Immediate impact January - July 2020

GEM Spain carried out a comprehensive survey of COVID-19 pandemic impact on entrepreneurs during the first six months of the pandemic. Some of the results are highlighted here but the full analysis is accessible online.

“Paralysis” (in 40% of business activity) and “uncertainty” (in 58% of companies) are the adjectives that best summarize the first 50 days since the COVID-19 outbreak in Spain. The main focus of entrepreneurs during this time was to maintain employment and to survive. The COVID-19 outbreak had the following immediate effects on entrepreneurship ecosystems: 47% of companies with fewer than 10 employees expected a very negative impact within the six months of onset of the pandemic; 25% of companies changed their business model and/or cancelled orders to suppliers; 17% reduced prices; 12% had to give up a part of their market; 14% reached agreements with suppliers; 32% froze their investment plans; and 28% requested extra financing.

Almost 50% of companies have continued their work remotely. Also, a high percentage of companies continuing their remote operations have high expectations about launching new products and services (58%) and looking for new customers (57%), while 49% of entrepreneurs believe that there are medium-term business opportunities for companies with sufficient, diversified resources in the midst of this situation.

The economy has been reactivated in phases, by territory. The largest and most populated cities, Madrid and Barcelona, as well as their surrounding areas, have been facing the greatest challenges in controlling the pandemic.

Tourism is the most affected sector in terms of economic activity; regulation and application of stringent guidelines in this sector throughout 2020 is probable. In the meantime, there are pilot programs in tourism: at the beginning of June, the first safe travel corridor was opened with other regions of Europe.

Immediate policy interventions January-July 2020

The most significant step has been the creation of a fund of €16,000 million to combat the effects of the pandemic, non-refundable and paid out by direct unconditional transfer. This represents the largest transfer of resources to Spanish regional governments have ever made outside of the regional government financing system. Transfers will be made in four tranches.

These policy measures have alleviated the pressure startups are facing due to constrained cash flow. Thus far, no long-term measures to support the wider entrepreneurial ecosystem have been taken.

Policymakers have taken the following extra- ordinary first steps: delaying tax collection for entrepreneurs and companies; approval of the collective temporary dismissal of workers; establishment of a guarantee line of €140,000 million; and the renegotiation and postponement of rent payments for business premises.

Future economic / policy outlook

GDP is expected to fall between 9% and 15%. The unemployment rate could reach 20%. By mid-year 2020, long-term plans were not clear.

If appropriate policy steps are not taken, some 43% of companies that have closed temporarily will probably reduce personnel in the year following reopening. Also, 11% of companies in temporary closure expect to change their activities and fully 15% expect to close or transfer the business.

In January 2020, the President of the Government created the first high commissioner in the history of Spain to turn our country into an entrepreneurial nation; a 10-year strategy will be announced this year.