SMEs And Fresh Investment Drive Growth In East Europe

Profession:TMF Group

TMF Group-commissioned research finds region benefitting from nearshoring and favourable tax environment despite unrest to the east

Solid recovery in Central and Eastern Europe (CEE) is helping to "pull up" neighbours in the South-East of the region, and the cluster of nine countries across central and south eastern Europe is making the most of a weak euro and lower oil prices, according to two reports commissioned by TMF Group and released today.

Business risks and opportunities in Central and Eastern Europe, commissioned by TMF Group and published by The Economist Intelligence Unit (EIU), finds that the business environment for small and medium-sized enterprises (SMEs) is strengthening in several countries in CEE, particularly in the Czech Republic, Hungary, Poland and Slovakia. However, businesses still face challenges in the administrative, regulatory and tax environments.

It finds economic growth will be increasingly driven by SMEs in the region, which will continue to outpace the Eurozone and wider EU. SMEs are benefiting from investment incentive schemes, improved funding opportunities and tax exemptions.

The report points out that the CEE region is seeing increased nearshoring (as opposed to offshoring) of manufacturing and service lines, particularly in Poland. Momentum for technology start-ups in countries such as Slovakia and Poland is rising. Moreover, the growth of shared service centres continues to offer major opportunities in countries like Hungary and Poland.

Yet, businesses operating in the CEE region continue to face major challenges. The report highlights areas such as excessive bureaucracy and sector-specific taxation. Red tape in public sector procurement remains an issue in several countries. Despite low corporate taxes, taxation systems remain in need of reform. The risk of arbitrary legislation, such as sector-specific taxes, is a problem.

Meanwhile South East Europe (SEE), which has been lagging behind in the recovery stakes, might now be worth a fresh look for those corporate executives under pressure to find growth globally, according to the CEEMEA Business Group in research commissioned by TMF Group. 

Companies that are expanding their business in the SEE region look to benefit from the generally stable economic growth, as well as corporate tax levels that are lower than in the majority of Western European countries. The SEE countries (Bulgaria, Croatia, Serbia and Slovenia) are home to around 20 million people...

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