Firms apprehensive as EU prepares for new frontiers

EU expansion provides challenges and opportunities for firms in the new — and old — members, reports Europe Correspondent Ann Cahill.

BUSINESSES in the new EU states are ill-prepared for enlargement but no less so than firms in other countries when they joined, a study says.

However, the preparations the new members have been making will introduce a new level of competition for current members, says Paul Skehan, the deputy general secretary of Eurochambres which carried out the survey.

The survey was carried out last month in the eight central European countries that become full members of the EU on May 1 and in Romania and Bulgaria.

Companies from Slovenia, the Czech Republic and Estonia the most open economies believe themselves to be the best prepared. But only 23% of companies in the highest scoring country, Slovenia, say they are fully informed about current EU laws.

On average, only 12% believe they are aware of the relevant provisions of EU legislation, while 21% say they have no information and 57% say they know only parts. The bigger companies claim to be more informed than smaller ones.

Secretary General of Eurochambres, Arnaldo Abruzzini, said prior to previous enlargements businesses also felt they were not prepared. "Some took incredible advantage of enlargement but were not prepared psychologically."

Preparations are most advanced in financial services, agriculture and manufacturing. Information and communications technology, real estate and construction firms lag well behind.

Firms surveyed expect to face tougher competition in their home markets as a result of enlargement. But they also foresee easier access to EU markets, more transparent business practices and a bigger inflow of foreign direct investment.

However, the main preoccupation of companies is a lack of finance, with 15% of those polled saying this will pose serious difficulties.

Despite their misgivings, however, 59% of companies remain optimistic down from 69% two years ago while a growing number, 20%, believe accession will have no impact.

Mr Skehan said some companies will struggle, but adds that enlargement will generally be good for Europe's economy. New members will have lower wage rates compared with firms in existing member states. Enlargement could also help bring taxes down, as has already happened in Estonia and Slovakia.

"The tax policy in Ireland over the past few years has been significant in what has happened with its economy. The effects of that kind of action flow through and if the accession adds downward pressure in terms of wages and taxes, it will be very positive", he said.

Enlargement could also boost the Lisbon agenda of increasing Europe's competitiveness, added Mr Abruzzini. He said the most important thing now for business in the new member countries was that they be effectively represented in Brussels.

"Organisations like Eurochambres will continue to help but we never take purely national positions, track legislation with particular national interests, and identify programmes of particular relevance to a national business community. In this regard, we strongly believe that Community funding should be made available to create Brussels-based national business representations from the Central European countries, said Mr Abruzzini.

Eurochambres is Brussels-based and has member organisations in 41 countries, representing over 17 million member companies.