The impact of EU enlargement

Most multinational investors in Central and Eastern Europe acknowledge that EU expansion will affect their business, but very few have made any budget provision to cover the cost of enlargement. In addition, most companies are only now starting to prepare for the changes that EU enlargement will bring. These are some of the findings of a pan-European survey commissioned by PricewaterhouseCoopers to determine to what extent, if any, companies are preparing for EU enlargement on May 1, 2004. The survey covered 100 of the major investors in Central and Eastern Europe and was conducted across a range of industry sectors. The majority of respondents (89%) confirmed that EU enlargement will affect their business and they need to prepare for the changes. However, two-thirds of the companies that responded to the survey have only started or will only start considering the effects of enlargement and preparing for them this year. 86% of the companies have provided no budget to manage preparation for enlargement. Only 7% of companies have put aside 50,000 euros or more. A regional approach is being adopted by the majority of companies (68%) in preparing for EU enlargement. This reflects not only the cost-effectiveness of preparing on a regional basis but also that the likeliest areas for restructuring are in logistics and distribution. With the removal of internal customs borders, companies can much more easily implement regional or pan-European warehousing systems, as happened with the introduction of the single market in the EU after 1993. Almost 20% of the respondents thought that their company structure would change because of accession, with half of those believing middle management will become more centralised, while 25% of say they foresee greater decentralisation. The greatest perceived changes will be in taxation, particularly indirect tax, and in accounting and reporting systems. This is reflected in the job functions of those responsible for preparing for accession, with 61% of the respondents being either