The business environment for SMEs in Central and Eastern Europe (CEE) is strengthening, particularly in the Czech Republic, Hungary, Poland and Slovakia.
According to research commissioned by business services firm TMF Group and published by the Economist Intelligence Unit, SMEs in the region are benefiting from investment incentive schemes, improved funding opportunities and tax exemptions.
Increased nearshoring of manufacturing and service lines is taking place, particularly in Poland. The country is the third-largest provider of outsourcing globally after China and India. Meanwhile, momentum is building behind technology start-ups in countries such as Slovakia and Poland. Moreover, the growth of shared service centres continues to offer major opportunities in Hungary and Poland.
Nevertheless, businesses operating in the CEE region continue to face major challenges. The research 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 are in need of reform. The risk of arbitrary legislation, such as sector-specific taxes, is a problem.
The successful economies in CEE are helping to ‘pull up’ their neighbours in the south-east of the region, the research found. Bulgaria, Croatia, Serbia and Slovenia – which are home to around 20 million people between them – are seen increasingly seen as attractive locations for growth potential by international businesses.