SMEs in Europe at the crossroads: further policy boost needed to help in recovery

17-10-2012 — /europawire.eu/ — Europe’s Small and Medium Sized enterprises (SMEs) continue to strive for recovery. If we take the EU as a whole so far their overall efforts have mainly led to ‘jobless’ growth, as shown by diverging trends in the EU-27 Member States. Today in Brussels, the first day of the 2012 European SME week, the European Commission released results of the SME Performance Review 2012 report, together with fact sheets describing SMEs’ progress in all EU Members States. Despite the challenging environment, SMEs stood their ground as the backbone of the European economy, accounting for more than 98% of all enterprises with some 20.7 million firms and more than 87 million people employees. The lion’s share 92.2%) of SMEs is represented by micro firms with fewer than ten employees. It is estimated that SMEs account for 67% of total employment and 58% of gross value added (GVA)¹.

Trends in Member States are increasingly divergent and there has yet to be a positive signal on the employment front. In this fragile situation, decisive policy action to tackle the factors that determine SME growth may tip the balance.

European Commission Vice President Antonio Tajani, Commissioner for Industry and Entrepreneurship, said: “SMEs have the potential to restore growth in Europe. They are at the heart of our efforts — as highlighted by the proposal to reindustrialise Europe that I released a few days ago. The most ambitious action plan to boost entrepreneurship Europe has ever seen will follow in November. We offer support and advice at a so far unknown level. We try to restore confidence so that SMEs can make progress once again and drag us out of the current crisis.”

Links:

Memo 12/783 “SME Fact sheets on 27 Member States”

The 2012 SBA performance review

More information on SME week 2012

SMEs performance varies considerably between Member States

SMEs in Austria and Germany² did particularly well. Their SME sectors are the only ones which exceeded their pre-crisis 2008 levels of both gross value added (GVA) and employment. However, in the majority of Member States, SMEs have so far been unable to bounce back to their pre-crisis levels.

On a more positive note, there is evidence that an increasing number of Member States have recently managed to turn the corner, with their SMEs once again starting to add employment and grow their business — pointing to a more sustained turnaround in the future.

So far, SMEs have fully recovered in only very few countries. The report finds that:

• Growing economies with increasing or at least stabilised demand help SMEs to maintain or even grow their business.
• The real value added growth is a result of both employment growth and real productivity growth, with the contribution of the former being clearly dominant.
• It also helps if an economy is strong in high-tech and medium high-tech manufacturing and knowledge-intensive services.
• Employment reduction in SMEs in Member States with the above characteristics was also much more modest than in others.

In addition, a number of cyclical and structural factors impact SME performance.

• SMEs’ access to finance have been deteriorating over recent months in most Member States, with a significant number not obtaining requested bank loans.
• there is evidence that the business environment in the individual Member States continues to differ significantly.

Number of SMEs, employment in SMEs and value added of SMEs (2005=100)

Note: 2011 and 2012 figures are estimates.

Firms in the so-called “high-tech manufacturing” and “knowledge-intensive services” performed particularly strongly in terms of productivity and employment. There are an estimated 46 000 SMEs in high-tech manufacturing (HTM) in the EU, and more than 4.3 million SMEs offering knowledge-intensive services (KIS). These include SMEs producing pharmaceutical products, electronics or legal and accounting services, as well as scientific R&D and creative industries. Together they represent more than a fifth (21.1%) of all SMEs in the EU.

The report argues that the creation of more such enterprises should be an integral part of any growth strategy and suggests appropriate policies measures.

EU Member States are reacting to SMEs’s problems

The number of national policy measures in support of SMEs has risen constantly and dynamically over the past years, with 38% more measures being taken in 2011 than in 2010. Close attention was given to issues such as:

• promoting entrepreneurship (accounting for 18% of the total policy measures),
• promoting the skills upgrading and fostering innovation in SMEs (16%),
• improving access to finance (15%).

However, the implementation of SME supporting measures is still unbalanced with some measures being still ignored by a substantial number of countries, such as facilitating a second chance for entrepreneurs who failed once, or taking into account the characteristics of small businesses when designing legislation.

Distribution of policy measures across SBA principles (2011)

The Commission, in cooperation with Member States, is working on a host of ongoing and upcoming initiatives to help SMEs. Today’s start of the European SME week kicks off a series of events celebrating SMEs all over Europe. The Entrepreneurship action plan —a number of concrete actions aimed at boosting entrepreneurship in the EU — will be also launched later this year. The plan will complement and build on the Small Business Act for Europe, driven by a network of national SME envoys. The next meeting of SME envoys, at which they will discuss progress in specific SME policy areas, will take place during the SME assembly in on 15-16 November in Cyprus.