How is the recession affecting Tenerife?

As Spain’s unemployment figure are about to soar through the 3 million mark, many expats wonder how the recession is going to affect Tenerife.  Already the evidence is easy to see as shops and businesses have been closing all around the island. 

Tenerife has been hit by a double whammy.  The main contributors to the island’s output have been construction and tourism, and both industries have suffered.  Spain’s property crisis, triggered by the global credit crunch, has overflowed into the island and some of the earliest casualties were property developers and estate agents.  The effect is rippling through the many types of company that supported the building boom, as well as those that are not directly connected.  Large numbers of workers who have been made redundant are no longer able to spend money in local businesses, so hardly any level of the economy is unaffected. 

Tourism is the other main income of the island and it has also been suffering.  A large proportion of the island’s tourists come from the UK, but a combination of recession in that country as well as a weak Pound against the Euro has affected holiday bookings.  Many visitors may choose to go to non-Eurozone countries this year, where their Pounds will go further.  Those tourists that do come to Tenerife will be spending less.  In early January, bureau de change offices in Tenerife and at UK airports were offering less than one pound for every Euro.  Most visitors can remember when they used to get 1.40 Euros or more to a pound, so many will be feeling that they are getting less value for money.  Tourist numbers in Tenerife will also be affected by the reduced number of airlines flying into the island after some operators ceased trading at the end of last year.

The number of people out of work in the Canaries has risen to nearly 18% of the working population, making the islands some of the worst hit areas in Spain.  More worrying is what will happen when these workers ‘run out’ of unemployment benefit.  Unlike the UK, benefits do not continue infinitely and are related to what you have put into the system.  In Spain as a whole this is seen as a major impending problem.  At the moment, all members of 700,000 Spanish families are currently living without unemployment support.  Another 361,070 people who currently receive benefits will be added to that list by May.  That is an astounding figure of over a million people in Spain with no job and no benefits.

The figures will be similar in Tenerife, particularly in the North of the island.  By the end of last year, the number of people looking for work between Buenavista and Tacoronte had reached 24,200, which is 30% of the total unemployed on the island. The most affected towns are Puerto de la Cruz, Los Realejos, Icod and La Orotava. Of those out of work, 13,950 worked in estate agencies, commerce and the hotel industry and over 6,000 from the construction industry.

The government is taking measures, including releasing 8,000 million Euros for town councils to use on public works and projects in order to create employment.  Ayuntamientos in Tenerife will receive four and seven million each. However many criticise this measure as being a very short term one.

Expats are concerned about their own livelihoods, many of which were reliant upon property and tourism.  Others, who receive an income from the UK such as a pension are concerned because the exchange rate has reduced their incomes.  High on the minds of many residents is also the possible increase in crime in Tenerife.  With so many people not working and not claiming benefits, more people may be forced to turn to crime. 

Of course, all these worries are not unique to Tenerife.  All over the world, people are concerned about the same things and suffering from the same economic troubles.  Although the situation may look bad, it is no worse than elsewhere and better than many other places.  The recession has prompted many more people to consider Tenerife as their future home.  Perhaps it is best summed up by one couple who are relocating at the moment, “At the end of the day, I’d prefer to be broke and warm in the Tenerife sun than broke and freezing my ***s off in Birmingham!”