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  • Only 48% of consumers believe post-vaccine life will be better

    Only 48% of consumers believe post-vaccine life will be better

    One year into the pandemic, almost half of consumers (48%) believe post-vaccine life will be better than before the pandemic, EY Index finds.

    Even more, consumers are more worried than four months ago about their health, their families families and their futures.

    The share of people who think they will live in fear of the COVID-19 pandemic for at least another year has risen from 37% (October 2020) to 40% (February 2021).

    Respondents in India and Brazil have consistently been the most concerned overall (more than 90% of consumers) throughout the pandemic, while people across other countries are now more worried about their family’s health than they were four months ago (up 4% in the US and 5% in Japan).

    Respondents in China and Germany said they are increasingly worried about their finances (4% increase) and freedom to enjoy life (more than 10% increase), since October 2020.

    In fact, the COVID-19 pandemic may have accelerated changes that were already underway (36%): moving out of cities, shopping online more and prioritizing health, affordability and sustainability.

    Sentiment about the COVID-19 vaccine

    Most (91%) global respondents do intend to take the vaccine, but 25% said they have ”reservations” and 9% don’t intend to take it at all.

    The latter goes up to 15% in the US and 19% in France but down to 3% in China, 5% in Brazil and 6% in the UK.

    Top reasons influencing global sentiment include being worried about potential side-effects (29%) and not trusting its safety (19%).

    Feelings about the vaccine are also polarized between high- and low-income consumers, which correlates with institutional trust.

    Thus, only 43% of low-income respondents plan to get the vaccine as soon as it is available to them (compared to 54% of high-income respondents).

    This may relate to 37% of low-income respondents having little or no trust in government compared to 28% of high-income respondents.

    Despite concerns, a majority of respondents (56%) would be more likely to shop with retailers that require employees to take the vaccine, while 48% of respondents think that those who refuse to take the vaccine are acting selfishly.

  • Romania: Investors are cautious, but don’t fully retreat

    Romania: Investors are cautious, but don’t fully retreat

    In Romania 46% of investors cancelled, decreased or paused investments, while 51% did no changes or increase in their investment plans, according to EY Attractiveness Survey Romania.

    Looking forward, investors are still optimistic and believe Romania will become more attractive after the COVID-19 pandemic will pass. Supply chain (35%) and manufacturing operations (36%) are regarded as main investment attractions.

    To increase the country’s competitiveness, the majority of foreign investors believe Romania should focus on its agriculture and IT assets. Romania should focus on its efforts on funding key issues like education, technological transformation and infrastructure.

    How was Romania performing in terms of FDI before COVID-19 emerged?

    In 2019, 78 foreign investment projects were carried out in Romania, a decrease of approximately 28% compared to the previous year (113 projects in 2018), placing the country on the 15th place in Europe. Nevertheless, it is important to mention that the value of FDI has not deacresed significantly from 2018 to 2019.

    A similar trend can be observed across the region, with CEE countries experiencing a decrease in the total number of FDI projects by about 20% compared to the previous year.

    2019 was a year in which foreign investors expressed a higher appetite for Western Europe, which held 80% of the European market share.

    While COVID-19 might have a negative influence on FDI dynamics in the future, in the past 13 years, following the succession to the EU, Romania has witnessed a considerable increase in terms of annual number of FDI projects, directly contributing to local economic growth.

    European countries, main investors in Romania

    At the end of 2019, the most important economies investing in Romania were, based on FDI stock data provided by BNR: Netherlands, with a share of FDI in the FDI stock of 23.2%, followed by Austria with a share of 12.6%, and Germany, with a share of 12.3%.

    Overall, the top 10 investor countries had a total share in total FDI stocks of 83.4%, while the top 20 countries had a share of in FDI stocks of 95.4%.

    It is noteworthy that the member countries of the European Union they had a share of 89.5%  in total FDI stocks, which emphasizes the EU’s role as Romania’s main strategic partner.

    FDI concentrated in Romania’s major cities

    Similar to other European markets,foreign investment was highly concentrated in major cities in 2019. Bucharest attracted 50% of the total number of announced FDI projects (a 10% increase from the previous year), while Timișoara took the second place, for the second year in a row, with a 11.5% market share.

