Flourishing CEE region boosted by Brexit

Key insights:

  • Central and Eastern Europe (CEE) is benefitting from a surge in employment as Brexit is encouraging migrants from certain sectors back to the region, and comes after CEE-focused funds raised a decade-high total in 2018. 
  • Growth in CEE is also encouraging migrants to move back to the region. Poland, for example, is growing through a ‘golden age’ of economic growth with growth averaging 4.2 per cent between 1992-2019.
  • Newly adopted EU rules are also forcing new member states to modernise and adopt more capitalist-centric policies, years on from Communism.
  • Even decades on from the fall of the Berlin Wall, new opportunities are appearing in the region as countries continue to implement new policies.

Central and Eastern Europe (CEE) is benefitting from a surge in employment as Brexit is encouraging migrants from certain sectors back to the region, and comes after CEE-focused funds raised a decade-high total in 2018.

"Unemployment is disappearing in the CEE region, and Brexit has helped to attract people, particularly those in financial services, back to the region," Pawel Gieryński, managing partner at Abris, said.

There are estimated to be about 1.6 million people living in the UK that emigrated from CEE, driven by new EU member states such as Poland and Hungary that joined in the early 2000s and Croatia in the decade after. Freedom of movement involving the UK is likely to end in 2021, and the legal status of some EU migrants may come into doubt after this point.

High growth in CEE is also encouraging migrants to move back to the region. Poland, for example, is growing through a ‘golden age’ of economic growth with growth averaging 4.2 per cent between 1992-2019 and was said to have the best growth in the western world in 2019.  

Private equity funds that focused purely on the region generated €1.8bn in 2018, higher than at any point in the previous decade. The UK’s imminent exit from the EU may have helped drive this growth, but is not the only reason.

Newly adopted EU rules are forcing new member states to modernise and adopt more capitalist-centric policies, years on from Communism.

"Convergence with EU rules has encouraged countries in CEE to modernise," Gieryński added. "No government in the region, for example, has proper policy for energy sustainability. However, alignment with EU rules encourages these countries to adopt new modern policies that could encourage investment opportunities."

After the fall of Communism in 1989, the privatisation of many sectors resulted in a multitude of new companies created and, therefore, many new investment opportunities to emerge. Even decades on from the fall of the Berlin Wall, new opportunities are appearing in the region as countries continue to implement new more financially-friendly policies.

“Many of these markets are still highly fragmented, with a multitude of SMEs operating in each sector, meaning there is potential for consolidation through buy-and-build strategies,” Gieryński said

“This has created a number of highly attractive investment opportunities in the CEE countries."

While deal volumes for the region fell in the first part of 2019, the number of deals completed in the year to end July (46) was comfortably ahead of the same period in 2018 (36). With no shortage of opportunities emerging, long-term prospects appear positive.

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