For the twenty seventh time the SME Outlook, a joint research project of the MKIK Institute for Economic and Enterprise Research (IEER), the Observatory (Figyelő) and the Volksbank, examined in July 2011 the Hungarian small and medium enterprise sector, its financial position, prospects, and the factors that influence an individual company's business position. In addition to questions related to the current business situation some current topics and issues and the corporate responses to these are analyzed which have an important role to play in this sector’s adaptability, financial standing and development. In the July 2011 survey problems of late payments and debt queues were examined among Hungarian firms.

The July 2011 survey found that one third of the business partners of small and medium-sized enterprises pay after the payment deadline routinely and that these late payments represent 38% of total sales, thus the breadth and depth of late payments in mid-2011 was similar to that of six months ago. The problem of late payments mostly affects construction companies; firms mainly involved in exporting are among the least affected by this problem. The rate of companies taking part in a debt queue rose to 45% in the last six months. The problem of the debt queue most frequently occurs at construction companies: more than 70% of them are afflicted with this.

July 2011 marked the seventh occasion of the MKIK Institute for Economic and Enterprise Research (IEER) quarterly business climate survey. This study involves 400 listed companies involved in manufacturing, construction and services, which are representative of Hungary's economic performance and sector distribution, and is done on a quarterly basis.

According to the results from the July 2011 survey, the business climate indicators pertaining to the current situation of Hungarian enterprises – with the exception of production level indicators – all showed an increase in July 2011, leaving only a partial indication of the less favourable macroeconomic situation. The short-term expectations of companies, however, show a significant negative shift: with the exception of the expected state of business situation, all other indicators for the next six months fell. As a result, the IEER quarterly Business Climate Index continued to decline in the second quarter after a peak in January, and the Uncertainty Index is in decline compared to the previous quarter.

Looking at the export turnover of businesses it was mostly the exporting firms that showed the highest score in the business climate index. The steady increasing tendency of the index since July 2010, however, turned negative in the summer of 2011. Exporters as well as producers for the domestic market are generally more optimistic in their outlook of their business situation for the next half-year; however, job creation will come from domestic firms only. As for the development of investment activity, the data suggests that it is more likely to decline in the coming months among companies operating in Hungary.

In April 2011 for the twenty-seventh time the Institute for Economic and Enterprise Research (MKIK GVI) conducted its business climate survey, in where 14,000 companies are examined biannually (April and October) with the assistance of regional commercial chambers. This is the largest and most comprehensive survey of its kind within Hungary, and is part of the Eurochambres business climate survey of 14 million companies as well. Based on the number of responses received, 1,803 business managers replied to our questionnaire in April.

In the April 2011 survey, we recorded the attitudes and opinions of managers toward the New Széchenyi Plan (USzT), a framework program for tender opportunities. The results show that 78% of respondents are familiar with the USzT, yet only 43% plan to use it. Familiarity with the USzT is very similar by different parameters of the companies, and we can say that most domestically owned enterprises are aware of the program and that most of these companies are intending to apply for tenders within the auspices of the USzT.

Slightly more than half of our respondents applied for public and EU tenders in the last five years, with large companies being the most active. The data suggest that the proportion of successful tenders increases with company size. As for the Széchenyi Card Program, 16% of the respondents presently take part. Among the examined companies this program is most widespread among small enterprises of ten employees or less and construction firms.

The joint research efforts of SME Panorama, the Monitor, the Economic and Enterprise Research Institute (GVI) and the Volksbank have set a target of making available, on a quarterly basis, corporate empirical surveys based on the study and analysis of Hungarian small and medium enterprises (SMEs) -- their financial position, prospects and the factors affecting their businesses. A government proposal to the Hungarian National Assembly in 2011 substantially changed personal taxation in several important ways. The expectation was that no one would be worse off with the introduction of the new system; however, several studies pointed out that not everyone will be positively affected by this change. The aim of the MKIK GVI study is to illustrate the proportion of SME workers adversely affected by the introduction of a flat personal income tax in 2011, as well as show which employees were most affected by the law. A third aspect will be an examination of how the companies responded to the changes in personal income, that is, what adjustments were observable until April 2011, when the survey was completed.

