIBIS will be analysed in more detail in the 2017 EIB annual report on “Investment and Investment Finance in Europe”. In general terms, the report indicates that the corporate sector is driving the recovery in investment, identifies gaps in terms of the “quality” of the capital stock and suggests a need for more policies focusing on the diffusion and adoption of new technologies and innovation.        

Spain through the lens of the EIBIS

In Spain, the survey covers 515 corporations and its second round broadly confirms the results of the first one: access to external financing is not a major concern overall for Spanish corporates. Indeed, years after the crisis, financial constraints may no longer be the most limiting factor. Compared to other EU countries, Spain stands at the median point of the distribution.

The 2017 EIBIS report identifies that uncertainty appears to be the main issue impeding investment growth in the long-term in Spain, followed by regulation (business and labour), and energy costs. The conclusions of the survey indicate that the negative impact of uncertainty has receded somewhat and, more generally, most of the factors hampering investment in Spain have declined in intensity. The results of the research in Spain suggest a need to foster investment, especially in the infrastructure sector, with the aim of replacing production capacities. They also show that public investment in energy and ICT infrastructure is seen as a priority by Spanish corporates, more so than in most other EU economies

The survey also illustrates that the quality of the capital stock is perceived as relatively high in Spain. However, intangible investment is lower in Spain than in the EU on average, especially investments in training. More intangible investment may therefore be required at a time when the economy is becoming increasingly knowledge-based. At the same time, the 2017 EIBIS report indicates that Spanish corporates are also making substantial investments in at the frontier processes and products.

During his opening remarks, EIB Vice President Román Escolano emphasised “the positive impact of EIB activity on the Spanish economy, contributing to a sustainable recovery by fostering investments, competitiveness and job creation. Since the EIB started its activity in Spain the EU bank has contributed to financing not only relevant infrastructure but also SME projects, facilitating access to credit with favourable conditions. I am confident that this EIB survey will contribute to providing very valuable and useful information to continue our contribution to supporting the Spanish economy.”