Pharmaceuticals and food, an oasis in an industrial sector that is experiencing a "worrying" situation with falls of 16% in 15 years

So far this year, industrial production has fallen by 0.8% compared to 2022, a decline that shows that the sector is not going through its best moment, after having had to face a chain of crises after the pandemic and the subsequent disruption caused by the escalation of energy costs following the Russian invasion of Ukraine. These have been the last things in the wheels of the industry, a strategic sector in which the 2008 crisis already brought an abrupt halt to the point that the production levels of that time currently seem practically unattainable.. The manufacturing of pharmaceutical products, the chemical and food industries constitute an exception in this “complex and worrying” scenario, while other areas such as the automotive industry are immersed in the process of reconversion.

The industry currently represents around 15% of Spain's GDP. According to the latest data available from the National Statistics Institute (INE), the general industrial production index (IPI) rose 0.9% year-on-year in October, a rebound with which the indicator returned to positive territory after accumulating four months in negative. Despite the increase, the production level so far in 2023 is still 0.8% below last year's data. “The industry is closely linked to the evolution of consumption in general, where we are experiencing falls,” explains Carlos Reinoso, spokesperson for the Alliance for the competitiveness of the Spanish industry. At the same time, the sector's turnover has been negative for six months. So far this year it has been reduced by 1% compared to the previous year, according to the INE turnover index.

“If we take a global picture of the industry, I would define the situation as complex and worrying,” says Reinoso.. The scenario worsens even more if the focus is broadened and current production levels are compared with the bonanza prior to the 2008 crisis.. Since then, the IPI – General Industrial Production Index – has been reduced by 16%, although the evolution has not been homogeneous throughout the sector, since the industrial fabric is very varied.. “Not all industrial sectors behave the same, their characteristics are different, depending on whether they are more or less exposed to the evolution of consumption, energy costs, internationalization…”, clarifies the spokesperson for the Alliance.

In fact, in the face of the general contraction of the sector, the production level of the pharmaceutical industry has skyrocketed by 65.69% compared to 2008.. In the last year alone it has grown 9.7%. To a large extent, the progress has come hand in hand with a significant increase in sales abroad, which in 2022 increased by 53%. Medicine is the third most exported product in Spain – only behind cars and fuel –, a country that already has more than one hundred manufacturing plants.. “The pharmaceutical industry has become one of the main drivers of the Spanish economy,” celebrated the general director of Farmaindustria, Juan Yermo, upon learning of the milestone.

Along with the pharmaceutical industry, the chemical and food industries currently exceed the production levels of fifteen years ago by 9.56% and 4.59%, although in the last year their IPI has been reduced by 3.6% and 1.7% respectively. “We are a strategic sector and we need security, fiscal stability, market unity and to match the legislative measures that are adopted at the current time,” said the president of the Spanish Federation of Food and Beverage Industries (FIAB), Ignacio Silva, this Thursday. at the General Assembly of the organization. The food industry is precisely one of the largest in number of workers, it employs 506,400 people, according to data from the Active Population Survey (EPA) for the third quarter, 17.9% of the total 2.82 million employed people working in Spanish industry.

Production drops

However, the general tone of the industrial sector differs from optimism. At the opposite end of the spectrum to pharmaceutical manufacturing, wood industry production has fallen 15% so far this year and clothing manufacturing has fallen 12.3%.. The collapse is significantly more marked if current data is compared to the 2008 IPI. In the last fifteen years, furniture manufacturing has shrunk by 51.35%, while the leather and footwear industry has shrunk by 43.26%, for example.

The concatenation of crises in recent years has not helped to get closer to the production levels prior to the great crisis. “Covid-19 has been followed by post-Covid, which put a strong strain on supply chains; but then the invasion of Ukraine came immediately… the industry has navigated one crisis after another and has managed to manage it even quite successfully, but with quite a few threats and a loss of competitiveness in the long term”, reflects Reinoso, who emphasizes that “one of the big problems that the industry is having is the increase in energy costs, which has not there has been a joint European response” and regrets “lack of ambition” in the measures taken from Spain.

A particular case is that of the automotive sector, one of the strongest industries in Spain.. The Spanish Association of Automobile and Truck Manufacturers (Anfac) predicts that the Spanish market will close 2023 with 950,000 passenger car registrations, 17% more than in 2022. The manufacture of motor vehicles has grown by 12.4% so far of the year, according to INE data, although it is still far from the levels of fifteen years ago. “We are large producers, but the automotive sector is undergoing an important transformation, due to the transition towards electric vehicles and that in some way also paralyzes production,” explains José Antonio Galdón, president of the General Council of Industrial Technical Engineering of Spain. (Cogiti).

“Spain can and should be a great reference in the mobility of the future. If we take advantage of our leadership in renewable energies, we will be able to attract more investments to lead the ecological transition,” said this Thursday the president of Anfac, Wayne Griffiths, who met with the new Minister of Industry, Jordi Hereu, who conveyed to him the Government's will. to launch the third call for PERTE for Electric Vehicles during the first quarter of 2024.

Increase competitiveness

In his first intervention in the control session of Congress, Hereu stressed on Wednesday that promoting the reindustrialization of Spain is a priority for the Government. The sector demands action to improve the competitiveness of the Spanish industry. In the short term, the Alliance spokesperson urges the Executive to extend the support measures in force to reduce the impact of the energy crisis on the industrial sector. “More in the medium term, the new Government must implement a package of measures that boosts the competitiveness of Spanish industry,” he claims, pointing to the possibility of simplifying administrative procedures to encourage investments, for example. “We believe that there are measures that can be approved easily and quickly,” he says.

“A certain protectionism of the European industry is also needed, because if we set standards for quality, safety, etc.. very demanding, we have to defend them, not have to compete with other products that do not meet those standards,” adds the president of Cogiti. “We are not knowing how to take advantage of the energy transition to feed back into industrial production,” he adds, insisting that “if we are working to be energy self-sufficient, we cannot depend on all products coming from outside.

The emergence of covid-19, like so many other crises, revealed the well-known strategic importance of the industrial sector. “In major crises, the most industrialized countries are the ones that have overcome it best and it is worrying that in Spain the industry has been losing weight,” warns Galdón. “It is important that Europe has strategic autonomy,” says Reinoso along the same lines, while recalling the wealth of the industry from an economic point of view.

“The industry not only generates employment, but it generates quality employment, it generates wealth and generates development, it is vital for any economy,” agrees the president of Cogiti. “The industry is more resilient than other sectors when things go wrong,” adds the Alliance spokesperson, who recalls that this sector is also the “engine” of innovation. “We have to be clear that without industry there is no progress,” concludes Galdón.