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Since the beginning of the century, manufacturing has lost a quarter of its jobs and 6.1 points of its contribution to Spanish income

In 2024, the manufacturing sector generated 9.9% of employment in Spain and 11.8% of gross value added (GVA), compared to 17.3% and 17.9% respectively in 2000, according to the new book published by the BBVA Foundation and the Ivie

The manufacturing industry has been losing weight in the Spanish economy and widening the gap with the EU. Based on 2024 data, it contributes 11.8% of gross value added (GVA) or income to the economy, which is 3.9 percentage points lower than the European average and falls short of the 20% target set by the EU. In terms of employment, the decline has been even greater. Manufacturing has reduced its workforce by 25% since the beginning of the century, now generating 9.9% of jobs in Spain, 7.2 points less than in 2000. Reversing this trend has been part of the European and Spanish agendas for years, although it has had no significant effect so far.

A common denominator in both the European and Spanish strategies to improve and increase the weight of manufacturing in the economy—repeatedly emphasized in strategic plans—is the importance of supporting productivity and competitiveness through two pillars: digitalization and energy transition. This triad, productivity-digitalization-energy transition, is the focus of the book La adaptación de la industria manufacturera española al escenario energético y la transición digital (The adaptation of the Spanish industry to the energy scenario and digital transition) published by the BBVA Foundation and the Ivie. The study was carried out by a team of researchers from the University of Valencia and the Ivie, led by professors Joaquín Maudos, Juan Fernández de Guevara, and María Dolores Furió, with the collaboration of economists: Consuelo Mínguez, Laura Hernández, and Miguel Ángel Casquet.

Overall, the Spanish manufacturing sector (except energy) employs more than 2.17 million people, accounting for 9.9% of the country’s jobs. However, since the beginning of the century, when this figure stood at 17.3%, the sector has lost 723,500 workers. In terms of its contribution to the country’s income, its share of the economy has fallen by 6.1 percentage points, from 17.9% of GVA at the start of the century.

In 2022 (the last year for which disaggregated data is available), four sectors accounted for nearly 60% of manufacturing output: agri-food (19.4%), metallurgy and metal products (12.7%), chemicals and pharmaceuticals (12.1%), and transport equipment manufacturing (11.8%). The rubber, plastics, and non-metallic minerals industry (9.3%) follows closely at 9.3%. In the European context, Spain’s agri-food industry stands out, with a share 8.4 percentage points higher than the EU-27 average. Although the difference is smaller, Spain also shows greater specialization in the textile industry and rubber and plastic products. On the other hand, the machinery and equipment manufacturing sector in Spain is half the weight of its EU-27 counterpart, and the computer, electronic, and optical products sectors is almost six times lower in Spain.

The manufacturing industry is a key pillar of Spain’s foreign sector due to its high export propensity. In 2022, its exports accounted for 20.3% of Spain’s GDP and 84% of total goods exports. However, due to Spain’s lower degree of industrialization compared to the EU-27 average, the share of its exports in GDP is also lower (20.3% vs. 31.1%).

The main reason given for increasing the weight of industry in Spain is its high labor productivity compared to services. However, when compared to the EU-27 average, Spain shows a 5.4% deficit, which widens to 29% compared to Germany or 16% to France. Furthermore, the higher labor productivity is not reflected in total factor productivity (TFP), which measures the efficiency of both capital and labor. In fact, manufacturing is 6% less productive than services in terms of TFP. Within manufacturing sectors, productivity differences are even more pronounced than in services. For example, the TFP of the transport equipment sector—the most productive—is 3.6 times higher than that of food, beverages, and tobacco, which has the lowest TFP.

In this context, where the ultimate goal is to enhance the competitiveness of Spanish manufacturing, two levers play a crucial role: digital transformation and energy transition toward efficiency and sustainability. Both are addressed jointly and strategically, as they are interconnected and complementary processes that reinforce the capacity for adaptation and growth.

Digitization makes a difference in terms of production efficiency, with greater differences observed in manufacturing than in services. In 2022, production efficiency in technology-intensive manufacturing sectors had more than doubled that of less digitized sectors. Growth in production efficiency is also higher in more digitized sectors. However, Spanish manufacturing, relies less on ICT than the European average, which points to a lower level of technological development. Among the Spanish manufacturing companies, 62% have at least a basic level of digitization, a figure which is below the EU-27 average of 68.3% and the target of 90%.

Although R&D investment in manufacturing (as a percentage of GVA) is much higher than in the overall economy (3.8% vs. 1.6%), Spain ranks third lowest among the 11 European countries with available data, whose average is 8.7%. The Spanish industry also performs poorly in intangible asset investment, with a ratio half that of Europe (10.6% vs. 20%).  Despite investing less in R&D than the European average, one argument in favor of reindustrialization is that manufacturing invests more than other sectors, with 44.1% of total R&D investment coming from manufacturing. In terms of R&D&I, 30% of companies that innovate in Spain are manufacturers, accounting for 40.1% of business R&D&I expenditure, with an innovation effort equivalent to 5.4% of GVA, far above the 1.3% in services.

The challenge of energy transition

The report explains that, if implemented effectively, energy transition could act as a catalyst for industry revitalization. The deployment of renewable energies throughout the territory increases the energy supply from local, environmentally friendly sources, which are cheaper and more predictable than fossil fuels, as they are not subject to international market fluctuations in prices. One of the key challenges for manufacturing is the gradual replacement of fossil fuels with renewables in its energy consumption mix.

In 2020, the Spanish manufacturing industry spent, on average, 8 cents on energy per euro of added value, compared to 6 cents in France, 5 in Germany, and 2 in Italy. However, the energy intensity indicator stood at 97.3 for the Spanish economy, compared to 99.9 for the EU-27 in 2021. This means that Spain is above the EU-27 indicator in terms of energy efficiency, requiring less energy to meet demand. Although its industry pays more for the energy needed to generate added value.

In sum, the authors emphasize that there is not just one manufacturing industry, but many, each with significant differences in the three dimensions analyzed in the monograph: productivity, degree of digitization, and energy efficiency. It is important to learn from best practices within the sector, such as those found in the chemical and pharmaceutical industry, which combines high productivity, a large percentage of companies with advanced or very advanced technological intensity, and successful results in reducing energy intensity.