Hungary reportedly mulls further measure against large retailers in fresh blow to foreign chains

Hungary reportedly mulls further measure against large retailers in fresh blow to foreign chains
By bne IntelliNews October 28, 2015

The Hungarian government is drafting a bill that would oblige large retailers to nearly double their staff, local media claimed on October 28.

The legislation, expected to come into force as of next year, will deal another blow to the country's large supermarket chains, which are mostly foreign-owned. Retailers are already feeling the impact of a series of new laws that seriously affected their operations.

According to a report in Magyar Idok, under the new proposal retailers with outlets larger than 400 square metres (sqm) would be required to employ one worker per 70 sqm. As a result, retailers would need to double their workforce, the daily estimates. The government claims the measure is aimed at improving services offered by retailers and making their operations more efficient. The move will, however, also force retailers to raise their expenditure.

Operators of large supermarkes such as Tesco and Auchan are expected to object to the measure, citing lack of resources, yet “as a result of gradually increasing retail sales, retailers saw their profit increase by HUF15bn-HUF18bn (€58mn) more than planned”, Magyar Idok notes.

The new bill is the latest of a series of new laws critics say are mainly aimed at bleeding foreign-owned companies. Many see the policies of the ruling Fidesz party in sectors such as retail, banking and utilities as dictated by the interests of domestic players. Critics accuse the party of close connections to domestic retailers, including CBA, Coop and Real, which mostly run small stores that duck under the restrictions.

The government has pushed through legislation forcing large retailers to stay closed on Sundays, a law requiring fast moving consumer good retail chains with an annual turnover of more than HUF50bn to close if they fail to report a profit over two successive years, and introduced a major hike to the supervision fee payable by food retail chains. In response, Tesco said it will close 13 stores and cut hundreds of jobs, while Spar said it will slash its investment programme in the country.