IRC Recruitment - Spain

Ricardo Barckhahn Ureta, Managing Director,  SKP Search Key People: We could say that we are entering into what resembles the film “Perfect Storm” For those that we can remember prior economic crisis, we have never gone thru a tougher one, in which all negative factors are present and at the same time.
1. Oil prices. Spain depends totally on imported oil & gas, thus every US$ increase on price affects directly all transport, electricity generation, manufacturing and agriculture. As a consequence, price increases on consumer goods and specially on basic food articles, are pushing inflation up and we may get pretty soon to rates of +6%. This is affecting salaries and pensions, exports and tourism, which are linked to inflation.
2. Housing. Construction companies building residential houses at an average of 700.000 new houses per year in the last seven years are now seeing that there is no demand, thus prices are going down and a 30% drop on prices is not a hypothetical scenario.  This is affecting already most of the construction companies that can not afford repayment of bank loans.
3. Banking. Most of the banks have significant risk exposure on bad debtors with their construction clients, which will affect directly their cash resources and bottom P&L results. And with the Euribor interest rate going up from 2 to 6% in the last five years, families can not afford to pay their mortgages, thus more bad debtors.
As a consequence of not recovering loans, banks have severely restricted financing companies’ working capital, thus unpaid bills inter-companies have increased. More companies applying for bankruptcy.
4. Unemployment. We are approaching 12% and do not show any signs of stopping there. Most of the mortgages are based on two-salaries per household and when one disappears, priority of first covering food remains and payments to the banks come to an end. With all the houses being embargoed, banks are becoming the largest real estate organizations.
5. Political instability. Spain is now divided into 17 independent and auto-administrated autonomies, which have being transferred competences and budgets-taxes. Thus they are now focused on solving their local affairs and the central government is left with no clout and no resources for handling nation-wide key economic aspects.
Executive search is directly linked with companies’ investments and development, in minor proportion with reorganizations. Thus we are having less local business and fortunately, we are increasing international assignments for our clients looking for international markets.