The Interpreneur survey: Understanding mid-market business trends in Spain

Spain recently experienced a significant surge in foreign investment, with an 8.1% increase in gross foreign investment in 2023. Notably, non-holding investments soared by 20.3%, reaching €9.912 billion, a remarkable 50.8% above the five-year average. This growth highlights Spain’s strong appeal to international businesses, particularly from the USA, UK, and Germany. In 2022, gross foreign investment exceeded €34.178 billion, the second-highest since 1993. Alongside this record FDI, exports also reached a historic high of €319.86 billion.

To understand how this landscape is affecting mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.

We have analysed the Spanish data to better understand what drives Spanish business owners when expanding abroad.

Global business trends: Do Spanish business leaders believe more business will expand overseas in the next 12 months?

Overseas business expansion is widely expected to increase by Spanish business leaders

At 89%, Spain is one of the most optimistic countries in the world that global expansion is on the rise, scoring significantly higher than other European neighbours in the survey. Highest were Nigeria and South Africa, scoring 98%.

This report offers valuable, important insight into the factors that have an influence when medium-sized companies decide to expand internationally. Perhaps the most significant finding of the study is the mindset of the medium-sized Spanish businesses consulted in terms of the various options available to finance their international expansion. The fact that financing alternatives like private capital and capital markets are front-of-mind versus traditional financing reveals a change of mentality, greater financial education and a more mature business landscape. The study also shows that business leaders see the complexity of tax regulations in different markets as a significant obstacle to global expansion.

Elena Ramírez Marín
Manager at Kreston Iberaudit
Member of Kreston Global Board

Which markets do Spanish businesses prefer to expand into?

Western Europe number one choice for Spanish interpreneurs when expanding businesses globally

A notable 57% of respondents identify Western Europe as their top choice for business expansion, mirroring a global sentiment where 52% are eyeing this region. Additionally, 36% show a preference for Eastern Europe, underscoring Spain’s strong inclination towards European expansion over more distant regions.

What makes a country more attractive to Spanish businesses looking to expand globally?

Geographic proximity primary attractor for Spanish interpreneurs

Spanish respondents valued geographic proximity the most (35%), contrasting with the global average, where this factor was ranked second to last in importance. This preference is reflected in their inclination to expand into neighbouring European countries rather than more distant global markets. Only the US scored higher at 38%.

Government support was considered the least important factor, mirroring the perspective of their global peers. Spanish entrepreneurs might rank government support as the least attractive factor for international expansion due to perceptions of bureaucratic inefficiencies, past negative experiences, and a preference for self-reliance.

What motivates Spanish interpreneurs to expand internationally?

Spanish businesses continue to see profitability in international expansion, with 48% of respondents identifying increased sales and revenue as one of the greatest benefits. Other significant advantages include enhanced brand awareness and reputation (37%), increased profitability (36%), and stronger strategic positioning and competitive advantage (34%).

The study shows that for medium-sized companies, expanding internationally poses a range of challenges. What we have observed at Kreston Iberaudit is that the internal infrastructure and resources of these companies tends not to be sufficiently robust to undertake a review of foreign market subsidiaries or to perform an initial introspective analysis, for example, with a possible partner in the target market. Auditors are playing an increasingly crucial role to ensure companies have the peace of mind that the financial aspect is covered, and are able to focus more on the logistics and commercial components, which also represent substantial challenges in the international expansion process.

Mercè Martí Queralt
Chief Executive and Chairwoman
Kreston Iberaudit

What are the biggest international expansion challenges in 2024 according to Spanish interpreneurs?

Adapting logistics and supply chain issues a challenge to doing business internationally, say Spanish CEOs

38% of Spanish respondents said that one of the biggest challenges faced by businesses during international expansion was adapting logistics and supply chain issues (e.g. managing international shipping, distribution, and communication), underscoring why neighbouring European countries may be more favourable for their expansion efforts.

Risk: What do Spain CEOs think are the biggest risks to global business expansion in 2024?

How much of a risk do the following pose to your business’s international expansion or planned international expansion?

Recession number one risk to global business say Spanish business leaders

46% of respondents felt economic slowdown or recession poses a disruptive or significant risk to their business’s international expansion or planned expansion.

45% felt that escalating geopolitical tensions and instability pose a disruptive or significant risk and an additional 42% felt this risk from financial market and foreign exchange volatility.

Spanish business leaders are the least concerned with environmental disruption and extreme weather, perhaps because Spain, compared to some other European countries, experiences fewer extreme weather events, leading to less immediate pressure to factor them into their expansion strategies.

Private Equity vs Venture Capital: Which is the preferred international expansion funding source for Spanish businesses?

Private investors offering Spanish businesses a quicker and more flexible way to fund international expansion.

Like the case with other rapidly expanding emerging economies we examined, private investors provide young and burgeoning enterprises with a versatile means of achieving rapid growth.

Understanding global tax: Is the C-suite ready for a global tax threshold?

Spanish CEOs confident in understanding global rules

With 96% confidence in understanding global tax rules but a perceived significant challenge in adapting logistics and supply chain issues, Spanish business owners should prioritise seeking expert guidance and strategic partnerships to navigate logistical challenges effectively while capitalising on their grasp of global tax regulations.

The growing importance of ESG for Spanish investors and interpreneurs

Spanish interpreneurs not prioritising but do value ESG when expanding internationally

The majority (88%) consider ESG practices when evaluating countries or regions for expansion, with only 14% ranking it as a top priority. However, 41% indicated that it wouldn’t be their top priority, and 33% would consider it only if it didn’t conflict with other objectives. This represents one of the lowest consideration rates, alongside Japan (19%) and France (15%). In contrast, China stands out, with 64% of respondents ranking ESG as a top priority.

The benefits of AI in international business operations

Spain businesses confident about the use of AI in global operations

82% of Spanish respondents agreed that they were prepared to harness the benefits of AI in global business operations within the next two years. However, a small group comprising 4% disagreed, which represents a slight difference of 1% from the global average of respondent opinions.