Skills shortages are holding private businesses back from realising their full potential, PwC said in its newly released Central and Eastern Europe Private Business Survey . The problem is costing revenue and is significantly impacting economic growth in CEE, with turnover losses estimated by private business owners in the region to be €358 billion, or more than 12% of GDP (or more than the GPSs of Hungary, Slovakia and Croatia combined).
A quarter of businesses surveyed said the lack of skilled labour was causing a mre than 5% revenue loss each year, according to the survey, which involved 600 private businesses in 15 countries in the CEE region.
Compounding the issue are tightening restrictions on immigration from some non-EU countries, as well as the problem of mass emigration with skilled workers seeking more lucrative jobs in Western Europe, and also in Russia.
Private companies in CEE face stiff competition for staff from multinational companies with bigger budgets and strong employer brands. Demographic factors such as mass migration, an aging population and low birth-rates are also compounding matters, PwC found.
"It is crucial for private businesses to keep up a dialogue with authorities in charge of education so that the needs of businesses and social expectations can be harmonised considering the required degrees," said Gergely Juhász, tax and legal services partner at PwC Hungary.
More than half of business owners surveyed expect revenue growth in the next 12 months, while just 8% expect lower revenues. Optimism appeared highest in Croatia, where 67% expect growth, while Hungary is slightly above average at 56% being optimistic. The most pessimistic responses came from Romania (50%) and Russia (42%).
The cautious mood possibly reflects global sentiment that storm clouds are looming, the survey said. Many economists note evidence of an economic slowdown in 2019, which looks set to continue, driven largely by slowing growth in China and amid uncertainty caused by the US-China trade war. Concerns about Brexit, the euro area's stability and weakness in Western European economies are also undermining confidence in CEE,
said Balázs Mészáros, assurance partner at PwC.
The survey suggests that most leaders (68%) see digitalisation as a way to improve processes, and nearly half of those surveyed view it as a tool to analyse data to tailor products and services. Only 35% appear to have a more sophisticated take on digitalisation, seeing it as a way to develop end-to-end digital solutions that ultimately meet customer needs.
According to PwC, only 23% of private businesses in these regions plan to allocate more than 5% of their investments to digitalisation, compared with 39% in more technologically advanced parts of Europe such as Scandinavia.
"An increasing number of businesses in the CEE region recognise the importance of having a digital transition strategy, yet many private businesses in CEE are just at the initial stages of digitalisation," Juhász said.