In the settlement of Dambovitsa, a grocery store located on the first floor of the block is on the verge of bankruptcy. With rising rents, skyrocketing utilities and pressure on wages from workers, the store isn’t selling enough to cover its costs. In addition, he collected outstanding payments to suppliers who are now filing for bankruptcy.

“If you are fair, you will not be able to cope with the taxes that the state takes from you. Contributions and taxes are killing you. You just have to work in the dark to survive,” explains the shop owner, who worked in socialist trade for many years.

In the capital, a small advertising company complains that it has only 3 out of 7 customers and their orders, which require double the amount of work, at prices similar to last year. “I have two more months to finish the projects I started, after which I will block it,” says Michaela, the founder and CEO of the small company.

In Bistrita Năsăud, the pastry shop will close its doors, because with the current prices of raw materials, only those with a lot of money will be able to afford their cakes. “And the salaries in Bystrica do not allow you to have a lot of money,” says the chief confectioner.

“At the beginning of 2023, we had 6,949 companies in a state of imminent bankruptcy, with a turnover of approximately 13.2 billion euros in 2022. Among them are also large companies with a turnover of more than 50 million euros, which will be affected by the minimum turnover tax, which will come into force in 2024. At least 48% of the turnover of companies in a state of insolvency is accounted for by these large companies, which will have to pay additional taxes next year,” says Ciprian Naku, head of the restructuring department. CITR.

The increase in VAT on the distribution of organic products, together with the increase in value added tax on high-quality food products (mountain, eco, traditional products, allowed by MADR), is causing major headaches for producers of such products who are struggling to survive in a market affected by inflation, increasing Romanians’ concerns about costs and increased production costs.

“When they lowered the VAT on organic products (in 2019 – ed.), they boasted that they wanted Romanians to live healthier lives. The impact on us and on the industry will be very big (VAT increase – ed.). We keep the same price for six years to sell. I made investments in automation precisely to drag the price, because if I make it more expensive, I won’t sell anymore. If I close, does the state still earn something from me? He won’t win anymore. And in my situation, it’s all organic producers,” says a small producer of organic juices.

The new package of tax measures creates great difficulties for all companies, whether they are large, medium or small

Ahead of the election campaigns, the Government seems unconcerned about the fact that company closures are reducing anemic budget revenues, and the government’s fiscal policy is extracting more and more from those who are fiscally sound instead of closing. the gate of the shadow economy. The demise of companies is happening right now and will radically change the landscape of commerce, further slowing consumption and economic growth.

Small firms emerged from the recession more fragile than their big sisters. Before the pandemic, half of them had cash for about two months of activity. After the pandemic, some recovered, while others did not. And the volume of transactions, which roughly corresponds to the volume of sales, shows a decline in many sectors of the economy.

The number of large companies at risk of insolvency reached 6,949, the highest level since 2013, according to CITR analysis.

Moreover, almost half (more than 40%) postpone access to the restructuring procedure for 3 years, remaining in the zone of imminent insolvency.

On the other hand, 83% of the national turnover is generated by 39,970 influential companies with total assets of more than 1 million euros. 43% of them are companies that are subject to restructuring or are in a state of imminent bankruptcy, according to the study. At the same time, they account for at least 84% of the total debt as of the beginning of 2023.

“Romania has responded with resilience and ambition to recent challenges, but they have not remained fruitless. The ability to change becomes even more important when the next challenges will require new solutions and even in some cases a rethinking of the business model. After more than thirty years, the economy of Romania can and should begin to learn from its own experience, to observe the cyclicality of some processes and the specificity of the crossroads. CITR’s research provides that perspective, looking at both the current moment and how this year fits into a multi-year cycle,” said Paul-Dieter Cirlenaru, CEO of CITR.

The number of companies in the difficulty zone increased by 18% compared to the beginning of 2022

“This year’s research shows us once again the fact that a large number of influential companies continue to face difficulties in 2023. Especially in the difficult economic context in which we find ourselves, entrepreneurs must be even more attentive to the alarm signals that may indicate difficulties and take timely measures to prevent the difficulties from worsening. The treatment of these cases consists of restructuring decisions, and the result will be the transfer of debts in a sustainable scheme, as well as a change in the way of doing business, which will give the business the prerequisites of efficiency for healthy development. For the business environment, preventing difficulties means changing for the better, adds Ciprian Naku, Head of Restructuring at CITR.

Based on the number of distressed companies, the industries most affected by the end of 2022 were construction (2,036 companies), real estate operations (1,254 companies) and trade (684 companies). According to turnover, the most affected sectors were: energy (2.96 billion euros), manufacturing industry (2.42 billion euros) and trade (2.17 billion euros).

As a result of the implementation of the European Prevention and Restructuring Directive into national law, Romanian entrepreneurs can benefit from clear procedures, namely the restructuring agreement and the preventive agreement, in which they have the freedom to negotiate with creditors and suspend enforcement, and the company’s creditors can benefit from a higher degree of debt collection, resorting to these restructuring mechanisms, at the first signs of difficulties.

About 40,000 companies were deregistered this year (in the first 7 months). Last year, almost 74,000 companies were deregistered, and in 2021 there were less than 67,000 of them.

Also, according to the Trade Register, in the first 8 months, about 4,000 professionals became insolvent, most of them in the field of trade, real estate operations, construction, and transport.