Analysts: Romania will operate with the handbrake on, especially in the context of fiscal uncertainty associated with 2025

The economy is going through a deep process of restructuring, determined by the effects of taxes hikes, inflation, the drop in sales and the deepening of the financial bottleneck and Romania will operate with the handbrake on for the next two years, especially in the context of the fiscal uncertainty associated to 2025, considers the coordinating partner Sierra Quadrant, Ovidiu Neacsu.” As we warned two years ago, the restructuring of the businesses will become the key word in the Romanian business. There are hundreds of companies which have chosen to prepare their business for crisis, reduce their exposure and look for backup financial solutions if need appears. Romania will operate, practically, with the handbrake on for the next two years, especially in the context of the fiscal uncertainty associated to 2025”, said Ovidiu Neascu in a press release sent on Tuesday. According to Sierra Quadrant analysis, over 16,000 companies closed their doors in the first four months of the year, almost 3,000 more than in the previous year.”In the four months of 2024 there were 16,153 companies dissolved, against 13,300 one year before and 10,677 in 2012. The previous record was registered in 2016 with 13,181 dissolved companies says the press release.Most companies dissolved in the first four months of this year activated in commerce and services (4,389), followed by those in constructions (1,662), professional, scientific and technical activities (1,572) and manufacturing industry ( 1,403).The large majority are companies in the sector of SMEs, badly affected by the effects of inflation, taxes hikes and drop in consumption, say the analysts. The top of domains where most companies were dissolved is the sector of transport and storage (1,202), information and communications (1,082) administrative services activities (843) and hotels and restaurants (840).According to the company analysts, not even the previous economic crisis met with such a number of dissolved companies, which is a sign the trust of the investors in the economic dynamics is at a very low level.”The economy goes through a process of restructuring, determined, mainly, by the effects of taxes hike, inflation, drop in sales and deepening of the financial bottleneck” said Ovidiu Neacsu, coordinating partner Sierra Quadrant, in the press release.If the dynamics of the dissolution of companies over the first four months keeps on in the months to come, it is not impossible that the number of companies exiting the economic landscape gets closer to the threshold of 50,000, against 39,031 in 2023, says the quoted source.Moreover, the data in the Trade Registrar show a total number of 58,899 companies in difficulty ( deregistrations, insolvencies, dissolutions and suspensions of activity) for the first four months of 2024, with over 15,000 more than in 2023 (43,585).In the first 4 months of this year, 32,626 companies were deregistered, 16,153 were dissolved, 7,594 suspended their activity and 2,526 became insolvent. Last year, over 133,000 companies went into difficulty (16,335 companies suspended their activity, 39,031 were dissolved, 71,241 were deregistered and 6,650 got into insolvency).According to the specialists, the companies with biggest problems, at the present moment, are those in trade, agriculture, industry and constructions, where there are taxes hikes, drop in purchasing power and limitation of loans that created issues."Among the firms that closed their doors in the first part of the year, most are so-called zombie firms, with negative capital, unable to face today's challenges. Their number will probably increase significantly in the next period. For the remainder, the chance of continuing business is given by the necessary restructuring of operations, the adaptation of the product and service offer to the new reality, the adoption of strategic planning plans'', say the experts quoted in the press release. According to Sierra Quadrant, the restructuring of operations does not mean only to reduce debts, to solve financing issues, the companies needing a strategic planning programme, complete business evaluation – who the clients are, what the market looks like, who are competitors, if there are innovation possibilities.Investors can avoid insolvency, bankruptcy or activity blockage if they use legal instruments which are available, such as the restructuring agreement or the preventive composition. The restructuring agreement operates as a proactive instrument, allowing the companies to approach financial issues before they escalate into insolvency and even bankruptcy. The companies can draw up a restructuring plan adapted to the needs and constraints unique for their business, without the limitation of rigid procedures for insolvency, explains the quoted document.An investor survey conducted by the Sierra Quadrant at the end of last year showed that 3 out of 5 respondents (62%) listed restructuring and streamlining financial operations as their main objective in 2024.   The reasons cited by entrepreneurs are primarily related to tax increases, cited by 67%, declining sales (43%), increasing financial bottlenecks (41%) and rising operating costs (38%).   With more than 25 years of experience in the Romanian business environment, Sierra Quadrant is one of the leading companies specialising in complex, highly difficult administration and liquidation work, characterised by large and diversified assets, a multitude of legal issues to be resolved in conjunction with the insolvency procedure: environmental balance sheet, hazardous substances in the property, unclear easements and disputes related to assets, etc.