    Regional areas of investment

    In the last decade, most FDI projects were implemented in the Bucharest-Ilfov region (59.3% of the total in 2015). A notable growth during this timeline can be observed in Western region of Romania (10%). During the same period, the Southern Region of Romania (Muntenia) attracted 15.5% more investment compared to the previous year.

    The North-Eastern region is characterized by a low FDI quota mainly due to the quality of local infrastructure, an aspect that isolates the region from the rest of the regions and implicitly from the activities that involves long-distance transport.

    If we compare the share of total FDI and the share of total GDP of the regions, it is easy to see how these indicators are interconnected.

    The South-Western region has the lowest share of total GDP (7.5%), being also the one that attracted the smallest FDI flow (after the North-East region). For Muntenia, Central Romania, Western, North-Western and South-Eastern regions, the values are relatively close, both in terms of weight in total FDI, as well as in terms of share in total GDP.

    However, they are far below comparing to the Bucharest-Ilfov region for both indicators, strengthening Bucharest’s strategic importance in terms of FDI. 

    Digital and business services sectors, leaders in FDI project numbers

    In 2019, in line with European trends, the digital and business services sectors  attracted the largest numbers of FDI projects, with a 36% market share for the digital sector and 16.7% share for business services. Together, they accounted for over 50% of the number of new jobs created.

    Occupying the third place, the agri-food business generated far less new jobs, being a much vulnerable sector, being also more vulnerable from revenue losses considering COVID-19 supply chain disruptions.

    Machinery and equipment manufacturing generated the second highest number of new jobs in 2019 (18.2% of the total number), even though there were 4 FDI projects announced last year.

    How can Romania retain its attractiveness post-COVID-19?

    Our survey shows investors decisions will be driven by the following market factors: social and political stability (66%), labor supply – skilled and unskilled (65%), cost-competitiveness of the country (65%).

    According to the respondents, Romania should focus on its efforts on funding key issues such as development of education and skills (84%), supporting high technology and innovation

    Industries (81%), investing in major infrastructure and urban projects (80%). In terms of sectors that could accelerate Romania’s development, the majority of foreign investors mentioned agriculture (35%), the IT sector (29%) transport and motor vehicle (21%).

    For companies already present on the local market, the safety and security measures put in place to prevent a major crisis in the future (74%) and the level of success in addressing the crisis caused by COVID-19 (61%) are essential.

  • The global transactions landscape has come to an abrupt standstill due to the pandemic

    The global transactions landscape has come to an abrupt standstill due to the pandemic

    The global transactions landscape has come to an abrupt standstill due to the COVID-19 pandemic, as companies preserve cash and grapple with the immediate impact of the crisis.

    EY research, however, reveals that companies that make bold decisions on their transaction and strategic investment plans early on after a crisis are the ones that benefit the most in the long-term.    

    Reviewing transactions in the immediate period (2008-2010) after the Global Financial Crisis (GFC), EY research found that companies that were early movers and made bold choices on portfolio-transforming transactions saw a 25% increase in total shareholder return (TSR) over the following decade, compared to those that didn’t.

    Businesses that made acquisitions saw 26% higher returns for shareholders. Those companies that proactively reshaped their portfolios by taking the harder, but more decisive, step to divest assets also reaped rewards achieving 24% higher returns over the same period.

    In further evidence that companies that invested their capital following the GFC gained in competitive advantage, the research found that they saw two- or three-times higher returns over those that took a cautious approach.

    Industry drivers behind pick up in M&A

    With M&A activity across all sectors affected by the COVID-19 pandemic, the drivers that are likely to lead to a shift up in gear for deals vary considerably by industry, according to EY analysis.

    In the healthcare sector, M&A activity is likely to be boosted by large companies buying innovative players in the cell and gene therapy space, as scientific advances continue to showcase the promise of these personalized therapies. A surge in joint ventures and alliances is also on the cards for the sector, as companies look to build the large-scale manufacturing and supply chain expertise required to scale-up delivery.

    The media and telecoms sectors look set to overcome challenges caused by the shutdown and capitalize on the continued shift in consumer preferences for digital entertainment media.

