British firms boast annual turnovers of EUR4 billion in Romania and make profits of EUR200 million, show Trade Register data.
Between 2010 and 2012 British companies had an average annual turnover of EUR6.3 billion and of EUR38 billion in the 2007-2012 period.
The profit made by British companies in Romania since Romania joined the European Union is EUR3.7 billion.
But turnovers and profits could in fact be higher because the Trade Register statistics only consider firms whose majority shareholders are British, but many British companies entered Romania via subsidiaries in other countries (one example is mobile telephony operator Vodafone, which features as having Dutch capital in the Trade Register).
British companies also stand to gain from Romania in other ways: the listing of Romanian companies in London (A&D Pharma between 2006 and 2011) and Romgaz at present. Franklin Templeton, the manager of Romanian investment fund Fondul Proprietatea, is American, but the Romanian management contract is conducted by Franklin Templeton’s London division). Gains are also made from state aid, as well as from social contributions of Romanians working abroad.
British firms also have investments in Romanian agriculture, where they have over 30,000 ha in their portfolio. In addition there are around 30-50 British expats working in Romania, according to ZF estimates. If one considers a net salary of EUR10,000 (plus extra benefits), they make at least EUR300,000 per year.
The biggest deal for the UK in Romania was the sale by the British state of two frigates for 161 million pounds in 2003.
So why are the Brits set against Romanians?
The UK was a staunch supporter of Romania joining the EU, with the reason cited at the time being that the country needed workers from countries such as Romania.
But now the UK’s position has radically changed and in the UK increasingly more voices are saying Romanians should not be given free access to the labor market. Human resources specialists, as well as political analysts say this is in fact a political stake and that Romanians are the scapegoat in the struggle for power of UK parties.
So the conflict generated by the liberalization of the labor market as of January 1 2014 between Brits and Romanians has no real stake because the number of Romanian citizens who make concrete plans to go and work in the UK is not large and the jobs they are likely to get are precisely those jobs that Brits say no to.
“There is definitely a political stake around the liberalization of the labor market for Romanians and Bulgarians. Since populist UKIP party, which endorses the UK’s exit from the European Union, has garnered more votes from the population, while the ruling conservative party is in somewhat of a crisis, UK’s prime minister David Cameron is looking to keep his voters by using some of the populist messages of his opponents. One of them is to do with discouraging Romanians from accessing the labor market,” believes Andrei Taranu, who teaches at the Faculty of Political Sciences within the National School for Political and Administrative Studies (SNSPA).
In fact, the head of the British government said this year he was considering introducing norms that would prevent migrants from “taking advantage” of UK social security before the labor market is free for Romanians and Bulgarians.
Andrei Taranu also says the Brits’ reticence towards Romanians also has to do with the problems they have faced with Romanians over time, such as begging and stealing.
“I think those who are most afraid of Romanians are minorities in the UK who don’t want to have competition accessing social aid and jobs, especially from better qualified people, who also speak English better,” Andrei Taranu also said.
In turn, Mirela Marinescu, recruitment manager within human resources group APT, says the dispute surrounding the liberalization of the labor market for Romanians has political connotations and no real basis because Romanians who wanted to work in the UK left Romania a long time ago.
“Most of Romanians who go to the UK have a specific target, they know where they are going because they are recruited by British firms. They don’t just go there without having any prospects, in the hope of finding something to do,” explains Mirela Marinescu.
Data centralized by Tjobs.ro, a website that recruits for jobs abroad, shows that the UK is not the first option for Romanians who want to work abroad, with jobs in Germany being more attractive for them, although they are fewer.
For instance, over the course of this year Tjobs.ro has had 78,386 applications for jobs in Germany, while 62,605 people applied for jobs in the UK.
“A British employer does not specifically plan to hire Romanians. So Britons and Romanians start off from an equal footing. And the UK is not the first option for a job abroad for many Romanians, who are turning towards northern countries anyway. An IT specialists is paid around 30% more in a northern country than in the UK.”
The UK is one of the ten countries which will have to allow free access to their labor market for Romanians and Bulgarians as of January 1 2014. The countries also include France, Germany, Belgium, Luxembourg and Austria.
More than 139,000 Romanians pay contributions of over 500 million pounds per year
Over 139,000 Romanians work in the UK, shows data cited by the Romanian Labor Ministry, which specifies their number could in fact be higher. Between January 2007 and March 2012 Romanian citizens received 111,000 national insurance numbers (a single identification number which centralizes social security contributions paid in the United Kingdom of Great Britain and Northern Ireland), which is necessary to employees and to those working on their own, shows data of the Labor Ministry citing information from the Department for Work and Pensions in the UK.
“But this is not an accurate reflection of the number of Romanian citizens who arrived in the UK after January 1 2007, only the number of documents issued based on applications from Romanian citizens. According to British regulations, certain categories of workers have the ability, but not the obligation of applying for registration certificates issued by the UK authorities,” specifies the Romanian Labor Ministry.
UK’s income tax is progressive (depending on the annual income, the contribution percentage is 20%, 40% or 50%) and the same is true of social security contributions.
If one considers a gross income of 20,000 pounds per year (almost 1,700 pounds per month), it means an employee will earn 15,962 pounds per year in net amount, so total contributions to the state are around 4,000 pounds per year. If each of the 139,000 Romanians contributes 4,000 pounds, this brings total contributions to 556 million pounds.
How much money consultants made from London stock exchange listing of Romanian companies
Romgaz, the largest and most profitable company controlled by the Romanian state, was listed this year on the London Stock Exchange through an initial public offering whereby it raised EUR144 million.
The listing also brought business of several million euros for consultants Goldman Sachs, Erste, Raiffeisen Capital & Investment, BCR and Clifford Chance. According to ZF estimates, the consultants collected EUR3-4 million (their fee was EUR7.56 million in total, including the Bucharest listing).
A London-based subsidiary of ING Bank brought Romanian pharmaceutical company A&D Pharma to the London bourse in 2006. A&D Pharma is the largest group in the local drug industry, which has now reached turnover of over EUR800 million. According to market information at the time, the consultants (the bank, the lawyers and other consultants) collected 3-4% of the IPO (EUR120 million), which means A&D Pharma paid around EUR5 million to them.
The British also made good money from managing Fondul Proprietatea (FP.RO), an entity created by the Romanian government in 2005 to compensate people who had been stripped of their properties by the communist regime who could not receive compensation in kind. The fund’s manager is Franklin Templeton Investments. US Franklin Templeton manages FP through a subsidiary in Romania, subordinated to the London division. In the past few years Franklin Templeton has collected EUR30 million through this contract.
Two British firms got state aid of EUR13M this year
Endava and SCC Services Romania are to UK companies which received total aid of around EUR13 million from the Romanian state this year.
Endava, which specializes in providing business IT services for financial applications, telecommunications, media and IT technology received a state aid of EUR9.5 million for a EUR20.67 million investment in software.
SCC Services Romania received a state aid of EUR3.87 million for a EUR7.74 million investment in expanding and diversifying the company’s activity.
(English version by Daniela Stoican)