Spain: End of the affair?

Luis Vidal, the Spanish architect who designed Heathrow Terminal 2, was not surprised by Brexit. He spent the three days running up to polling day in London, criss-crossing the capital in black cabs. “I asked 15 cab drivers how they would vote and all but the last one said they would vote to exit,” he recalls, speaking to Building back at his Madrid studio on a charming tree-lined city centre street. “The last cabbie said: ‘Well of course the others are voting to exit – they want to punish the Conservative government because of [taxi hailing app] Uber!’” His eyebrows shoot up.

“I said to him: ‘That’s not what the poll’s about!’ But that’s just a little example – people were confused.”

Five months on, confusion still reigns. It’s not just the Brits still trying to get their heads around what “Brexit means Brexit” means.

On the Continent, citizens and businesses are attempting to do the same. Spain is no different.

Madrid is a fascinating place to visit to gauge the aftershocks of the Brexit vote from a European perspective and how it has affected the perception of the UK construction sector. Spain is hardly held up as a European economic success story – it was battered by a financial crisis, a euro crisis and a property crash. But it has more than recovered its momentum and is actually forecast to be one of Europe’s fastest growing economies this year. And from a construction perspective, Spain has been strengthening its ties with Britain in recent years. Alongside Luis Vidal Architects, Spanish building giants Ferrovial, Dragados and FCC and consultants including Sener are working in the UK, with a particular focus on major infrastructure programmes like HS2. Meanwhile, British consultants such as Gleeds and Arup and architect Broadway Malyan are big in Spain.

Brexit throws up challenges as well as opportunities for Spanish construction firms. Factors include the sharp drop in the value of sterling relative to the euro, the prospect of companies relocating from the UK to cities like Madrid, and the referendum’s ramifications for freedom of movement in Europe. Vidal’s practice for one has already begun to feel the Brexit effect – he reveals that a major London office scheme his practice was designing for a US-Spanish multinational has been put on hold as the client considers a move to a different European city, while he says Madridistas have picked up that some UK firms have “immediately stopped” hiring architects from the rest of Europe.

So what do the Spanish and those UK companies working in Spain think of Brexit and what do they think its impact on construction professionals both in Spain and the UK is likely to be?

The Spanish view of Brexit

Reaction to Brexit in Madrid ranges from bafflement to dismay. “It was a surprise,” says Belén Marquina, Madrid-based deputy managing director for Ferrovial. “I’m a European and I feel European. I don’t understand why you don’t want to go with us? […] But I respect your decision.”

David Johnson, Gleeds’ Madrid-based regional director for Western Europe, is more frustrated with his fellow Brits back home. He says it has raised anxieties among Brits in Spain about their “nationalities and freedom of movement”, although he has a Spanish wife so he doesn’t think his freedoms should be affected. But he adds: “I’m still really disappointed. I think it’s dreadful for Europe and even worse for the UK. Young people complain that they have been left out in the cold.”

Across all sectors things are looking up. It’s tough to think of a country that was hit for six as hard as Spain – it has so much room to grow

David Johnson, Gleeds

Vidal is an Anglophile. He studied architecture at Greenwich University in London; he travels to the UK often on business and to see friends and he even incorporated vast ribbons of glass into the roof of Heathrow Terminal 2 in an effort to convince travellers that London is sunnier than they may have heard. Asked for his personal views on the Brexit vote, he says: “I was really sad and sorry it happened.” Inspired by his own experience training in London, Vidal says he has helped scores of young Spanish architects land jobs or placements in UK practices down the years and he regrets that this appears to have come to a stop.

Engineer Arup, which has 150 staff in Madrid, is concerned about any potential restrictions to freedom of movement. Mark Chown, Arup’s Spain director, warns: “Freedom of movement is very important to a consultant like us. Mobility is part of our regional strategy. We do a lot of staff exchange and it’s good for staff development. [Any threat to this] is one of the potential negatives of Brexit.” He adds: “By any reckoning [Brexit is] a poor choice by people in the UK. But I’m very confident business will get around any challenges. It might just be slightly hard to do.”

Both Vidal and Johnson believe the UK’s loss could be Madrid’s gain. Johnson says: “There’s a lot of opportunity for the future. Firms will want to move out of the UK and an expensive city like London. They’ll be looking to set up in other parts of Europe.” Vidal agrees: “We feel we’ll get more business in Spain. We have a very good standard of living, great culture, great climate and great food. More companies will want to relocate here.”

