British business expatriates risk too much in Spain (1/23/2008)

A sizeable number of British expatriate entrepreneurs in Spain end up losing their money and their homes due to lack of adequate preparation, a new study has found.

While many thousands are tempted to pack up everything in the UK and leave for the better climate in Spain, the risks and impact of failure are significant, according to two researchers from the University of Portsmouth Business School.

Laura Wilson-Edwardes and Dr Andreas Hoecht researched the risk attitudes and strategies of British and German expatriate entrepreneurs in Spain. They found that a sizeable proportion of British expatriates are not sufficiently prepared, sometimes lacking even basic language skills. New British entrepreneurs to Spain seem not to be sufficiently aware that Spanish employment laws and business regulations are quite different to the UK, often wrongly believing that there is standardisation across the European Union.

Laura Wilson-Edwardes said: "We quickly found British entrepreneurs who had lost everything on failed business ventures. In one of the worst cases we found, a family was reduced to living in a rented caravan too embarrassed to admit their situation to their family back home. In this case, an entire family, including children who should have been in school, were scratching a living as cleaners.

"The parents had owned a hotel in the UK, but had sold up this profitable livelihood to live the Spanish dream. Sadly, we found this was not an isolated example of just how badly things can go wrong."

Researchers also found that fraud is common within British and German expatriate communities in Spain and most victims are new arrivals who make easy targets for their fellow nationals. Conmen seem quick to befriend and defraud vulnerable would-be entrepreneurs with bogus business opportunities. Those arriving in Spain cash-rich from the sale of their homes in the UK should be particularly alert to this possibility, the researchers said.

Bars and restaurants can be sold to unsuspecting would-be entrepreneurs who fail to spot that the accounts are false. Faking customers - paying people to eat, drink and make venues look busy when being shown to prospective buyers - was also reported as a common trick. The researchers concluded that entrepreneurs abroad are in danger of placing too much trust too quickly in strangers just because they come from the same country.

Most of the interviewees were more than happy to talk to the researchers about their experiences.

Laura Wilson-Edwardes said: "In almost all of our interviews with British nationals people just wanted to talk and talk about the business mistakes they had made. As a researcher, I was surprised to find myself acting like a counsellor in some situations, providing a rare opportunity for these failed or failing entrepreneurs to tell their sad stories."

The study found two types of entrepreneurs are the most likely to succeed when setting up a new business: The "professional prepared" and the "artisans". The reason they tend to do well is they have sufficient assets to tide over their business for the first two to three years, they are pursuing a line of business where they have experience and they make good use of business networks.

It is also important to "do your homework", including learning Spanish and understanding local laws and regulations.

The researchers found that the German nationals are likely to be more afraid of failure in their business ventures, while British expatriates appear to have a more relaxed attitude to this risk.

British entrepreneurs appear to have a larger cash buffer, usually from selling their family home in the UK. While this explains a reluctance of Germans to become entrepreneurs at home and abroad, it may also go some way in explaining the high failure rate among British expatriates in Spain.

Germans tend to not arrive in Spain armed with cash but to be seeking work abroad because of a lack of business and employment opportunities at home. Germans are almost forced to be more careful and more risk averse in their business decisions because they tend to have less money to cushion any mistakes.

The study suggests some policy recommendations for both the UK and the German governments. For the UK, the researchers suggest that the government should consider placing more emphasis in entrepreneurship education on understanding and calculating business risks.

The research was funded by the Anglo-German Foundation for Study of Industrial Society based in Berlin and London.

Note: This story has been adapted from a news release issued by the University of Portsmouth

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