Why Expand in Spain in 2025?

Executive Summary: A Strategic Market for Sustainable International Growth

In 2025, Spain presents a resilient and opportunity-rich environment for international businesses seeking to expand operations in Southern Europe, Latin America, and North Africa. While economic growth has normalized post-COVID, Spain remains ahead of the Eurozone average, thanks to robust domestic consumption, a dynamic tourism sector, EU-funded transformation projects, and a highly internationalized labor pool.

For international executives weighing market entry, acquisition, or regional headquarters relocation, Spain combines macroeconomic stability with sector-specific opportunities and institutional support that align with long-term growth, ESG goals, and global operational efficiency.

Macroeconomic Environment: Stability Amid Regional Uncertainty

Spain’s GDP growth in 2025 is expected to range between 1.5% and 1.8% according to IMF, significantly outpacing the Euro zone average of 0.9% (ECB, S&P Global). While the broader European context remains cautious, Spain’s fundamentals are supported by:

• Strong private consumption and domestic demand
• High absorption of NextGenerationEU funding
• Ongoing labor market reform and digital infrastructure investments
• Controlled inflation and normalized interest rates

Strategic implication: Spain offers more predictable returns for companies needing a stable European foothold during global economic recalibrations.

Strategic Sector Opportunities in 2025

The Spanish economy is evolving toward innovation, sustainability, and digitalization. Priority sectors for foreign investors include:

Renewable Energy

• One of Europe’s leaders in wind and solar power.
• EU-backed investments in green hydrogen, grid modernization, and energy storage.

Technology & Digital Services

• Barcelona and Madrid are fast-growing tech hubs with investments in cybersecurity, fintech, and AI.
• Government incentives for digital startups and R&D centers.

Tourism, Lifestyle & Health

• Rebounding strongly post-COVID with over 94 million tourists in 2024 according to the OECD Tourism Trends and Policies 2024 , supporting demand in hospitality, retail, and luxury.

Advanced Manufacturing & Automotive

• Emerging clusters for electric vehicle production and semiconductor investments.

Key Regions to Watch:

• Madrid: HQ and finance
• Barcelona: Innovation, design, life sciences
• Valencia & Seville: Renewable energy, logistics, manufacturing

Talent & Labor Market: Opportunity with Caveats

Spain has taken meaningful steps to modernize its labor market:

• Overall unemployment fell to 10.6% in late 2024,  it’s lowest since 2008.
• Youth unemployment remains high (26.6% according to the EURopean Employment Services) but continues to decline.
• Many STEM graduates annually with bilingual capabilities in urban centers.

However, businesses must plan for:

• Regional talent disparities, particularly between urban and rural areas.
• Need for upskilling in emerging technologies.
• Labor law compliance, especially for subsidiaries and foreign employers.

ALTIOS Insight: Companies should consider a phased recruitment model using international HR coordination or Employer of Record (EOR) services to mitigate onboarding risks and navigate local regulations.

Legal, Tax, and Regulatory Snapshot

Spain is part of the EU Single Market and Eurozone, which streamlines many regulatory processes. However, foreign investors should be aware of :

• Corporate tax rate (Impuesto de Sociedades) : 25%
• Social security contributions: Significant employer obligations (~30% of gross salary)
• Permanent establishment risks: May arise with local staff or reps before formal incorporation
• Startup incentives: R&D tax credits, grants for innovation, and green investments

Tip: Consult a local legal advisor or market entry partner early to avoid compliance risks during pre-incorporation activity or indirect market presence.

Access to EU & Global Markets

Spain’s geographic and logistical positioning provides a strategic platform for:

• Export to Latin America and North Africa
• EU-wide distribution via top-tier ports (e.g., Valencia, Algeciras) and freight corridors
• Strong air and high-speed rail networks for corporate mobility

Stat: According to ICEX Invest in Spain, 74% of foreign companies in Spain export to third markets, with 92% projecting stable or increasing export volumes in 2025.

Government Support and EU Funds

Spain is one of the top recipients of NextGenerationEU funds (€140B through 2026), driving significant public-private investment in:

• Sustainable mobility
• Digital transformation
• Circular economy
• R&D and industrial innovation

Support mechanisms include:

• Subsidies for low-carbon production and facility upgrades
• Startup grants and accelerator programs
• Regional tax incentives for job creation and infrastructure development

Note: The IMF cautions that under-utilization of these funds could limit Spain’s long-term transformation. It’s essential to monitor regional execution before committing to capex-intensive projects.

Responsible Internationalization: Spain & the CSRD

With the enforcement of the Corporate Sustainability Reporting Directive (CSRD), companies operating in Spain must align their internationalization with ESG compliance:

• Mandatory sustainability disclosures (for companies with >250 employees or €40M turnover)
• Carbon footprint tracking and due diligence on supply chain partners
• Implications for site selection, energy use, and labor practices

ALTIOS Advisory: Spain offers a supportive framework for companies implementing low-carbon internationalization plans, especially in sectors like manufacturing, logistics, and tech.

