The referendum went ahead on 1st October despite being suspended by Spain’s Constitutional Court. The Spanish government tried to stop voting and hundreds of people were hurt in scuffles with police at polling stations. The Catalan authorities claim that just under 90% of voters backed independence – but turnout was only 43%.
However, the issue has an impact outside of politics, with the possibility of independence threatening to cause economic turmoil. Spain has had to slash its growth forecast for 2018, following the unofficial referendum, with Deputy Prime Minister Soraya Sáenz de Santamaría revealing that hotel reservations had plunged by up to 30 per cent as the crisis bit into the nation’s finances.
Speaking after a weekly cabinet meeting, she said, ”The events that we are experiencing in Catalonia make us more prudent. In fact, if there were no quick solution to this issue we should be forced to lower expectations of economic growth for the year 2018.”
The government expects Spain’s economy to grow by just 2.6 per cent next year, with Ms de Santamaría adding that there would be no “quick solution” to the crisis and this forecast would have to be lowered. Experts have warned that the conditions created by the Generalitat could plunge Catalonia into a deep recession. The dramatic financial warning came amid reports Spaniards were boycotting Catalan products, with sales of some items dropping by up to 70 per cent.
The unrest has already had major repercussions in terms of business; dozens of companies have already moved their legal headquarters from Catalonia, further cementing rising concerns that growth in the region could take a hit, and, by extension, to that of Spain as a whole. Banco Sabadell, the country’s fourth largest bank, has already announced it will move out of the region to Alicante over fears for its future. CaixaBank, another large bank has also decided to move its registered office to Mallorca in light of the situation in Catalonia.
With Santander also recently buying the struggling Banco Popular for one Euro, some would question the wisdom of holding too much capital in the Spanish Banking system. For long term savings, expats have the option to hold funds outside of Spain. However, with new ISAs not available to Spanish Residents an International Bond would provide a suitable alternative whilst also providing Tax efficiency.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
One of the most common questions asked of expat financial services firms is what should clients do with their pensions. Some wish to keep all their money in a UK-based pension, some will look to transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS) and others will want to take a tax-free lump sum from their fund. In short, what an individual chooses to do will depend heavily on their personal circumstances together with any advice they receive from their expat financial services professional.
What would you look for when choosing a destination to move to abroad? A sea-side location with warm weather all year round, lots of culture and opportunity for adventure, perhaps? Or a place with a great economy and plenty of career prospects?