The first thing a visitor to Madrid sees on the 12km journey from Barajas airport into the centre of Western Europe’s third-largest capital are four towering office buildings nearing completion just north of the main business district that runs along the Paseo de la Castellana.

The structures, on the site of what used to be Real Madrid’s training ground, make up the Cuatro Torres (Four Towers) enterprise park and the first building is due to be completed by the end of the year. They are a potent symbol of the vitality and expansion of Spain’s commercial and political capital, as well as an example of the importance of construction to the country’s economy.

One of the towers will become the headquarters of the bank Caja Madrid, which is following rivals such as Santander by consolidating its various offices in central Madrid into one purpose-built head office. Santander occupied 17 buildings before relocating to an office park about 12km from the city centre three years ago. Moving out has not only allowed these companies to bring everything under one roof, it has given them the opportunity to cash in on skyrocketing property prices in the city centre.

This has not prevented Spanish banks from maintaining a branch on virtually every corner of Madrid. The Spanish, says Debbie Mills, director of personal markets for Lloyds TSB in Spain, are used to having a face-to-face relationship with their bank and they do not like to travel. As a result, there is one bank branch for every 1,000 people in Spain, compared with one for every 9,000 in Britain, and Spanish banks are opening yet more. BBVA has 7,000 branches. Ms Mills says that banks are routinely the first commercial tenants in residential developments, grabbing space even before supermarkets.

British banks are beginning to recognise the growth opportunities in Spain. Lloyds TSB, with only 25 branches in Spain, is dwarfed by its British rival Barclays, with 500. Lloyds TSB is targeting UK expatriates who are customers in Britain, as well as Spanish investors, whom Ms Mills says tend to be more sophisticated than those in the UK and have relationships with three or four banks. The bank is a member of the British Chamber of Commerce in Spain. It was set up by two British businessmen in Barcelona in 1908 and now has more than 400 members. As well as FTSE 100 mainstays such as British Airways, Diageo and BT, the number of Spanish companies joining the organisation is on the rise. Ferrovial, owner of BAA, and Iberdrola, which bought ScottishPower earlier this year, are recent additions to the list.

Sophie Shellim, the Madrid regional director, says that the group is holding a function next month in the city for the all-party parliamentary group on Spain, whose members include Lord Brennan and Chris Bryant, Labour MP for Rhondda.

Britain has become much more focused on Spain recently after a spate of high-profile acquisitions such as that of Abbey by Santander for £8.6 billion in 2004 and Telefónica’s purchase in January 2006 of mobile operator O2 for £17 billion. The latter remains the largest deal by value made by a Spanish company.

Telefónica looked to Britain after reaching saturation point in South America through its policy of buying stakes or taking full control of telecoms there. As one senior official of the telecoms company explains: “Britain is a very open and extremely friendly place to do deals.” Its acquisition of O2 faced none of the regulatory hurdles or government interference that often occurs in other European countries.

The figures speak for themselves. Spain invested £21.4 billion in the UK last year, or 55 per cent of the total. That figure is likely to be exceeded this year because the ScottishPower deal was worth £11.6 billion alone. There are 500 Spanish companies operating in the UK, a list that now includes Iberdrola.

An Iberdrola executive says his company, like others in Spain, was attracted to the UK because of its deregulated economy and the lack of barriers to foreign investment. “Spain is also among the most deregulated markets in Europe, and has received a lot of inward investment from the UK, so there is a strong connection,” he says.

The UK is the third-largest foreign investor in Spain, after Luxembourg and the Netherlands, and 700 companies now do business on the Iberian peninsula. An estimated one million Britons now own property in Spain.

Despite concerns about the property market, construction accounts for 18 per cent of Spanish GDP, higher than Germany at the peak of the reunification boom. Even if there is a fall, Vicente Orts, an executive director at the body responsible for promoting investment in Madrid, is confident the capital will not suffer. “Madrid’s economy is not based on construction. Services account for three quarters of the city’s economy, and there is an industrial base as well,” he says.

The lifestyle in Madrid seems to hold an enduring attraction for foreigners, who make up 15 per cent of the city’s population. Ms Mills is a big fan: “Living in Madrid is great: people seem to enjoy life more here – and the weather is superb too.”

Madrid

Origin of name Founded as a fortress known as Mayrit in the 9th century by the Muslim Emir Mohamed I
Area 8,020 sq km
Population 6 million
Density 5,280 people/sq km
GDP €164 billion
Exchange rate £1 equals €1.42
Cost of living A loaf of bread €0.60
Visa regulations None for EU citizens
Time zone GMT+1 hour
Website promomadrid.com
Airlines offering direct flights to Madrid include British Airways, bmi, easyJet, Ryanair

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