On the comeback trail

UK construction firms with business interests in Spain will have to weigh up whether this optimism is enough to overcome uncertainties about operating in the region after the Brexit vote. Spain’s construction sector has been through hell and back over the past 10 years, but there are reasons to be cheerful. After suffering more than any other European country’s construction sector – industry output declined by an average of 6.4% a year in 2005-14 – it returned to growth last year and is forecast to modestly grow by an average of 2.2% a year between now and 2030, according to Global Construction Perspectives. Also, after a 10-month political deadlock including two inconclusive general elections, Spain finally formed a minority government on Saturday under the conservative Popular Party, which is likely further to steady market nerves.

British consultants Gleeds and Broadway Malyan are among those feeling more positive about work in the country. Their Madrid offices experienced terrible lows during the recession, with both cutting almost two-thirds of staff, but both are now employing more people than at their pre-crash peak – 75 in the case of Gleeds and 54 at Broadway Malyan.

Other international studios left the country. But we stayed and we have been rewarded now as there are fewer practices competing in the market

Jorge Ponce, Broadway Malyan

“The fall was dreadful,” Gleeds’ Johnson says of the downturn. “None of the people we let go deserved it. A lot of good people and firms left the industry during that time.” Johnson is relieved the market looks rosier today. Having stayed on in the city, Gleeds celebrated 25 years in the Spanish capital this year. “The mood now is generally pretty good,” Johnson says. “There are a lot of opportunities – across all sectors things are looking up. It’s tough to think of a country that was hit for six as hard as Spain – it has so much room to grow.”

He points to the resurgent retail, hospitality, residential, industrial and offices sectors. One project that illustrates the turnaround is advertising behemoth WPP’s scheme to redevelop a derelict former Telefónica headquarters building in Madrid into a new home for its Spanish ad agencies, which British architect BDG – owned by the advertising giant – is working on.

Jorge Ponce, board director for Spain at Broadway Malyan, can relate to Gleeds’ experience: “[The recession] was a bad moment for everybody and plenty of architectural studios closed down […] Other international studios left the country. But we stayed and we have been rewarded now as there are fewer practices competing in the market. We came out from the crisis with fantastic recognition so now our reputation is very good.”

Many Spanish firms, particularly the country’s builders, moved business overseas en masse during the downturn. While they now see signs of green shoots, however, some are a way off from returning their focus back home. Marquina at Ferrovial, which targeted Latin America, the US, Australia and the UK, says the contractor’s revenue from Madrid is still 90% down on its peak, at €100m compared with €1bn pre-recession. She is not yet telling her Ferrovial colleagues based in the UK to return to Spain. “Now is not the time to come back here,” she says. “I’m very fortunate to work for a big company,” she admits. “In some of the Spanish regions there is still no work, no tenders, even now.” But in Madrid she can see signs of improvement: “It is time to develop slowly, slowly. After a big crisis when you see a small light at the end of the tunnel you feel more positive.”

Future relations

Freedom of movement is very important to a consultant like us. Mobility is part of our regional strategy

Mark Chown, Arup

While the current construction growth projections in the UK and Spain may be very different, it’s clear there are still opportunities in both construction markets, and a willingness from companies from both sides to work together. Simon Manley, British ambassador to Spain, dismisses talk of bad economic consequences from Brexit. He points to multimillion-pound capital investments made by Rolls-Royce in Spain and Spanish train manufacturer CAF back in the UK since the June referendum. He adds: “We’re working hard to maintain investment in the UK. No other country has the same appetite for foreign investment – just look at Hinkley Point C.”

However, Marquina says Ferrovial executives in the lead up to the vote were predicting dire consequences for the UK if it voted for Brexit. She recalls one executive warning staff: “It could be like the pain in Spain. But worse.” Indeed, her UK colleagues’ initial reaction to the vote “was negative, they were very worried”. But she says, cautiously, “things haven’t changed”. She can also see the potential silver linings. “If your island is to be more of an island you’ll need a bigger airport,” she jokes, referring to the prospective expansion of Heathrow.

Marquina’s main concern in the immediate aftermath of the Brexit vote was for her youngest son, 23, who is bilingual and living and working in London as an economist. “He was worried after the vote,” she says. “But when you are young, things are more positive. Now he says he wants to stay in the UK. He’s talking about applying for dual nationality there.” With so much in flux after the referendum, it’s easy to jump to doom-laden conclusions. But perhaps it’s not so inevitable relations between the UK and the Continent will suffer.

Additional reporting by Louise Dransfield