2015 sme annual report_final_12!11!15

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Annual Report on European SMEs

2014 / 2015

SMEs start hiring again

SME PERFORMANCE REVIEW 2014/2015

FINAL REPORT

NOVEMBER 2015

This report has been prepared in 2015 for the European Commission, Directorate-General for Internal Market,

Industry, Entrepreneurship and SMEs; Directorate H: COSME Programme; Unit H1: COSME Programme, SMEEnvoys and Relations with EASME by the consortium composed of:

CARSA

PwC Luxembourg

Innova SpA

The University of Manchester, Manchester Institute of Innovation Research

London Economics

DIW Berlin

DIW Econ

Authors: Patrice Muller, Cecilia Caliandro, Viktoriya Peycheva, Dimitri Gagliardi, Chiara Marzocchi, RonaldRamlogan and Deborah Cox

Editor: Karen Hope

DISCLAIMER

The information and views set out in this publication are those of the author(s) and should not be considered as the official

opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included

in this publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for

the use which might be made of the information contained in this publication.

ISBN 978-92-79-52922-1

doi: 10.2873/886211

© 2015 – European Union. All rights reserved.


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PROJECT CONSORTIUM MEMBERS

The project consortium is composed of the following organisations:

•

Prie!aterhouseCoopers Soi"t" Coop"rati#e – the largest professional services firm in Luxembourg with over2100 people employed from 57 different countries. It provides audit, tax and advisory services including managementconsulting, transaction, financing and regulatory advice to a wide variety of clients from local and middle market

entrepreneurs to large multinational companies.

• CARSA – a leading Spanish research, innovation and technology consultancy, with 25 years of experience in managingprojects, carrying out studies for public authorities, evaluating research funding programmes, and performing other research

and innovation activities, with a focus on SMEs.

• $he %ni#ersit& o' Manhester( Manhester Institute o' Inno#ation Researh – a research centre in theManchester Business School at the University of Manchester. The research and lecturing staff in the Institute focus on

technology, innovation management, science, technology and innovation policy, technology foresight, and the evaluation of

research and related topics.

• I))*+A SpA – a research, innovation and technology consultancy with a presence in 8 countries, including the UnitedStates. The consultancy is a major European player in management & innovation consulting, technology transfer and

valorisation, seed capital support and applied research lab facilities.

• London Eono,is – a leading UK consultancy, specialised in economics and policy analysis, with expertise in analysisof applied economics in all areas where they can provide a powerful set of tools for decision-makers.

• DI- .erlin (German Institute for Economic Research) – the leading German think tank for applied economic research andpolicy advice, headquartered in Berlin since its founding in 1925.

• DI- Eon – the economic consulting company of DIW Berlin, with a clear focus on the business needs of clients, whose

work is based on the combination of sound economic theory with advanced economic tools and real data.


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Table of Contents

FOREWORD .......................................................................................................................................................................................................... 1

EXECUTIVE SUMMARY ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............. ............ ............ 3

1. INTRODUCTION ....................................................................................................................................................................................... 7

PRELIMINARY REMARKS ................................................................................ ............................................................... .... 7

SME PERFORMANCE REVIEW AND THE SMALL BUSINESS ACT ............................................................................... .................. 8

IMPORTANCE OF SMES IN THE ECONOMIES OF THE MEMBER STATES IN 2014 ........................................................................... 9

IMPORTANCE FOR SMES OF DIFFERENT SECTORS OF THE EU ECONOMY IN 2014 .............................................. ........................ 12

IMPORTANCE OF SMES IN DIFFERENT SECTORS OF THE EU ECONOMY IN 2014......................................................................... 14

COMPARISON OF THE IMPORTANCE OF SMES IN THE EU28 ECONOMY AND OTHER SELECTED COUNTRIES ...................................... 15

2. THE ACTUAL AND EXPECTED PERFORMANCE OF SMES FROM 2008 TO 2016 ...................................................... 18

MACROECONOMIC CONDITIONS AND BUSINESS ENVIRONMENT FACED BY SMES IN 2014 ................ ......................................... 18

Overall macro-economic performance of the EU28 economy ............................................................................ 18

Evolution of aggregate demand components in the EU28 economy .................................................................. 19

Business conditions faced by !Es in 2"1# ........................................................................................................ 2"

HOW HAVE SMES FARED IN 201! AND 2014" ................................................. ............................................................... . 21

HOW HAVE EU28 SMES FARED SINCE 2008? ........................................... .......................................................... ............. 25

THE PERFORMANCE OF EU# US AND $APANESE SMES A COMPARATIVE ANALYSIS .................................................................... 28

THE OUTLOOK FOR EU28 SMES IN 2015 AND 201% .............................................. ...................................................... ..... !1

3. CONTRIBUTION OF SMES TO JOB CREATION ......................................................................................................................... 36

EMPLOYMENT DYNAMICS IN VARIOUS SECTORS OF THE ECONOMY ......................................................... ................................. 42 !E employment by broad economic sector from 2""8 to 2"1# ....................................................................... #$

!ore granular industrial analysis of !E employment gro%th ......................................................................... ##

!E employment dynamics in sectors of different e&port intensity ................................................................... #9

!E employment dynamics in high-technology and 'no%ledge intensive sectors ............................................ ()

EMPLOYMENT DYNAMICS BY SI&E CLASS .................................................. .............................................................. ............ %2

HOW DO SMES WHICH CREATED EMPLOYMENT DIFFER FROM THOSE WHICH REDUCED EMPLOYMENT" ......................................... %!

THE PATTERN OVER TIME OF NET EMPLOYMENT CREATION ' DESTRUCTION BY SMES IN RECENT YEARS .......................................... 74

FURTHER ANALYSIS OF THE CHARACTERISTICS OF EMPLOYMENTCREATIN( SMES FOR SELECTED COUNTRIES ................................... 78

4. CONCLUSIONS ..................................................................................................................................................................................... 81

REFERENCES .................................................................................................................................................................................................... 83

I. ANNEXES ................................................................................................................................................................................................ 85

II. METHODOLOGICAL OVERVIEW .................................................................................................................................................. 153

III. INDEX OF FIGURES .......................................................................................................................................................................... 155

IV. INDEX OF TABLES ............................................................................................................................................................................ 159


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A N N U A L R E P O R T O N E U R O P E A N S M E s 2 0 1 4 / 2 0 1 5

1

FOREWORD

For the first time in a number of years, our annual EU SME report presents good news at a time whenthe EU has 23 million unemployed citizens, many of whom are young and have not yet started theircareers

!here are positive signs of a turn"around for Europe#s SMEs $s the report finds, a sizeable minority ofSMEs have already e%panded their businesses and wor&forces and it is particularly encouraging to note

that many of these are young firms

!he report also states that there is no reason for complacency Many more SMEs need to 'oin the club of 'ob creators (n terms of policy, this means that Member States and the European )ommission need to

continue their efforts to create the best possible policy environment !his re*uires a comprehensiveapproach, with SMEs at the centre $ priority strongly endorsed by the European )ommission under themandate of +resident unc&er