Risk Factors and Mitigation Strategies

Spain’s business climate in 2025 is relatively stable, but not without structural and external risks. A well-informed expansion strategy requires understanding these potential headwinds and planning accordingly.

Political & Administrative Risks

• Government Instability: In an article published in December 2024, Financial Times+1Reuters+1 shares that Prime Minister Pedro Sánchez’s minority government relies on precarious alliances, notably with the Catalan separatist party Junts per Catalunya, which has threatened to withdraw its support, potentially destabilizing governance.
• Autonomous Regions: Spain’s 17 autonomous communities possess significant legislative powers, leading to regulatory variations across regions. For instance, Catalonia has its own Statute of Autonomy, granting it exclusive jurisdiction in areas like culture, education, and health, which can result in inconsistencies for businesses operating nationwide.

Mitigation: Maintain local legal counsel and work with advisors who understand both national and regional frameworks. Engage early with regional investment agencies (for example, ACCIÓ, Madrid Invest).

Execution Risk on EU-Funded Projects

• Underutilization of NextGenerationEU Funds: While Spain has secured over €140 billion in funding, execution at the regional level remains uneven, potentially delaying infrastructure and digital projects.

Mitigation: Monitor fund deployment status by region and adjust timelines accordingly. For capital-intensive projects, seek co-financing with public-private partnerships.

Labor & Talent Risk

• Youth Unemployment Still High: As of November 2024, according to Tarding Economics, Spain’s youth unemployment rate stood at 26.6%, indicating potential mismatches between education and employer needs.
• Regional Talent Gaps: Technical talent is concentrated in major cities, while rural regions may present hiring challenges.

Mitigation: Consider using Employer of Record (EOR) services to test labor markets before full incorporation. Offer upskilling or internal training aligned with local university partnerships.

Regulatory & ESG Risk

• New ESG Reporting Rules: The EU’s Corporate Sustainability Reporting Directive (CSRD), effective from January 2024, mandates that companies report on their environmental, social, and governance (ESG) impacts. This includes detailed disclosures on greenhouse gas emissions across the entire value chain.
• Carbon Reporting Requirements: Royal Decree 214/2025 introduces more rigorous carbon footprint measurement obligations in Spain, aligning with broader EU sustainability goals.

Mitigation: Build ESG compliance into your internationalization roadmap from the start. Use Spain’s alignment with EU policy as a testbed for broader European sustainability compliance.

External & Geopolitical Risks

• Geo-Economic Fragmentation: Ongoing geopolitical tensions between the EU, China, and the US could affect trade flows and supply chain reliability.
• Trade Dependency: According to a recent Reuters study, Spain’s economy remains heavily reliant on tourism, which accounted for a record 94 million visitors in 2024. This dependency makes the economy vulnerable to global shocks affecting travel and consumer behavior.

Mitigation: Use Spain as a diversification base rather than a single-market bet. Structure regional operations to serve both mature EU economies and high-growth regions like North Africa or Latin America.

Key Takeaway

Spain remains a stable and well-regulated market in the European context, but foreign investors must prepare for regional policy differences, EU execution lags, and rising ESG obligations. With the right partners and entry model, these risks can be managed without compromising speed or impact.

Modes of Market Entry: Tailored to Your Strategy

Based on your industry and strategic goals, consider the following entry approaches:

Mode	Best For	ALTIOS Note
Direct Subsidiary	Mid-to-large firms requiring full control	Setup time: 2–3 months. Requires local director and bank account.
Strategic Partnership	Firms testing the market	Partner screening & Go/No-Go phases recommended.
M&A	Fast entry with existing market share	Due diligence and deal structuring typically take 4–6 months.
Export via Distributor	First movers with low initial risk tolerance	Assess exclusivity and control terms carefully.

Strategic Recommendations

To successfully enter and scale in Spain in 2025, we recommend:

• Prioritize resilient sectors such as green energy, advanced manufacturing, and tech services.
• Select entry modes based on your internal capabilities and risk tolerance.
• Use Spain as a regional platform for Southern Europe, Latin America, and North Africa.
• Integrate ESG into expansion plans to stay ahead of European regulations.
• Engage local experts to navigate labor, tax, legal, and operational complexities.

Conclusion

Spain in 2025 is not a high-growth outlier, but it is one of the most balanced, stable, and strategically located markets in the EU. For international companies looking to diversify risk, consolidate EU operations, or lead in sustainable innovation, it offers a compelling mix of infrastructure, talent, and institutional support.

Spain is not just open for business; it’s evolving for the future. The time to assess, engage, and execute your market entry is now!