    Whereas, in the technology sector, established players who are looking to augment their capabilities, especially in cloud and customer engagement, will expand their market share and increase their top line by capitalizing on the attractive pricing of innovative start-ups.

    In retail and industrials, combinations aimed at shoring up balance sheets and companies’ ability to generate higher levels of cash flow and boost cash reserves will help spur up activity. At the same time, transactions in the automotive sector will be driven by existing market trends, such as the shift to fully electric vehicles.

  • Businesses remain optimistic on foreign direct investment plans

    Businesses remain optimistic on foreign direct investment plans

    Analysis reveals that the COVID-19 pandemic disrupted many business plans leading to the delay or cancellation of 35% of 2019 foreign direct investment (FDI) projects into Europe, according to the 20th edition of EY Europe Attractiveness survey.

    This comes as analysis of 2019 projects highlights stronger YoY performance compared to the 2018 (0.9%, up from -4%)

    Based on research conducted in April 2020, 49% of respondents believe Europe is at risk of becoming a less attractive investment destination amid concerns over future economic instability as a result of the pandemic. However, in the near-term, investors remain bullish, with 51% of business leaders expecting a minor decrease in the number of new projects initiated, while 11% of respondents expect no deviation from their plans in 2020.

    Alongside this, 80% of leaders surveyed in April 2020 stated that government stimulus packages influence their investment decisions and will favor nations with stronger COVID-19 pandemic stimulus support measures in place.

    Mapping FDI

    Data reveals that 52% of FDI projects between 2015-2019 originated from countries within Europe, demonstrating FDI from Europe can be an incredible economic and transformational force for Europe. Analysis of projects in 2019 found that seven of the top ten investor countries were within Europe. Almost a quarter (23%) of projects originated from the United States.

    The analysis of FDI destinations found that in 2019 France saw the largest increase in new projects up 17% YoY, with 1,197 new projects – resulting in France overtaking the UK as the most attractive destination in Europe for the first time. Despite a drop-in the number of investment projects into Germany in 2018, analysis reveals that projects into the country remain level in 2019 (2019: 971 projects, 2018: 973 projects). 

    However, the United Kingdom remains attractive as investment increased by 5%, closely behind France with 1,109 projects in 2019. The UK growth aligns with a reduction of investors’ Brexit concerns, as just under a quarter (24%) of respondents (vs 38% in 2018) cite Brexit uncertainties as one of their top three risks to attractiveness across Europe.

    The report highlights that sectors that require a specialized workforce, such as construction, saw projects rise by 158% in 2019 (209: 124 projects, 2018: 48 projects), while the Information, Communications and Media (ICM) sector also saw a significant increase in FDI projects by 117% (2019: 241 projects, 2018: 111 projects).

    Despite strong performance in the textiles and clothing sector from Western Europe, FDI projects into central and eastern European countries fell, resulting in an overall sector decline of 22%. However, the survey found that almost four in ten (37%) businesses are considering an increase in their manufacturing presence in Europe.

    While data suggests that projects within the digital sector have fallen slightly (-1% YoY), 55% of organizations surveyed plan to enhance their digital customer experiences and business-to-customer interactions, while 82% expect technology adoption to accelerate in the next three years – a direct result of the COVID-19 pandemic creating new challenges and opportunities for businesses.

    FDI projects and job creation in Europe – a critical crossroad

    Between 2003 and 2017, FDI projects accounted for over 11m new jobs within the European Union. However, due to the COVID-19 pandemic, the report reveals a potential decline of up to 50% in the number of new jobs created following the completion of FDI projects. To safeguard against such potential downturns, governments must adapt their education and training and development systems to help make sure it can offer a workforce with the right skills in the post-COVID-19 landscape.

    Data suggests that the digital and business services sectors (including professional and legal services) generated almost a quarter of new jobs (24%) in 2019. Nations such as Ireland, Poland and Portugal, which attract FDI projects focused on service-orientated, software development and R&D, are likely to see new job creation rates remain high.

    While the outbreak of COVID-19 is having an impact on numerous sectors and industries, the transportation sector (including automotive and aeronautic manufactures and suppliers) is facing the biggest risk.

    The sector accounted for 23% of new jobs in 2019 (down from 25% in 2018). Research shows this sector has experienced the greatest supply chain disruption and revenue losses, leading to a greater proportion of projects being delayed, downsized or cancelled than in other sectors.