!angible progress has been made since the adoption of the Small -usiness $ct for Europe .S-$/ in

2001 !he findings of 456#s SME +erformance 4eview7 our analytical tool that monitors theS-$#s implementation 7 confirms such progress 8owever, further efforts are needed to fully implementthe S-$ in Member States !his )ommission#s SME strategy encompasses all EU policy areas $ll newlyinitiated EU policy pac&ages are designed with SMEs in mind !he new Single Mar&et Strategy .SMS/ isan e%ample !he SMS sees the potential of the EU as a tool for building a stronger and fairer EU

economy, one mar&et place with fewer obstacles to enable the free movement of goods and services

$s the EU SME Envoy and Member of the )ommission for the (nternal Mar&et, (ndustry, Entrepreneurshipand SMEs, ( am ideally placed to coordinate the SME policies of the )ommission and of the Member

States For me, the findings of this report demonstrates that our 'oint efforts are starting to showpositive results as well as a positive and encouraging challenge to ensure that we remain engaged in

pro"SME policy reforms in the EU

El9bieta -ie:&ows&a

Member of the )ommission for the (nternal Mar&et, (ndustry, Entrepreneurship and SMEs and EU SMEEnvoy


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EXECUTIVE SUMMARY

!his report provides an overview of the past and forecasted performance of SMEs from 2001 to 20;? of the increase in employment in 20;> in the non"financial business sector,

which includes all sectors of the economy e%cept for @financial servicesA, @government servicesA,

@educationA, @healthA, @arts and cultureA, @agriculture, forestry and fishingA SMEs are a highly diverse

population of enterprises, and are present in every noo& and cranny of the economy, with activities

ranging from the production of artisan food to the production of high tech space e%ploration e*uipment,

from retail services to the provision of highly specialised professional services, from focusing primarily

on serving domestic customers to focusing mainly on the e%port mar&ets

(n short, SMEs are ubi*uitous, and in 20;> accounted for BB1? of all enterprises in the non"financial

business sector in the EU21 For every &m2 of land surface the EU has an average of C SMEs Moreover,

in 20;> SMEs employed almost B0 million people " amely, in 20;> EU21 SME

value added grew by 33? and employment by ;2?, while in 20;3 value added grew by ;


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where it stood in 2001 (n contrast, SMEs in the @accommodation and food servicesA and the @business

servicesA domains benefitted from robust growth in these sectors

$ more detailed analysis at the Member States level shows that SMEs in only = countries .$!, -E, E,

M!, GU, SE and UH/ have fully recovered in terms of the number of SMEs, value added and employment

(n contrast, SMEs in B countries still have to achieve a recovery in any of the 3 performance indicators

.EG, ES, 84, 8U, (E, (!, +G, +! and 45/ (n the remaining Member States, SMEs have only achieved a

recovery in one or two of the performance indicators

rilling further down into the sectorial performance of SMEs across the different Member States, one

observes that a full recovery in terms of number of SMEs has been achieved in the ma'ority of Member

States in the @services sectorsA, while the reverse is true in the @manufacturingA and @constructionA sectors

!he recovery in terms of value added is more unevenDA manufacturingA, @constructionA, and @wholesale and

retail tradeA .the largest sectors/ are still lagging behind in most Member States, while @accommodationA,

and @business servicesA have performed positively throughout almost all the EU21 !he performance is

somewhat more negative for employment, where only a few countries have achieved more than full

recovery in at least four sectors .$ustria, ermany, France, Malta, Gu%embourg, United Hingdom and

Sweden/

!he positive developments for EU21 SMEs are e%pected to gain momentum in 20;C and 20;, eightMember States .Githuania, (taly, )roatia, Gatvia, )yprus, +ortugal, Spain and reece/ post

double"digit net employment losses


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• !he strongest SME employment growth was recorded mainly in sectors which are small For

e%ample, the best performers in terms of SME employment creation were Ielectricity, gas steam

and air conditioning supply, water supplyI, Iadministrative and support service activitiesI, and

Isewerage, waste management and remediationI !hese sectors show employment growth in

e%cess of ;0? over 2001"20;3, but they account for less than ;0? of total SME employmentEmployment in some of the larger sectors such as @food and beverage serviceA, @legal and

accountingA, and @real estateA, grew by ;0?, B?, and 1? respectively over the period 2001"

20;3 !hese three sectors account for 1?, 3? and 3? respectively of total SME employment

(t is estimated that one out of five EU SMEs e%perienced a net growth in terms of employment during

the crisis years !his represents a relatively large sub"segment of appro%imately > million of the total

22,3 million SMEs in the EU

6hat are the characteristics of these SMEs which appear to be spearheading a recovery in SME 'ob

creationJ

Firstly, the 'ob"creating SMEs were primarily those providing services !hey were far more prominently

represented in this group than, for instance, manufacturing firms 8owever, there is no reason or

indication to assume that manufacturing firms could not replicate the employment e%pansion observed

in the services firms

Secondly, net employment creation was particularly strong from 2001 to 20;> in &nowledge"intensive

services !his was the case across all three SME size classes .ie micro, small, and medium"sized firms/

(n contrast, all of the four types of technology"intensive goods producing sectors .ranging from low

technology to high technology/ showed net 'ob losses between 2001 and 20;3 uring this period the

less technology"intensive SMEs lost a higher proportion of their 'obs than the more technology"intensive

SMEs (n 20;>, in terms of employment, the goods"producing sectors stagnated

!hirdly, young SMEs of no more than nine years of age were the main net employment creators in recent

years 8owever, a number of older firms created new 'obs as well, or &ept their staff, which contributed

to stabilising the labour mar&et as a whole

Finally, general economic conditions, especially the macro"economic environment, have a ma'or

influence on the SMEAs employment creation performance !his means that many of the 'ob"creating

firms were based in Member States with a more favourable macro"economic environment

!hus, while the analysis found that particularly young firms active in &nowledge"intensive service sectors

and based in favourable macro"economic conditions were the main net 'ob creators, one should not

neglect or underestimate the importance of all the other SMEs for the growth and 'obs in the EU $s this

report focuses on the analysis of recent SMEs trends, it cannot provide detailed recommendations as

regards the future course of EU SME policy, but may stimulate the discussion not only on how the

success of the best performing group of SMEs can be sustained, but also on how can it be replicated

across all sectors, SME age classes and Member States


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; (ntroductionPreliminary remarksPreliminary remarksPreliminary remarksPreliminary remarksSMEs are the bac&bone of the European economy

