Catalonia – independence debacle threatens Spanish ITC recovery

Like many other EU countries Spain has seen a recovery in ITC spending in the last few years. The Figure shows the total spending on IT and Communications offerings by annual spending to the end of each quarter and a market share for the total to the end of June 2017. In total the market grew by 3.4% to reach €83b for the year to the end of June. Telefonica held by far the largest market share (12.8%), relegating Apple to second place with 2.4%. Just as with Brexit and the election of Donald Trump as US president, the attempts by Catalonia to seek independence from the rest of Spain will have ramifications for our industry irrespective of whether or not it achieves its aims. This post is a short summary of ITCandor’s research and some thoughts about the affects of the social and economic changes of this new nationalism.

I told you this sort of thing would affect our industry badly – it was one of my predictions for 2017. In the case of Catalonia and Spain I feel less able to comment on the evolving political and social events than I am with the UK or USA, although I learned a little from visiting Catalonia a couple of months ago when I witnessed a mass independence demo in Barcelona. In terms of economics (and specifically the ITC industry) I notice that telecoms services takes a large percentage of spending (41%) in Spain than in the world (37%) – in general terms this is an indication of an immature IT market. The recovery of the overall market is significantly affected by the growth of telecom services. When looking at the 4 ITC general categories  (see Figure) I notice that software is now larger than hardware spending, that IT Services and software have been growing steadily and that hardware spending has been relatively stagnant.

If we want to split data for the Spanish market down by region, the first step is to look at GDP. The Figure uses DatasMacro’s Figures (quoted in Wikipedia). It shows that Catalonia accounted for 19% of Spanish GDP in 2016 – just ahead of Madrid. I believe however that Catalonia accounts for a greater proportion of the country’s spending on ITC offerings – just look at the vendors’ customer references, Smart City projects in Barcelona, where the vendors’ HQs are, etc. I’m keen to look into this more deeply if I can find a sponsor.

So what’s likely to happen to ITC spending? There are a couple of things which come to mind immediately:

  • Whether or not Catalonia achieves independence, business spending levels will fall due to uncertainty as they have in the UK and USA due to Brexit and Trump’s election.
  • Successful independence will far more troublesome for the EU than Brexit will be.
  • It may also be very challenging for the new country if it can’t remain as part of the EU – it will have to choose a new currency and set up new trade rules with what remains of Spain, the EU and other countries.
  • The rest of Spain will need to rebalance, especially if Catalonia is currently one of its richest regions.

Scotland’s potential independence is somewhat akin to Catalonia’s situation; it had a free vote in 2014 (extended down to 16-year olds and above), but narrowly decided to remain part of the UK. The English were excluded from voting and – to a certain extent – even discussing Scotland’s independence, since the first referendum debate was not broadcast by the BBC in England.

I wish all of Spain the best of luck in achieving a workable solution to Catalonia’s nationalist ambitions. For those of us involved in the ITC industry there will be a disruption in spending to measure and overcome in coming quarters…. and I’ll keep you updated as always.

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