Author: Florentina Șuțnea, Managing Partner, PKF Finconta
Defined in terms of today’s progress paradigm, a country's performing economy is service-based. Even though other branches still occupy another important place in the structure of the developed countries' economy, the one of services claims leadership. The development of services is also desirable for Romania if it wants to be a competitive economy. The evolution of this industry is very important and therefore monitoring of progress is necessary and useful.
Throughout the world, the industry's main growth drivers of the services sector are the public policies to support the development of this sector, the technological change, the per capita income growth, the changing purchasing behavi-ors and the consumer experience requirements.
In Romania, the survey ”Business outlook in 2018” highlights the growth prospects of companies in the professional services industry this year:
• Turnover – Only 26% of companies in 2018, compared with 54% in 2017, say their turnover will increase by +10% - +30%, while 28% vs. 20%. 33% say they will have an increase of +5% - +10% and 12% vs. 24% over the range +1% - +5%. Thus, in 2018 there is a slowdown in growth compared to last year, and 9% of companies said that their turnover will stagnate this year and the 8% said they would drop over the next 12 months.
• Profit – The outlook for the evolution of turnover is repeated on a larger scale in the case of profit for service companies in 2018. Except for profit growth over the range of +5% - +10%, now projected by 24% of the front companies of 12% in 2017, all other growth intervals show a decrease this year. The largest drop is on +20% - +30%, with 13% fewer companies saying they expect this profitability. Moreover, 10% of the respondents say they expect a fall in profit in 2018 compared to 0% in 2017.
• Investments – Investments in the services sector are in line with the evolution of the turnover and the expec-ted profit for 2018. On the growth interval +10% - +20% we see the largest decrease in investments of 11% (from 28% in 2017 to 17% in 2018) and a further 11% lower the percentage of companies that say their profit will grow by +30% this year (from 18% in 2017 to 7% in 2018). On the other hand, the number of companies stopping investments this year is slightly increasing from 12% in 2017 to 15% in 2018.
• Number of employees – Compared to 2017, in 2018 the number of service companies that say they will ha-ve +5% - +10% more employees drops from 35% in 2017 to 17% in 2018. The percentage of companies sa-ying they want increases the number of employees by +1% - +5% remains at 35% and the number of compa-nies keeping the same number of employees as last year increases from 18% to 25%, while 12% of compa-nies say they expect a decrease of the number of employees in 2018 compared to 2% in 2017.
• Evolution of wages – In 2018, 31% of companies, compared to 18% in 2017, say they will raise wages by +1% - +5%, while all other positive wage developments are down between 2% and 18%. Thus, 29% of com-panies in 2018 compared to 47% in 2017 expect wages to rise by +5% - +10%, and 12% of companies in 2018 compared to 29% in 2017 expect wages to rise +10% - +20%. In 2018, 22% of companies in this indus-try (compared to 0% in 2017) say they will not change wages in the next 12 months.
• Challenges and opportunities – The most important challenges for companies in the professional services industry in early 2018 are the following: tax changes (58%), lack of specialized workforce (57%), productivity growth (33%), motivation of employees 30%) and increased costs (29%). The most important opportunities mentioned by professional service companies are the following: economic growth (65%), increased con-sumption (62%), growth in exports and opening up other markets (45%), digitization and online opportunities (45%) and access to European funds and SME funding (38%).
Therefore, the forecasts made by the Business Evolution study in Romania show that the development of the services sector has a rebound at the moment. The desirability of an economy based on high added value services, which will increase Romania's economic competitiveness, is only a horizon of the next (at least) 5 years. Betting on this sector can be gained if the design of public policies to support entrepreneurial initiatives in this sector will take into account its specific growth factors.
For more than 22 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.