The results show that the gross wages of employees at 35 percent of the companies surveyed has not changed in 2011, and declined for 1 percent of SMEs. A majority of businesses in turn raised wages: 27 percent of companies raised wages by less than 5 percent while 36 percent raised wages over 5 percent. The wage rate together with a company's business situation and outlook for the future are significantly related: a favorable business outlook means that a higher wage increase will be more likely. The results found that 82 percent of SMEs have workers whose real incomes fell as a result of the tax system changes introduced in 2011. For those businesses that are entirely Hungarian owned an average of 53% of workers are adversely affected by the new income tax law, while at entirely foreign-owned companies it’s only about 36%.

The changes in personal income tax rules may lead to the beginning of different adaptation strategies by companies. 52 percent of companies claim to fully compensate workers for lost wages, while another 19 percent claim to only partially offset lost wages. The remaining 29 percent, however, are unable to compensate their workers at all for the loss of income. Thus, companies in a favorable business position are able to wholly or partially offset the loss of wages, while those in an unfavorable financial situation are typically unable to compensate their workers for a loss of income.

Arbitration Boards - operated by the Hungarian Chamber of Commerce and Industry - are out-of-court bodies that are responsible for the settlement of consumer disputes.

Arbitration Boards - operated by the Hungarian Chamber of Commerce and Industry - are out-of-court bodies that are responsible for the settlement of consumer disputes.

IEER conducted a survey – between 3 and 7 September 2007 – among enterprises about their opinions on the legal settlement options between enterprises and on the working processes of Hungarian tribunals. We analysed the answers – sent back by post, e-mail, fax or online format – of 321 enterprises. In addition, we used telephone queries with legal representatives of 50 large companies. On this research, IEER worked together with the Supreme Court of Hungary and the Hungarian Chamber of Commerce and Industry.

The Hungarian Court of Arbitration - operated by the Hungarian Chamber of Commerce and Industry – is one important institute of legal certainty in Hungary. In our recent analysis, we are measuring the average time of the judgement process using data from 2006–2008. Results show that litigation process in the Hungarian Court of Arbitration do not exceed more than a year in the majority of cases. Moreover, there is no correlation between the importance of cases (measured by pecuniary value) and the litigation time.

This research program aims helping the regional development and training committees (RFKB – in Hungarian) in order to establish a quota of the maximum number of different vocational trainings. The research is based on IEER's own large-sample empiric survey from 2011. The survey covered the opinion of different agents of the labor demand such as micro-, small-, medium-, and large sized enterprises, and it also aimed to find out the opportunities that a recent graduate has on the labor market. In the analysis, we also evaluated the expected labour demand for vocational school graduates and compared the results to the expected number of recent graduates in 2014.

It was the 27th occasion in April 2011 when the Institute for Economic and Enterprise Research (HCCI IEER) carried out its business climate survey. This is being realized in April and October each year by contacting more than 14.000 companies in cooperation with the regional Chambers. In Hungary this is considered to be the most extensive business climate survey involving the highest number of companies. It is also a part of the European business climate survey fulfilled by Eurochambers covering 14 million ventures. From among the companies contacted 1803 CEOs have filled out our questionnaires – our research results are based on their responses.

According to our April 2011 database the amelioration of business climate has been further continuing on since October 2009. The IEER Business Climate Index /BCI/ showed an improvement in comparison with the past six months: from the October +10,4 value a change to +16,8 points could be observed. The value of the IEER Uncertainty Index has not changed compared to the outcome of our October research: it is still rather high being at the level of 45,5 points. Consequently as per our results the improvement of business climate has been steadily developing in the Hungarian enterprise sector although the uncertainty factor related to the expectations and to the judgement of business situation can still be considered as significant. On long-term bases – in view of the April data of the previous years – this year’s outcome indicates improvement as well. However, the fact that the level of our business climate index recently reached is still inferior to that of the period 1998 – 2002 is to be taken into account. Within the Hungarian economy the recovery process from the crisis is still on but is rather slow in respect of the economic events of the last three years.