SMEs are defined as businesses which employ less than 2C0 staff and have anSMEs are defined as businesses which employ less than 2C0 staff and have anSMEs are defined as businesses which employ less than 2C0 staff and have anSMEs are defined as businesses which employ less than 2C0 staff and have an

annual turnoverannual turnoverannual turnoverannual turnover of less than EU4 C0 million, and K or their balance sheet total isof less than EU4 C0 million, and K or their balance sheet total isof less than EU4 C0 million, and K or their balance sheet total isof less than EU4 C0 million, and K or their balance sheet total is

less than EU4 >3 millionless than EU4 >3 millionless than EU4 >3 millionless than EU4 >3 million !hey comprise three categories of enterprises, namely

micromicromicromicro, smallsmallsmallsmall, and mediummediummediummedium""""sizedsizedsizedsized enterprises !he size"class definition used

throughout the present report is based on the definitions used in the Structural

-usiness Statistics .S-S/ database maintained by Eurostat, and the definition is

solely based on the number of people employed .for precise definitions see

$nne% (;/

(n 20;>, 223 million SMEs were active in the nonnonnonnon""""financial business sectorfinancial business sectorfinancial business sectorfinancial business sector

across the EU21 .$nne% (2/ !he non"financial business sector consists of all

sectors of the economies of the EU21 or Member States, e%cept for financial

services, government services, education, health, arts and culture, agriculture, forestry, and fishing; SMEs

account for BB1? of all enterprises in this sector

(n 20;>, SMEs in the non"financial business sector generated more than EU4 3= trillion of value added

.C1? of the sectorAs total value added/, and employed almost B0 million people .


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6ithin the SME population, micro"enterprises accounted for B2=? of all

enterprises active in 20;> in the non"financial business sector, and small and

medium enterprises for only of the three SME groups in total non"financial sector business employment

and value added was much less s&ewedD

• Micro SMEs accounted for 2B2? of total employment , and small and medium"sized SMEs for

20>? and ;=3? respectively

• Micro SMEs accounted for 2;;? of total valued added , and small and medium"sized SMEs for

;12? and ;1C? respectively

6ithin the micro SMEs, businesses without any employees accounted for CB? of all businesses in 20;2,

the last year for which such detailed information is available

!his report on the state of European SMEs, published by E) rowth, is an integral part of the annual SME

+erformance 4eview

!his first chapter!his first chapter!his first chapter!his first chapter provides a brief overview of the annual SME +erformance 4eview, and gives a snapshot of

the SME sector in 20;> in the EU21 and selected non"EU countries

!he second chapter!he second chapter!he second chapter!he second chapter reviews the performance of the SME sector in 20;3 and 20;>, and more broadly since

2001, in the EU21 and selected non"EU countries, and describes the outloo& for SMEs in 20;C and in 20;<

in the EU21

!he third chapter!he third chapter!he third chapter!he third chapter e%amines in greater detail the employment record of SMEs in the EU21 during the

economic recession and subse*uent recovery, see&ing in particular to gain a deeper understanding of the

features characterising SMEs which have increased their employment

Finally, the fourth and last chapterFinally, the fourth and last chapterFinally, the fourth and last chapterFinally, the fourth and last chapter summarises the &ey findings of this yearAs review and assessment of the

performance of SMEs in the EU21, and presents a number of recommendations aimed at improving the

performance of SMEs in the years ahead

SME Performance Review and the Small Business ASME Performance Review and the Small Business ASME Performance Review and the Small Business ASME Performance Review and the Small Business Act ct ct ct

!he SME +erformance 4eview is one of the main tools used by the European )ommission to monitor and

assess countriesA progress in implementing the Small -usiness $ct .S-$/ on a yearly basis

!he review provides e%tensive information on the implementation of the measures from the S-$ $ction

+lan, and on the performance of SMEs in EU Member States and = partner countries .$lbania, the Former

Lugoslav 4epublic of Macedonia, (celand, Moldova, Montenegro, Serbia, and !ur&ey/

!he output of this review consists of two parts, the $nnual 4eport on European SMEs .ie the present report/

and the S-$ country fact sheets -oth the report and the factsheets are published by the )ommission on its

website2

Micro SMEs account for 9%! of all SMEs


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Importance of SMEs in the economies of the MemberImportance of SMEs in the economies of the MemberImportance of SMEs in the economies of the MemberImportance of SMEs in the economies of the Member

States in 2014States in 2014States in 2014States in 2014

!he enterprise population consists almost entirely of SMEs in all Member States!he share of SMEs in the total enterprise population ranges from around BBC?

in Gu%embourg and ermany to more than BBB? in +ortugal, (taly, and reece

.see $nne% (3 for full country details/

6hile SMEs account for practically the same share of the overall number of

enterprises active in the Member States, their economic contribution varies

mar&edly (ndeed, in 20;>, the number of SMEs per EU4 million of valued added

generated in the non"financial business sector ranged from 2 in Gu%embourg to

2= in -ulgaria .Figure ;/ 5verall, most of the )entral European countries are characterised by a high

number of SMEs per EU4 million of value added generated in comparison to 6estern Europeancountries

FigureFigureFigureFigure 1111: Number of SMEs per EUR million of value added in the non: Number of SMEs per EUR million of value added in the non: Number of SMEs per EUR million of value added in the non: Number of SMEs per EUR million of value added in the non----financial business sector across EU Member financial business sector across EU Member financial business sector across EU Member financial business sector across EU Member

States in 2014States in 2014States in 2014States in 2014

Source: Eurostat, National Statistical Offices and DIW Econ

Micro SMEs play a relatively more important role in Southern and EasternMicro SMEs play a relatively more important role in Southern and EasternMicro SMEs play a relatively more important role in Southern and EasternMicro SMEs play a relatively more important role in Southern and Eastern

EuropeEuropeEuropeEurope .)roatia, )zech 4epublic, reece, 8ungary, (taly, +ortugal, +oland,

Slova&ia, Slovenia and Spain/ than on average in the EU21 and also inalso inalso inalso in -elgium-elgium-elgium-elgium

and Franceand Franceand Franceand France .see $nne% (3 for details/

$mong this group of ;2 Member States, the shares of SME employment

accounted for by both small SMEs and mediumsmall SMEs and mediumsmall SMEs and mediumsmall SMEs and medium""""sized SMEssized SMEssized SMEssized SMEs are typically below

EU average !he only e%ceptions areD

The num#er of SMEsrelative to the si&e

of the economy is

particularly hi"h in

'entral Europe and

(ortu"al

3

5

27

8

223

38

9

4

6

19

14

19

4

9

16

2

14

10

4 16

18

16

5

11

19

3

15 to 30

10 to < 15

5 to < 10< 5

Micro SMEs in )el"ium*'roatia* '&ech +epu#lic*,rance* -reece*.un"ary* /taly* (ortu"al*(oland* Slovaia*

Slovenia and Spainaccount for a lar"ershare of SMEemployment than onavera"e in the EU28


