Economy

Foreign investment keeps the positive trend and anticipates reinforcing the economic activity in Porto

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Porto has been mostly struck by the pandemic at the level of micro companies, hotel and tourism sectors and national investors. Conversely, big companies, the Tech sector and international investors indicate slight losses. 

These are the main conclusions of a study carried out by the Municipality of Porto, through InvestPorto, the attraction of investment office, which has analysed the effects of the pandemic in the city's strategic business companies.

This study by Porto City Hall features the findings calculated on the basis of the feedback by 65 companies in the city, through the inquiry: "Porto: Covid-19 Business Continuity Survey", drafted by InvestPorto.

Participating companies with over 4.000 employees have generated a combined turnover of 768 million euros.

It is worth highlighting that despite the strong impact of Covid-19 on local economy, the majority of strategic companies for the city's economic development faces the future with optimism and retains the intention of continuing to recruit new collaborators.

Current situation of companies in Porto

The majority of investors indicate slight losses due to Covid-19, less than 30%, although 15% of those companies have cut their activity in less than half.

The Hotel and Tourism sector was the one who suffered the most with the crisis, with all investors registering moderate to high losses.

In contrast, the ICT sector investors indicate residual losses. The study also concludes that, as a general rule, the lower the operations' size, the greater are the losses due to the pandemic.

But the first signs of economic recovery are in place. According to the report, 82% of the companies are running normally.

The sample shows that only 3% of the companies were about to put their activity on hold; and 15% had temporarily suspended activities (half of those belong to the Hotel and Tourism sector).

Another finding of this study highlights that Covid-19 has brought new business opportunities to 1 out of 4 investors in Porto. These opportunities arrive in an asymmetric shape, focusing on consulting services, technological business and shared services.

The overwhelming majority of these companies, about 91%, indicates that they are capable of meeting immediate liquidity needs; only 8% of respondents said they had no cash flow for the next two months, 60% of these companies are micro companies.

As a way of tackling Covid-19, 8 out of 10 companies have adopted the teleworking regime. Bigger companies have also adhered to this solution.

Fractioned payment of tax excises and Social Security was the most popular extraordinary public support measure, and it was requested by 22% of the companies that participate in the study. Micro companies have resorted to this measure more than bigger companies.

Besides, 15% resorted to the lay-off simplified scheme and 12% resorted to credit lines or to moratoria granted to companies affected by Covid-19. Both SME and bigger companies adopted this scheme and only 3% of the companies resorted to human resources redundancy.

The biggest majority of investors approved municipal support measures. Circa 79% of investors approves the way the Municipality of Porto tackled the pandemic and 71% agrees with the measures taken by the Portuguese government.

Only 2% of the companies affirmed that they disagree with the measures taken by the Municipality, and 8% said they did not approve of the measures by the Portuguese government.

The study also indicates that the approval rate by foreign investors is higher than that of national investors.

The post pandemic scenario

Two out of three investors are facing the recovery period for Covid-19 on a positive note. However, only half of the companies of the Hotel and Tourism sector foresees the future on the same positive note.

As a general rule, the biggest the company the better its post-Covid-19 period perspectives; also, according to this study, foreign-owned enterprises see the future in a brighter way than the national-owned companies.

One out of three investors anticipate to expand its presence in Porto; the ICT sector and the external investors lead when it comes to new investment intentions. Conversely, the Hotel and Tourism sector is expected to experience a period of contraction.

Foreign capital will not contract, as two out of three foreign investors anticipate to increase the rhythm of new investments in Porto and no medium or bigger company foresees cutting investments in the city. However, 40% of the micro companies anticipate a period of reduction.

Half of the companies anticipate to continue hiring, but 21% postponed new hires. In the ICT sector, 67% of the companies anticipate that they will continue hiring. Within the Hotel and Tourism sector only 25% of the companies intend to hire.

Foreign companies staffing plans sustained fewer changes due to Covid-19, and 72% keep the intention to hire. When it comes to Portuguese companies, only 38% anticipate new hires.