  • Four consumer behavior trends emerge during the COVID-19 pandemic

    Four consumer behavior trends emerge during the COVID-19 pandemic

    The COVID-19 crisis is being defined by four distinct consumer behavior segments, according to the first edition of the EY Future Consumer Index, a survey of 4,859 people tracking consumer sentiment and behavior across the US, Canada, the UK, France and Germany.

    These are “Cut deep,” “Stay calm, carry on,” “Save and stockpile” and “Hibernate and spend”.

    Consumers that fall into the “Cut deep” segment (27.3%) are spending less across all expense categories as the pandemic impacts employment; others representing the “Stay calm, carry on” category are continuing to spend as normal (26.2%).

    Most consumers (35.1%) represent the “Save and stockpile” segment, indicating that they feel pessimistic about the future, while consumers that fall into the “Hibernate and spend” segment (11.4%) are spending more across the board.

    Cut deep

    These consumers are mainly more than 45 years old and have seen the biggest impact on their employment status. Almost a quarter have seen their jobs suspended, either temporarily or permanently. Seventy-eight percent of them are shopping less frequently, while 64% are only buying essentials. Thirty-three percent feel that brands are far less important to them in the current climate.

    Stay calm, carry on

    These consumers do not feel directly impacted by the pandemic and are not changing their spending habits. Just 21% of them are spending more on groceries, compared with 18% that are spending less.

    Save and stockpile

    This segment shows particular concern for their families and the long-term outlook. More than a third (36%) are now spending more on groceries, while most are spending less on clothing (72%) and leisure (85%).

    Hibernate and spend

    Primarily aged 18-44, these consumers are most concerned about the impact of the pandemic. However, only 40% of this segment say they are shopping less frequently. And while 42% say the products they buy have changed significantly, 46% of them say brands are now more important to them.

    Five new segments may emerge as consumers move beyond the pandemic

    The four segments identified could morph into five very different ones as the crisis abates. For example, the Index currently suggests that over time, most consumers in the “Save and stockpile” segment will migrate to two new segments: “Remain frugal” and “Cautiously extravagant.”

    These new consumer segments, detailed in the Index, could emerge post-COVID-19 and be summarized as: “Keep cutting” (13.1%), “Stay frugal” (21.7%), “Get to normal” (31.4%), “Cautiously extravagant” (24.7%) and “Back with a bang” (9.1%).

  • Evolution of the Romanian tech startups ecosystem in 2019

    Evolution of the Romanian tech startups ecosystem in 2019

    After years of constant growth, 2019 set a new milestone in the development of the Romanian tech startups ecosystem. It is growing up and attracting investor’s interest, Money Buzz! learned from EY ”Venture Capital and startups in Romania” report.

    ”Funding of Romanian startups became more sustainable and diversified. The pipeline of the local and international ventures is no longer driven by a few small-sizedcompanies in e-commerce and marketplaces, rather it shows a balanced mix of innovative ideas in FinTech, Biometrics, Blockchain, Robotic Process Automation and HR related solutions. Bucharest is the main hub in Romania, driven by its strong digital workforce and diversity”, the report shows.

    Funding is driven by international investors

    Top funding is driven by international investors with only a few local Romanian funds able to participate in Series A+ rounds. Among the local VC funds investing in the ecosystem, we increasingly see more international players scouting the Romanian tech market for investments opportunities.

    In terms of M&A, corporates remain the most relevant exit channel for startups founders and their VC investors. Romanian ventures are sold in rather early stages, whereby the buyers’ headquarters are outside Romania. Besides the missing experience of an international IPO, the local stock exchange market has never been seen as a relevant exit channel for the Romanian tech startups, despite favorable macroeconomic conditions.

    Empowered by the success of UiPath, the first Romanian unicorn, the local tech startups ecosystem is experiencing a radical transformation. We see double-digit growth in the ecosystem indicators: number of startups, new accelerators, capital raising rounds, total funding amount.

    Half of the investment rounds in 2019 are between $100k and $2m. UiPath accounts for 92.5% of total funding

    Source: EY ”Venture Capital and startups in Romania” report.