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• FranceFranceFranceFrance, where the share of SME employment of small SMEs is above the EU21 average but

the share of SME employment accounted for by medium"sized SMEs is below average

• )zech 4epublic, 8ungary, +oland, and Slovenia)zech 4epublic, 8ungary, +oland, and Slovenia)zech 4epublic, 8ungary, +oland, and Slovenia)zech 4epublic, 8ungary, +oland, and Slovenia, where, in contrast to the French case, the

employment share of medium"sized SMEs is above the EU21 average but the employmentshare accounted for by small SMEs is below the EU average

)onversely, the share of SME employment accounted for by micro SMEs in 20;> is below the EU21

average in the following ;< Member StatesD $ustria, -ulgaria, )ypD $ustria, -ulgaria, )ypD $ustria, -ulgaria, )ypD $ustria, -ulgaria, )yprus, enmar&, Estonia, Finland,rus, enmar&, Estonia, Finland,rus, enmar&, Estonia, Finland,rus, enmar&, Estonia, Finland,

ermany, (reland, Gatvia, Githuania, Gu%embourg, Malta, etherlands, 4omania, Sweden and Unitedermany, (reland, Gatvia, Githuania, Gu%embourg, Malta, etherlands, 4omania, Sweden and Unitedermany, (reland, Gatvia, Githuania, Gu%embourg, Malta, etherlands, 4omania, Sweden and Unitedermany, (reland, Gatvia, Githuania, Gu%embourg, Malta, etherlands, 4omania, Sweden and United

HingdomHingdomHingdomHingdom 8owever, in all but 3 .)yprus, Malta and etherlands/ of these same ;< Member States, the

shares of employment of both small SMEs and medium"sized SMEs are above the EU average

$dditionally, in )yprus, Malta,)yprus, Malta,)yprus, Malta,)yprus, Malta, and etherlandsetherlandsetherlandsetherlands, the share of SME employment accounted for by small

SMEs is below the EU21 average while the share is above the EU21 average in the case of medium"

sized SMEs .For a more detailed data brea&down, see -o% ; in $nne% (3/

6hile SMEs as a group accounted in 20;> for


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FigureFigureFigureFigure 2222: Share of SME employment and value added in total employment and value added of non: Share of SME employment and value added in total employment and value added of non: Share of SME employment and value added in total employment and value added of non: Share of SME employment and value added in total employment and value added of non----

financial business sector financial business sector financial business sector financial business sector---- 2014201420142014


!ypically, the share of value added generated by SMEs in the non"financial business sector issmaller

than their employment share For e%ample, in the EU21, SMEs accounted for C1? of value added in

20;> while their employment share was B percentage points higher

!his pattern of a larger SME employment share than SME value!his pattern of a larger SME employment share than SME value!his pattern of a larger SME employment share than SME value!his pattern of a larger SME employment share than SME value""""added share is also observed in alladded share is also observed in alladded share is also observed in alladded share is also observed in all

Member States e%cept Gu%embourg and the UHMember States e%cept Gu%embourg and the UHMember States e%cept Gu%embourg and the UHMember States e%cept Gu%embourg and the UH .Figure 3/

• !he differences between SME employment and value added shares are particularly mar&ed in

8ungary, 4omania8ungary, 4omania8ungary, 4omania8ungary, 4omania, and +oland,+oland,+oland,+oland, where the differences are greater than ;C percentage points,

and (reland(reland(reland(reland, which notably has the highest gap of 2> percentage points

• !he only countries with a negative gap, albeit small in magnitude, between the SMEAs shares of

employment and value added, are Gu%embourgGu%embourgGu%embourgGu%embourg and the UHUHUHUH (n the case of the UH, the difference

reflects the fact that many micro SMEs are not included in the S-S SME population> (n the case

of Gu%embourg, the very small negative gap is largely e%plained by the fact that the differences

between the average sizes of the wor&forces of large enterprises and medium"size SMEs is

much smaller than in the EU21

• Estonia, enmar&, etherlandsEstonia, enmar&, etherlandsEstonia, enmar&, etherlandsEstonia, enmar&, etherlands, and MaltaMaltaMaltaMalta show a positive, albeit relatively small, employment"

value added share gap of less than C percentage points

54%

63% 64% 64%

65% 66% 67% 67%

67% 68% 68% 68%70% 70% 70%

71% 71%73% 73%

76% 77%78% 79%

79% 80%

82% 83%

87%

UK DE FI FR DK SE NL RO HR LU PL AT C& HU BE SK IE SI ES B( LT EE LV PT IT MT CY EL

47% 50% 50%

53% 54% 54% 55% 56%

58% 59% 60% 61% 61% 62% 62% 62%

63% 63% 63%67% 67% 68% 69%

69%73% 75%

76% 77%

IE RO PL DE HU UK HR C& FR SE FI AT SK DK B( BE ES NL SI PT IT LU LT LV CY EL EE MT

Employment

alue $dded


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FigureFigureFigureFigure 3 33 3: Share: Share: Share: Share of SME value added and employment in total nonof SME value added and employment in total nonof SME value added and employment in total nonof SME value added and employment in total non----financial business sector value added and financia l business sector value added and financial business sector value added and financia l business sector value added and

employment employment employment employment ---- 2014201420142014


!his difference between the SME!his difference between the SME!his difference between the SME!his difference between the SME share of total employment and valued added in the nonshare of total employment and valued added in the nonshare of total employment and valued added in the nonshare of total employment and valued added in the non""""financialfinancialfinancialfinancial

business sector reflects the fact that the activities underta&en by SMEs are typically morebusiness sector reflects the fact that the activities underta&en by SMEs are typically morebusiness sector reflects the fact that the activities underta&en by SMEs are typically morebusiness sector reflects the fact that the activities underta&en by SMEs are typically more labourlabourlabourlabour

intensiveintensiveintensiveintensive than those underta&en by large enterprisesthan those underta&en by large enterprisesthan those underta&en by large enterprisesthan those underta&en by large enterprises

!he economy"wide difference in labour intensities of SMEs and large enterprises in the non"financial

business economy .the labour intensity gap/ varies across Member States, reflecting a combination of

differences in the labour intensities of the different sub"sectors of a Member StateIs economy and

differences in the relative importance of the various sub"sectors across Member States .See $nne% (C

and (< for details/

)onse*uently)onse*uently)onse*uently)onse*uently, an increase in SME activity will result typically in a proportionally larger rise in, an increase in SME activity will result typically in a proportionally larger rise in, an increase in SME activity will result typically in a proportionally larger rise in, an increase in SME activity will result typically in a proportionally larger rise inemployment than an increase of similar magnitude in the activity level of large enterprisesemployment than an increase of similar magnitude in the activity level of large enterprisesemployment than an increase of similar magnitude in the activity level of large enterprisesemployment than an increase of similar magnitude in the activity level of large enterprises

