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Foreign investors keep positive outlook and plan to boost investments in Porto
17 June 2020
Foreign investors keep positive outlook and plan to boost investments in Porto
The Covid-19 crisis has hit Porto’s micro-enterprises, hospitality and tourism businesses and Portuguese investors the hardest. In contrast, large firms, tech companies and foreign investors tend to record smaller losses. These are just some of the key findings of a survey carried out by InvestPorto, the investment promotion body of the Municipality of Porto, which studied the effects of the pandemic on the city's strategic businesses.

InvestPorto drew its conclusions from the feedback of 65 firms located in the city, which was obtained through the "Porto: Covid-19 Business Continuity Survey" conducted between May 19th and June 5th, 2020. Surveyed companies employ over 4,000 workers and generated a combined turnover of more than 768 million euros in 2019. InvestPorto can provide an English translation of the findings report upon request.

One of the main highlights of the study is that, despite the strong impact of Covid-19 on the local economy, most companies deemed strategic for the economic development of the city are positive about their future and maintain their intention to recruit new employees.

Current status of companies in Porto

The majority of surveyed investors report that business activity has dropped by less than 30% due to Covid-19. However, about 15% have seen their activity reduced by more than half. The hospitality and tourism industry suffered the greatest impact from the crisis, with every investor in the sector reporting moderate to high losses.

On the other hand, the number of tech investors reporting high losses is minimal. The study also concludes that, in general, the smaller the scale of the company, the greater the losses due to the pandemic.

Some early signs of economic recovery have begun to surface. According to the survey, 82% of firms are now running normally. Only 3% were about to shut down and 15% were temporarily shut down (half of which were in the hospitality and tourism sector).

Another key conclusion of the study is that Covid-19 brought new business opportunities for 1 in every 4 investors in Porto. However, these new opportunities are focused on a handful of industries, notably in advisory and consulting services, in the IT industry and in shared service centres.

The overwhelming majority of companies, around 91%, claim to have secured their immediate funding needs. Only 8% of respondents said they did not have enough funds for the next two months, 60% of which were micro-enterprises.

Due to the coronavirus outbreak, eight out of ten companies switched to remote working. Among large firms the adoption of remote working was even more widespread.

The most frequently requested Covid-19 business support scheme allowed companies to pay taxes and social security contributions in lighter instalments. This option was requested by 22% of the companies participating in the study. Micro-enterprises made use of this measure more often than larger enterprises.

In addition, 15% of companies resorted to the employee furlough scheme ("layoff simplificado”) and 12% to either government-backed loans or the credit/rent moratoriums for companies affected by Covid-19. The take-up of the latter measures was higher among SMEs and large enterprises. Only 3% of the companies resorted to employee termination.

Investors agree with Porto's municipal response

The vast majority of investors (79%) approve the response of Porto City Hall to the pandemic and 71% agree with the measures introduced by the Portuguese national government.

Only 2% said they did not agree with the local government’s response in Porto, while 8% said they did not agree with the Portuguese national government’s approach. The study also found that the approval rate among foreign investors is higher than among Portuguese investors.

Post-pandemic business outlook for Porto

Two out of three investors are positive about the post-Covid-19 recovery period. However, in the hospitality and tourism sector, only half of companies look to the future in the same way.

Typically, the larger the company, the better its post-crisis prospects and, according to the study, foreign companies tend to see their future in a more positive way than most Portuguese firms.

One out of three investors plan to expand their presence in Porto, with the IT sector and foreign investors leading new investment intentions. On the other hand, a significant downturn in investments in the hotel and tourism sector can be expected.

Foreign investment shows little signs of slowing down, with more than half of foreign investors expecting to increase the pace of new investments in Porto. Among large and medium-sized companies, none expect to divest in the city. However, 40% of surveyed micro-enterprises expect to downsize their investments.

Half of the companies maintain their intention to continue recruiting more staff, but 21% have postponed new hires. In the IT sector, 67% of companies plan to continue hiring. In the hospitality and tourism sector, only 25% intends to recruit new staff.

Recruitment plans of foreign-owned businesses have changed relatively less due to Covid-19 than those of Portuguese companies. 72% of foreign companies maintain the intention to hire more human resources in Porto. Among Portuguese companies, only 38% foresee new hires.

InvestPorto's new top priority: support the local economic recovery

InvestPorto provides free, personalised support to companies and investors doing business in Porto. InvestPorto's team coordinates the response of different stakeholders in the Municipality of Porto to meet the unique needs of each investment, while ensuring that all private information remains secure.

Priority support is given to investments that add strategic value to the local economy of Porto, be it for boosting qualified employment and innovation, introducing new capabilities in the region or strengthening the local economy. Services offered to investors and companies include:
  • Local information and tailored advice (incentives and business intelligence)
  • Business location analysis
  • Licenses and permits fast-track
  • Networking and inter-institutional cooperation
  • Aftercare and support in talent attraction and retention
By conducting the "Porto: Covid-19 Business Continuity Survey", InvestPorto sought to better understand the local impact of Covid-19 and further improve its actions. At this time, the main focus of InvestPorto is in developing the right conditions for a swift adaptation of Porto's business community to the new challenges and opportunities brought by the coronavirus pandemic.

The study revealed that companies that sustained less losses due to the impact of Covid-19 make more use of InvestPorto's support services than those that suffered the most. Some of the resources that InvestPorto made available in response to Covid-19 include:
Additional resources and information for companies and investors in Porto can be found at www.investporto.pt

For further enquiries, get in touch with InvestPorto's team.

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