Author: Florentina Șușnea, Founder & Managing Partner, PKF Finconta
A country's economic performance is service-based. In the most competitive countries in the European Union, the service economy claims leadership. The development of the services sector is also desirable for Romania if it wants to be a competitive economy. Therefore, the development of this sector is very important, whilst monitoring of its development is necessary and useful.
Public policies to support the development of this sector, technological developments, per capita income growth, changing purchasing behaviors and consumer experience requirements influence the growth of turnover, profit or investment in the services sector.
In Romania, the results of the survey Business outlook in Romania for 2018 for the second half of the year 2018 highlights the growth prospects of companies in the professional services sector by comparing the results with those of the research carried out in the first semester as follows:
- Turnover – 25% of companies in the second half of 2018, compared with 26% in the first half, say turnover will increase by +10% - +30%, while 18% vs. 28% say they will have an increase of +5% - +10% and 17% vs. 12% over the range +1% - +5%. Thus, in the second half of 2018 there is a slowdown in growth compared to the first half, reinforced by the expectation of the 7% of companies that say that their turnover will stagnate this year and of the 32% who say it will fall in 2018, compared with only 9% earlier this year.
- Profit – The same outlook is repeated on a larger scale in the case of profit forecasts for the professional services companies in the second half of 2018. The largest percentage drop of profit of from 34% in the first semester to 21% in the second semester is in the range between +1% - +5 %, followed by a fall from 24% to 18% over the +5% - +10% increase in profit. Exceptions to this negative growth trend are the companies that expect a profit is expected to increase between +10% - +20% from 14% in the first half of the year to 18% in the second. Moreover, 21% of the respondents say they expect a fall in profit in 2018 compared to 10% in the first six months.
- Investments – Investments in the services sector are in line with the evolution of the turnover and the expected profit for the first half of 2018. In the range +10% - +20% we see the largest decrease in investments of 10pp (from 17% in the semester one percent to 7% in the second semester) and 8pp less companies that say their profit will increase by +1% - +5% this year (from 33% in H1 to 25% in H2). There is an increase in the percentage of companies stopping this year's investment from 16% in the first half to 25% in the second half of the year.
- The number of employees – Compared to the first half, in the second half of the year 2018 the number of professional services companies that say they will have by +5% - +10% more employees drops from 17% in H1 to 4% in H2. The percentage of companies that say they will increase their number by +1% - +5% also drops from 34% to 29% and the number of companies keeping the same number of employees as last year increases from 24% to 39%, while 18% of companies say they expect a decrease in the number of employees in the second semester, compared with 12% in the first semester.
- Evolution of salaries – In the second semester, with small differences, salaries remain in line with the growth estimates in the first half of the year. Exceptions are made by the percentage of companies which expect a salary increase in the range of +1% - +5%, which drops from 31% in the first semester to 20% in the second semester. In the second half of the year 2018, 32% of the respondent professional services companies say they will not change the wages in the company, versus 22% who were in the same opinion in the first half of the year.
- Challenges and opportunities – The most important challenges for companies in the service industry in 2018 are: lack of specialized workforce (57%), increase in productivity (33%), the motivation of employees (30%) and increase in costs (29%). The most important opportunities mentioned by professional service companies are economic growth (65%), increased consumption (62%), growth in exports and opening other markets (45%), digitization and online opportunities (45%) and access to European funds and SME funding (38%).
The findings of the survey Business outlook in Romania for 2018 show that the prospects for the development of the services sector are now reserved. The aspiration that Romania's economy relies on services with high added value compared to EU countries is still a distant target. Achieving this goal depends on the entry of the services sector on the map of the interest of policymakers. Supporting this sector is also demonstrated by supporting relevant entrepreneurial initiatives in this area. A strong entrepreneurial environment in the services sector leads to a high-performing economy.
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For more than 23 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR, and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas, we tailor our services to your business and your needs: audit, corporate finance, tax, bookkeeping and accounting advisory services, transfer pricing, payroll and personnel administration, and insolvency.