)hapter 3)hapter 3)hapter 3)hapter 3 discusses in greater detail employment creation by SMEs and the sensitivity of such

employment to changes in business activity levels

(t is important to note that the greater labour intensity of SMEs does not mean that SMEs are less

productive than large enterprises, as the activities of the latter are often capital intensive $ny

comparison between the productivity of SMEs and large enterprises would need to ta&e account of the

combined usage of labour and capital

Importance for SMEs of different sectors ofImportance for SMEs of different sectors ofImportance for SMEs of different sectors ofImportance for SMEs of different sectors of

the EU economy in 2014the EU economy in 2014the EU economy in 2014the EU economy in 2014

(n the EU21, of all the economic sectors in the non"financial business sector, the

@wholesale and retail trade and repairA@wholesale and retail trade and repairA@wholesale and retail trade and repairA@wholesale and retail trade and repairA sector accounts for the largest share of SME

employment, number of SME firms, and SME value addedD 2


18/167


13

=;? of SME value added .See -o% ;/ $ detailed description of the relative importance of SMEs in

different sectors across EU21 Member States is provided at $nne% (, from 22? and ;>?, respectively, of total SME employment to

20? and ;2? respectively Similarly, the contribution of SMEs in these two industries to the value added generated by the non"financial business sector declined by ; and 3 percentage points respectively from

2001 to 20;>

)o: 1

;ey sectors of SME activity in 2014

Employment Employment Employment Employment

alue added alue added alue added alue added


26%

20%

12%11%

10%8%

6%4%

3%1% 0% 0%

- h o l e s a l e / r e t a i l t r a d e

M a n u

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0

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$ r a n s p o r t a t i o n

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- a t e r s u p p l &

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22%

20%

13%

11%

7% 6% 6% 6%5%

1% 1% 1%

- h o l e s a l e

/ r e t a i l t r a d e

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19/167

14

)onversely, the contribution of SMEs in the @accommodation and foodA@accommodation and foodA@accommodation and foodA@accommodation and foodA and @business servicesA@business servicesA@business servicesA@business servicesA sectors to

total SME employment increased from 2001 to 20;> by ; percentage point in each sector, and to total

SME value added , by respectively ; and 2 percentage points .more detailed information on these

sectoral trends is provided in $nne% (=/

$mong the five &ey

sectors, the @wholesale@wholesale@wholesale@wholesale

and retail tradeAand retail tradeAand retail tradeAand retail tradeA sector is

the most important one

for micromicromicromicro and smallsmallsmallsmall SMEs

in terms of value added,value added,value added,value added,

employmentemploymentemploymentemployment and numbernumbernumbernumber

of enterprisesof enterprisesof enterprisesof enterprises

(n the case of mediummediummediummedium""""

sizesizesizesize SMEs, the

@manufacturingA@manufacturingA@manufacturingA@manufacturingA sector is

the most important one

(n contrast, the

@accommodation and@accommodation and@accommodation and@accommodation and

foodAfoodAfoodAfoodA sector is the least important of the five sectors for micromicromicromicro and mediummediummediummedium""""sizesizesizesize SMEs and in terms of

value added for smallsmallsmallsmall SMEs .$nne% (1 provides more detailed information on distribution of SMEs by

size class in the different sectors/

Importance of SMEs in different sectors of the EUImportance of SMEs in different sectors of the EUImportance of SMEs in different sectors of the EUImportance of SMEs in different sectors of the EU

economy in 2014economy in 2014economy in 2014economy in 2014

ot only does the relative importanceot only does the relative importanceot only does the relative importanceot only does the relative importance totototo SSSSMEsMEsMEsMEs of of of of the various subthe various subthe various subthe various sub""""sectors of thesectors of thesectors of thesectors of the

nonnonnonnon""""financial business sector vary across EU21, but the relative importance offinancial business sector vary across EU21, but the relative importance offinancial business sector vary across EU21, but the relative importance offinancial business sector vary across EU21, but the relative importance of

SMEsSMEsSMEsSMEs inininin each of the C &ey sectorseach of the C &ey sectorseach of the C &ey sectorseach of the C &ey sectors variesvariesvariesvaries as wellas wellas wellas well

• SMEs account for a very large share .more than =0?/ of total sector

employment and value added in @constructionA@constructionA@constructionA@constructionA and in @accommodation@accommodation@accommodation@accommodationand foodA, @business servicesA,and foodA, @business servicesA,and foodA, @business servicesA,and foodA, @business servicesA, and @wholesale and retail tradeA@wholesale and retail tradeA@wholesale and retail tradeA@wholesale and retail tradeA

• (n contrast, the contributions of SMEs and large enterprises to

employment and value added in the @manufacturingA@manufacturingA@manufacturingA@manufacturingA and @otherA@otherA@otherA@otherA sectors

are more evenly balancedmore evenly balancedmore evenly balancedmore evenly balanced !he @otherA sector regroups the following

industriesD @mining and *uarryingA, @electricity and gasA, @water supplyA,@mining and *uarryingA, @electricity and gasA, @water supplyA,@mining and *uarryingA, @electricity and gasA, @water supplyA,@mining and *uarryingA, @electricity and gasA, @water supplyA,

@transportation and storageA, @information and communicationAO@transportation and storageA, @information and communicationAO@transportation and storageA, @information and communicationAO@transportation and storageA, @information and communicationAO @real estate@real estate@real estate@real estate

activitiesA,activitiesA,activitiesA,activitiesA, and @administrative and support servicesA@administrative and support servicesA@administrative and support servicesA@administrative and support servicesA

•

$mong the various sectors comprising the @otherA category, the @real estateA@real estateA@real estateA@real estateA sector is the onlyone where SMEs account for a very large share .1C? and more/ of sector"wide value added

and employment

SMEs account for more

than < of construction

sector value added and

employment* and

#etween = and a#out <of value added and

employment in

wholesale and retail*

accommodation and

food and #usiness

services

!ype of!ype of!ype of!ype of

SMEsSMEsSMEsSMEs

Most important sectorMost important sectorMost important sectorMost important sector

among C &ey sectorsamong C &ey sectorsamong C &ey sectorsamong C &ey sectorsin 20;>in 20;>in 20;>in 20;>

Geast important sectorGeast important sectorGeast important sectorGeast important sector

among C &ey sectors in 20;>among C &ey sectors in 20;>among C &ey sectors in 20;>among C &ey sectors in 20;>

MicroMicroMicroMicro6holesale and retail

trade$ccommodation,

Manufacturing ./

SmallSmallSmallSmall6holesale and retail

trade-usiness Services .E, /,

$ccommodation .$/

MediumMediumMediumMedium Manufacturing $ccommodation

Note: N! number of enterprises, E ! employment and " ! value added



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15

FigureFigureFigureFigure 4444: The contribution of SMEs in various sectors to sector : The contribution of SMEs in various sectors to sector : The contribution of SMEs in various sectors to sector : The contribution of SMEs in various sectors to sector----wide value added and employment wide value added and employment wide value added and employment wide value added and employment ----

