Micro-enterprises in Romania continue their upward trend

Over 60% activity volume of Romanian micro-enterprises is achieved by companies with a turnover of up to 250.000 euros.

Instant Factoring, the first Romanian online micro-factoring fintech,  has released a new study on the evolution of micro-enterprises in Romania, companies with a turnover of up to 500,000 euros. According to the study, micro-enterprises in Romania continue their growth trend: in 2018 there were 524,900 active companies, 2.5% more than the previous year. They achieved a total turnover of 129 billion lei and a profit of 27.5 billion lei (21% of the turnover and an average of 52.390 lei per company), while 63% of the sector’s consolidated turnover, accounting for 82 billion lei, was generated by companies with a turnover of up to 250.000 euros.

Although the total turnover of micro-enterprises that registered their balance sheet at July 2019 is slightly decreasing by 6%, from 139.1 billion lei in 2017 to 131 billion lei in 2018, the evolution remains positive for the last 5 years. Companies less than 5 years old generated the largest share (24%) of turnover in 2018.

TO evolution in the last 5 years: +11%

According to the distribution of companies by turnover level, the companies in the range of 50.000-250.000 euros achieved 47.5% of sectors’ consolidated turnover, with an increase of 2.5% compared to 2017, followed by the category 250.000-500.000 euros with 36.3% and the smallest ones, under 50.000 euros, with a share of 16.2%.

Retail still ranks first

In terms of sectoral distribution, Retail remains the largest sector, with a turnover of 25.8 billion lei in 2018. Wholesale follows with 15.4 billion lei and the Construction Industry with 13,6 billion lei in 2018. The remaining positions in top 5 are taken by Transportation and Warehousing micro-companies with 13.2 billion lei and those from the Processing Industry with 13 billion lei.

Top 5 active micro-enterprises reach 62.8% of the consolidated turnover of all micro-enterprises in Romania, with a total of 81 billion lei. The rest generate a business volume of 48 billion lei, respective 37.2% out of the total.

The workforce continues to decline

The workforce decreased by 12% compared to 2017 and almost by 20% compared to 2014, at 1 million employees in 2018. For 2019, we estimate the stabilization of the workforce around the level of 1 million employees. Among the factors that generate tensions on the local labour market are the accelerated migration process, the inadequacy of the education system to the market requirements and the absence of measures to integrate inactive persons.

Retail sector records the largest employed workforce, 143.700 employees (14.7%), followed by Manufacturing 139.000, respectively 14.2% and Construction with 122.000, respectively 12.5% of the total.

The authors of the study consider that the increasing cost per employee with 12% in 2018 compared to the previous year, more accentuated than the productivity one of 9%, represents an important risk on the medium term, with a direct impact on the local competitiveness.

Bucharest also leads in terms of employees’ volume, with over 173.000 people, that is 17.7% of the total. Cluj (5.5%), Constanta (4.6%), Timis (4.3%) and Ilfov (3.8%) counties follow. The active micro-enterprises registered in these counties had almost 350.000 employees, that is almost 35.8% of the total.

According to company representatives, it’s worrying that over 40% of the active micro-enterprises didn’t have any employees in 2018. Most of them, respectively 102.500, had zero turnover in 2018.

Evolution in the past 5 years: -20%

“The micro-enterprise segment is still very important for us. We consider it one of the main sectors that could generate local economic growth. It’s worth noting that 43.2% of micro-enterprises are aged between 10-20 years, which shows that entrepreneurs are struggling to survive on the market, have already been through an economic crisis and are still active and deserve all the support they can get to grow their business”, said Adina China-Birta, General Manager, Instant Factoring.