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Analysis: Investments of companies activating in Romania will be in stand-by because of fiscal instability

Investments of companies activating in Romania will be in stand-by because of fiscal instability, of the increase of operational costs and of the restriction and higher costs of financing, to which the increases crisis in the labour market is added, according to an analysis released on Tuesday by one of the main players in the insolvency market.

According to Sierra Quadrant data, a coherent business plan will be a challenge for companies in 2019.

“In these conditions, ensuring new additional measures to prevent business risk must be in the foreground of managers’ preoccupations. In an economy where over 95% of companies have no financial reserves, a partner’s entering insolvency or bankruptcy could attract serious consequences in the whole economic chain. Ensuring prevention mechanisms such as better information about business conditions and partners,is essential beyond financial resources,”experts say.

On the other hand, specialists consider that businessmen should make a better estimate of business dimensions since many companies enter insolvency because they overestimated incomes, had very optimistic expectations about the economic potential of industry, of location and of partners, suppliers and customers.

As for the fields in which businesses could become risky, quoted data refer to insolvencies recorded in 2018. The highest number of insolvencies was recorded last year in retail and wholesale trade, vehicle and motorcycle repairing - 2,606 (-7.69%), followed by constructions (1,277), processing industry (974), hotels and restaurants (629), transport and storage (564).

Most cases of suspension from activity in 2018 were in trade (5,609), on the rise by 17% compared to the previous year, followed by other service activities (1,625), professional, scientific and technical activities (1,490), constructions (1,362) and processing industry (1,225).

Most dissolutions were recorded in wholesale and retail trade, automobile and motorcycle repairs (10,788), on the rise by 12% against 2017, constructions (3,264), with an advance of 10% and those of professional, scientific and technical activities with 3,075 cases.

Data of the National Office of Trade Registrar (ONRC) show that the number of companies set up in 2018 dropped compared to the previous year with over 1,100, to 135,532, while the number of newly set up companies with limited responsibility dropped by 4,000 to 94,244.

“The capital city, where most companies are, ranked first in the top of most risky business areas in 2018. Most companies that entered insolvency last year were in Bucharest - 1,637. But insolvencies dropped in the Capital by 17.66% compared to the same period of 2017” the analysis shows.

Bucharest is followed with the counties of Bihor - with 571 insolvencies (+10.87%), Timis with 432 (+6.93%), Iasi with 423 (-27.44%) and Constanta with 414 (+4.28%). On the overall 588 companies entered insolvency in December 2018.

Bucharest also ranks first for the chapter of companies with suspended activity with 1,897 cases of 18,038 at national level. The classification continues with the counties of Bihor (1,045, +21%), Cluj (816, +9.68%), Constanta (720, +5.88%), Prahova (671, +5.84%), Neamt (649,+10.1%) and Iasi (638, +12.3%).

Specialised in difficult and complex works of administration and liquidation, Sierra Quadrant is one of the first ten specialised companies in the country. In the ten years of activity the company completed over 650 bankruptcy and liquidation procedures.

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