2014201420142014


Comparison of the importance of SMEs inComparison of the importance of SMEs inComparison of the importance of SMEs inComparison of the importance of SMEs in

the EU28 economy and other selectedthe EU28 economy and other selectedthe EU28 economy and other selectedthe EU28 economy and other selected

count count count countriesriesriesries

$s in the EU21, SMEs account for more than BB? of all enterprises in the partner

countries .$lbania, the Former Lugoslav 4epublic of Macedonia, (celand, Moldova,

Serbia, and !ur&ey/ and in the US$, apan, and the -4()s .-razil, 4ussia, (ndia,

and )hina/ .see $nne% (B for details/

8owever, in the case of employment , EU21 SMEs account generally for a

somewhat smaller share of total employment in the non"financial business

sector than in the other countries !he main e%ception is the US$US$US$US$, where the

share of SME employment in the non"financial business sector is about ;Cabout ;Cabout ;Cabout ;C

percentage points lower than in the EU21percentage points lower than in the EU21percentage points lower than in the EU21percentage points lower than in the EU21

(n contrast, the share of value added generated by SMEs in the non"financial business sector shows a

slightly more mi%ed picture, with the share being lower in apan, Moldova, Serbia, !ur&ey, and the US$,

and higher in $lbania, (celand, and the former Lugoslav 4epublic of Macedonia

44%

82%

68%

77% 77%

49%

59%

88%

71%

83% 82%

53%

M#-(#.$- C'-.$.'- "'+#+$.#+ .$# A'))'#.'- #-

(''

B- S $/ !. " $

V*+,- A-

E/+/-3

35%

24%

48% 45%41%

85%

56%

34%

23%

55% 52%58%

88%

49%

M-- #-

#$$,-

E+.$., #- # #.$ **+, T$#-*'$.#.'- I-('$)#.'- #-

'))-#.'-

R#+ .#. A)-.$#./ S:

V#+ A

E)*+',)-.

SMEs in the EU 28

account for a smaller

share of employment

than in other countries

e:cept for the US>

The picture with

re"ard to the SMEshare of value added

is sli"htly more mi:ed

C &ey sectorsC &ey sectorsC &ey sectorsC &ey sectors

5ther sectors5ther sectors5ther sectors5ther sectors


21/167

16


22/167


17

#ey messages of chapter $: %he "ctual and E&pected 'erformance of S(Es from $))*#ey messages of chapter $: %he "ctual and E&pected 'erformance of S(Es from $))*#ey messages of chapter $: %he "ctual and E&pected 'erformance of S(Es from $))*#ey messages of chapter $: %he "ctual and E&pected 'erformance of S(Es from $))*to $)+to $)+to $)+to $)+

• Macro-economic and cyclical business conditions facing SMEs in the EU 28 improved

somewhat in 201!

• "n 201# EU28 SME are finally emerging from the long shadow of the economic and financial

crisis with SME value added growth of $!$% and SME employment growth of 1!2%! &his is a

more than welcome improvement over 201$ when SME value added grew by only 1!'% and

SME employment declined by 0!(%!

• )oo*ing ahead# EU28 SME value added is e+pected to increase by $!$% and $!,% in 201(

and 201'# EU28 SME employment is proected to grow by 0!8% and 0!.% and the number of

SMEs in the EU28 is forecast to increase by 0!(% and 0!,%!

• Medium-si/e SMEs are forecast to slightly outperform small and micro enterprises in both

201( and 201' in growth in value added generation# employment and number of

enterprises!

• ll the maor SME sectors are predicted to share in the overall upswing of SME activity# but

construction and manufacturing will continue to lag behind the other sectors!

• Member States are proected to continue to e+hibit a great deal of diversity in terms of SME

performance in the two years ahead!


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18

2 !he $ctual and

E%pected +erformanceof SMEs from 2001 to20;<

!his second chapter of the 20;C SME $nnual 4eport first discusses the general macro"economic

conditions faced by SMEs since 2001, and the recent issues and challenges faced by EU21 SMEs

e%t, the chapter reviews the performance of SMEs in 20;3 and 20;>, and then more generally since

2001

!he final section focuses on the predicted performance of SMEs in 20;C and 20; SME $nnual 4eport discussed e%tensively how the evolution of different macreconomic

aggregates has a varying impact on the different sectors in which SMEs are especially present (n

particular, the 20;> 4eport highlighted the following &ey findingsD

• 8ousehold demand has a significant impact on the performance of SMEs in the @accommodationA

and @otherA sectorsO

• 5n the other hand, @constructionA value added is mainly affected by gross fi%ed capital formationO

• (n all sectors, intermediate demand, ie the demand for goods and services emanating from

domestic firms, is positively affecting SME growth of value addedO

• (n the case of @accommodationA and @retail and wholesale tradeA, the factors that affect

employment growth are household e%penditure and intermediate demand by other sectorsO

• ross fi%ed capital formation significantly affects employment in both @constructionA and @business

servicesAO

• E%ports of goods and services stimulates typically SME value added in @manufacturingA

(n the light of last yearAs findings, &ey macroeconomic trends are reviewed below in some detail, asthese trends largely e%plain the differences in SME performance across sectors

The macro$economic

and #usinessenvironment facin"

SMEs in the EU 28

improved in 2014


24/167


19

ata on the level of economic activity in the non"financial business sector .ie value added/ are only

available in nominal terms 8owever, the pic&"up in growth in + at constant prices, and the generally

very low inflation in the EU21, suggests that the increase in the level of economic activity in the non"

financial business sector reflects a real, albeit moderate, pic&pic&pic&pic&""""up of economic activity in the nonup of economic activity in the nonup of economic activity in the nonup of economic activity in the non""""

financial business sector starting in 20;>financial business sector starting in 20;>financial business sector starting in 20;>financial business sector starting in 20;> .see figures in $nne% (;0/

!he evolution of the level of +level of +level of +level of + .in real terms/ since 2001 varievarievarievariedddd mar&edlymar&edlymar&edlymar&edly across the EU21D

• !he level of real + in 20;> was the same as in $))* or higher in ;< Member States .$ustria,$ustria,$ustria,$ustria,

-elgium, -ulgaria, )zech 4epublic, Estonia, France, ermany (reland, Githuania, Gu%embourg,-elgium, -ulgaria, )zech 4epublic, Estonia, France, ermany (reland, Githuania, Gu%embourg,-elgium, -ulgaria, )zech 4epublic, Estonia, France, ermany (reland, Githuania, Gu%embourg,-elgium, -ulgaria, )zech 4epublic, Estonia, France, ermany (reland, Githuania, Gu%embourg,

Malta, +oland,Malta, +oland,Malta, +oland,Malta, +oland, 4omania,4omania,4omania,4omania, Slova&ia, Sweden,Slova&ia, Sweden,Slova&ia, Sweden,Slova&ia, Sweden, andandandand UnitedUnitedUnitedUnited HingdomHingdomHingdomHingdom/ !hese countries have clearly

emerged from the long shadow of the 2001K200B financial and economic crisis

• (n contrast, in ;2 Member States .)roatia, )yprus, enmar&, Finland, reece, 8ungary, Gatvia,.)roatia, )yprus, enmar&, Finland, reece, 8ungary, Gatvia,.)roatia, )yprus, enmar&, Finland, reece, 8ungary, Gatvia,.)roatia, )yprus, enmar&, Finland, reece, 8ungary, Gatvia,

(taly, etherlands, +ortugal, Slovenia and Spain/,(taly, etherlands, +ortugal, Slovenia and Spain/,(taly, etherlands, +ortugal, Slovenia and Spain/,(taly, etherlands, +ortugal, Slovenia and Spain/, the level of real + remained in 20;> stillthe level of real + remained in 20;> stillthe level of real + remained in 20;> stillthe level of real + remained in 20;> still

below below below below its 2001 level, sometimes substantially soits 2001 level, sometimes substantially soits 2001 level, sometimes substantially soits 2001 level, sometimes substantially so .see $nne% (;;/.

