Business contextual costs reach 10-year high

The costs of running a business have reach a ten-year record in Portugal.

Admin charges, distribution, legal and licensing costs, and red tape inefficiencies all increased for companies in 2024 making running a business increasingly more expensive and cutting into profit margins.

Not surprisingly, small and medium size companies in the transport sector are those which have been most pummeled.

This is according to the study offices at the ministries of Finance (GPEARI) and the Economy /Directorate-General of the Economy.)

In a report published recently in the Quarterly Bulletin of the Portuguese Economy, the authors have honed in on the results of an survey into contextual costs based on data also released by Portugal’s National Statistics Institute (INE).

The sentiment is that “contextual costs have had an increasing impact on running businesses” it concludes.

Based on the survey, a scale of 1-5 has been drawn up with 5 being the number of most obstacles that companies face.

In 2024 the overall indicator was at 3.14 or above what companies thought was the average at 2.5.

And this indicator has risen on the 3.09 registered for 2021 to the highest value since 2014 when Portugal was at the trail end of a Great Recession.

Contextual costs have risen over the past 10 years. In 2014 the overall indicator stood at 3.04.

The INE indicator looks at business perceptions on obstacles across nine categories: starting a business, getting licences, industrial networks, loans, the legal system, the tax system, administrative charges and red tape, road blocks to internationalisation and human resources.

Yet, of all these nine categories, it is Portugal’s legal system which is the worst, with the contextual cost indicator standing at 3.66 up on 2021, reversing an improvement trend since 2014 when it was at 3.7.

Licensing was at 3.55, tax at 3.28, admin costs 3.24 (up from 2.76), while the other costs access and cost of credit, industry networks, and stumbling blocks to internationalisation stood at 2.63, 2.72 and 2.83 respectively.

SOURCE: Negócios

Image: Freepix