$s the level of SME activity and employment is heavily dependent on the$s the level of SME activity and employment is heavily dependent on the$s the level of SME activity and employment is heavily dependent on the$s the level of SME activity and employment is heavily dependent on the overalloveralloveralloverall level of economiclevel of economiclevel of economiclevel of economic

activity and demand for goods and services, the lac& of full economyactivity and demand for goods and services, the lac& of full economyactivity and demand for goods and services, the lac& of full economyactivity and demand for goods and services, the lac& of full economy""""wide recovery in 20;>wide recovery in 20;>wide recovery in 20;>wide recovery in 20;> in a numberin a numberin a numberin a number

of Member States e%plains largely theof Member States e%plains largely theof Member States e%plains largely theof Member States e%plains largely the wea- wea- wea- wea- SME performance in these countriesSME performance in these countriesSME performance in these countriesSME performance in these countries

(n fact, in all Member States where + in 20;> was still below its 2001 level, the level of value added

generated by SMEs in 20;> also remained well below the 2001 level For e%ample, in reecereecereecereece, the level

of real + in 20;> was 2C? below2C? below2C? below2C? below its 2001 level, and the level of value added generated by SMEs in

20;> was 33? below33? below33? below33? below its 2001 level

Moreover, in countries where no full economy"wide recovery was achieved, the wea-ness in SME value

added was more pronounced than in real .D' (n contrast, in countries where a solid recovery was

achieved, the performance of SMEs .in terms of value added/ was even stronger than that of the overall

economy !o a large e%tent this reflects the differing impact of changes in various components of

aggregate demand .private consumption, government current e%penditures, gross capital formation by

households, businesses and government and e%perts/ on the demand for goods and services produced

by SMEs

ifferences in macro"economic performances do not only e%plain differences in the value added

performance of SMEs, but also differences in SME employment creation since 2001 !he employment

creation record of SMEs will be further discussed in the third chapter of the report

-efore proceeding to review the performance of SMEs in 20;>, the ne%t section discusses briefly the

diverging evolution of various aggregate demand components !his discussion will shed further light on

the underlying factors e%plaining differences in SME performance

Evolution of aggregate demand components in the EU28 economy Evolution of aggregate demand components in the EU28 economy Evolution of aggregate demand components in the EU28 economy Evolution of aggregate demand components in the EU28 economy

From 2001 to 20;3, e%ports of goods and services .both intra"EU and e%tra"EU/ and, to a much lesser

e%tent, public sector consumption, were cumulatively the only sources of economic growth

ross capital formation, which includes all investments in fi%ed assets such as housing, infrastructure,ross capital formation, which includes all investments in fi%ed assets such as housing, infrastructure,ross capital formation, which includes all investments in fi%ed assets such as housing, infrastructure,ross capital formation, which includes all investments in fi%ed assets such as housing, infrastructure,

buildings and machinery,buildings and machinery,buildings and machinery,buildings and machinery, dragged downdragged downdragged downdragged down economic growth substantiallyeconomic growth substantiallyeconomic growth substantiallyeconomic growth substantially


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20

For e%ample, gross fi%ed capital formation by households .mainly housing/ was almost 2;? lower in

20;3 than in 2001, gross fi%ed capital formation by government .buildings, civil engineering, etc/ was

;>? lower in 20;3 than in 2001, and gross capital formation by businesses .buildings, plants, etc/ was

;2? lower Such a depressed level of gross fi%ed capital formation will clearly impact on the level of

SME activity in the @constructionA@constructionA@constructionA@constructionA sector, as SMEs account for the bul& of @constructionA value added and

employment, and, more generally, on the level of SME activity economy"wide as the @constructionA sector

is one of the &ey five sectors of importance for SMEs

+rivate consumption also depressed the performance of the SME sector+rivate consumption also depressed the performance of the SME sector+rivate consumption also depressed the performance of the SME sector+rivate consumption also depressed the performance of the SME sector as the level of private

consumption in 20;3 was ;2? lower than in 2001, and this aggregate demand component is a ma'or

driver of retail sales, another sector which is very important for SMEs and in which SMEs account for the

bul& of value added and employment .see $nne% (;3 for details/

Unfortunately, the strong gains in ne%t e%ports .ie e%ports minus imports/ from 2001 to 20;3 had only

a more limited, direct, stimulating impact on the EU21 SME sector, as the ma'ority of SMEs are not

active in e%port"oriented sectorsC

(n contrast to the largely imbalanced growth observed over the period 2001 to 20;3, all the main

aggregate demand components contributed positively to economic growth in 20;> with e%ports of

goods and services remaining the most important engine of growth, albeit much less so than in previous

years .see $nne%es (;> and (;C for details/ !his more balanced growth e%plains to a large e%tent the

recovery of SME value added in 20;>

(n the ma'ority of Member States,(n the ma'ority of Member States,(n the ma'ority of Member States,(n the ma'ority of Member States, e&poe&poe&poe&portsrtsrtsrts were the &ey driver of the recovery and showwere the &ey driver of the recovery and showwere the &ey driver of the recovery and showwere the &ey driver of the recovery and showedededed the strongestthe strongestthe strongestthe strongest

growth over the period 2001growth over the period 2001growth over the period 2001growth over the period 2001""""20;>20;>20;>20;> $t the other end of the spectrum was gross fi%ed capital formation,

which was still below pre"crisis levels in many countries, including a number of Member States where

overall recovery was achieved For this reason, recovery for SMEs in the construction sectorconstruction sectorconstruction sectorconstruction sector was still very

partial, as will be shown later in this section

BusinesBusinesBusinesBusiness conditions faced by SMEs in 2014s conditions faced by SMEs in 2014s conditions faced by SMEs in 2014s conditions faced by SMEs in 2014

!he analysis above showed that general economic conditions facing SMEs improved somewhat in 20;>,

and the latest survey of financing conditions faced by SMEs, run 'ointly by E) rowth and the

European )entral -an& in autumn 20;>, confirms this observation !he survey results show that relative

to the previous 20;; and 20;3 surveys .Figure C/D

• Finding customers remainFinding customers remainFinding customers remainFinding customers remainedededed the most pressing problem for SMEsthe most pressing problem for SMEsthe most pressing problem for SMEsthe most pressing problem for SMEs -ut, relatively less so than inprevious years, as the share of respondents highlighting this issue has been decreasing over

time (n some cases, this may e%plain a hesitancy to invest and add on new employees even if

firms have sufficient cash to do so

• $ccess to finance$ccess to finance$ccess to finance$ccess to finance also decreased in importance, with only ;3? of respondents choosing this

problem as the most pressing problem in 20;>

• $ higher proportion of firms chose @availability of s&illed staff or e%perienced managersavailability of s&illed staff or e%perienced managersavailability of s&illed staff or e%perienced managersavailability of s&illed staff or e%perienced managersA, and

@regulationA@regulationA@regulationA@regulationA, as the most pressing problem


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21

FigureFigureFigureFigure 5555: Most pressing problems faced by SMEs: Most pressing problems faced by SMEs: Most pressing problems faced by SMEs: Most pressing problems faced by SMEs –––– a comparison of the latesta comparison of the latesta comparison of the latesta comparison of the latest SAFE survey resultsSAFE survey resultsSAFE survey resultsSAFE survey results

ote that results do not add up to ;00? because the categories @othersA and @donAt &nowKno answerA have been e%cluded from the

analysis

Source: $)+0 S"1E Survey

!he fact that the relative importance of the latter two factors is rising, while the relative importance of

finding customers is declining, suggests that the structural business environment issuesstructural business environment issuesstructural business environment issuesstructural business environment issues are gradually

becoming more important, while the effect of the recent adverse cyclical developments is gradually

waning

evertheless, mar&et conditions .ie lac& of customers and competition/ were the most fre*uently cited

problem by SMEs across the EU !hese two issues combined have been identified by at least 30? of

respondents in all Member States, with the e&ception of )roatia,)roatia,)roatia,)roatia, )yprus,)yprus,)yprus,)yprus, FinlandFinlandFinlandFinland,,,, reece, andreece, andreece, andreece, and Slovenia,Slovenia,Slovenia,Slovenia,

(n these five countries, access to financeaccess to financeaccess to financeaccess to finance is most fre*uently cited as a problem for SMEs .see anne%

(;


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22

FigureFigureFigureFigure 6 66 6: Annual growth in SME value added and employment in the EU28 in 2013 and 2014: Annual growth in SME value added and employment in the EU28 in 2013 and 2014: Annual growth in SME value added and employment in the EU28 in 2013 and 2014: Annual growth in SME value added and employment in the EU28 in 2013 and 2014

Source: Eurostat, National Statistical Offices, DIW Econ

6hile within the EU21 as a whole, SME valued added showed good growth of 33? in 20;>, this

e%perience was not shared by all Member States (n fact, one can easily identify four different groupsfour different groupsfour different groupsfour different groups of

Member States on the basis of the growth of SME value added in 20;> .see Figure =/

• (n contrast to the positive development in SME value added in the EU21 economy, SMEs in a

first group of < Member Statesfirst group of < Member Statesfirst group of < Member Statesfirst group of < Member States .)P, )L, EG, 84, (! and SE/.)P, )L, EG, 84, (! and SE/.)P, )L, EG, 84, (! and SE/.)P, )L, EG, 84, (! and SE/ showed a decline in value added in

20;>

• (n a second group of > Member States .ES, F(, F4 and GU/second group of > Member States .ES, F(, F4 and GU/second group of > Member States .ES, F(, F4 and GU/second group of > Member States .ES, F(, F4 and GU/, SMEs posted only very marginal

positive valued added growth in 20;>

• !he SME sector in all other ;1 Member States showed positive value added growth of at least

;C? in 20;> !his group of Member States consists ofD

o a set of B Member States .$a set of B Member States .$a set of B Member States .$a set of B Member States .$ustria, Slova&ia, -elgium, enmar&, -ulgaria, +ortugal,ustria, Slova&ia, -elgium, enmar&, -ulgaria, +ortugal,ustria, Slova&ia, -elgium, enmar&, -ulgaria, +ortugal,ustria, Slova&ia, -elgium, enmar&, -ulgaria, +ortugal,

Estonia, 8ungary and GatviaEstonia, 8ungary and GatviaEstonia, 8ungary and GatviaEstonia, 8ungary and Gatvia//// where the SME sector posted growth in valued added of at

least +234 but less than the E5$* average of 62647 and,

o a second set of B countries .etherlands, (reland, ermany, Githuania, Sloveniaa second set of B countries .etherlands, (reland, ermany, Githuania, Sloveniaa second set of B countries .etherlands, (reland, ermany, Githuania, Sloveniaa second set of B countries .etherlands, (reland, ermany, Githuania, Slovenia, +, +, +, +oland,oland,oland,oland,

Malta, 4omania and United HingdomMalta, 4omania and United HingdomMalta, 4omania and United HingdomMalta, 4omania and United Hingdom//// in which SMEs recorded value added growth

greater than the EU21 average

1.%)

0.9)

2.4)

1.%)

0.9)

1.1)

0.1)

0.1)

0.5) 0.4)

2)

1)

1)

0)

1)

1)

2)

2)!)

!)

M$' S)#++ M) A++ SME T!TAL M$' S)#++ M) A++ SME T!TAL

V#+ A E)*+',)-.

% "#- 2012;2013

!.2) !.!)!.!) !.!) !.2)

1.!)1.0)

1.!) 1.2) 1.2)

0)

1)

1)

2)

2)

!)

!)

4)

M$' S)#++ M) A++ SME T!TAL M$' S)#++ M) A++ SME T!TAL

V#+ A E)*+',)-.

% "#- 2013;2014


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23

FigureFigureFigureFigure 7 77 7: SME value added growth (in %) in 2014 by Member State: SME value added growth (in %) in 2014 by Member State: SME value added growth (in %) in 2014 by Member State: SME value added growth (in %) in 2014 by Member State

Source: Eurostat, National Statistical Offices, DIW econ

!he employment growth performance of SMEs also varied greatly

across EU21 Member States, mirroring largely but not completely

the value added growth performance discussed above .see Figure

1/

!he strongest SME employment growth in 20;> was recorded in4omania4omania4omania4omania,,,, MaltaMaltaMaltaMalta and the UHand the UHand the UHand the UH, and the wea-est in )yprus, Finland, and)yprus, Finland, and)yprus, Finland, and)yprus, Finland, and

(taly(taly(taly(taly !he employment creation record of SMEs is discussed in

further detail in the ne%t chapter of this report

5verall, across the EU21 a5verall, across the EU21 a5verall, across the EU21 a5verall, across the EU21 a positive positive positive positive relationship e%ists between SMErelationship e%ists between SMErelationship e%ists between SMErelationship e%ists between SME value added value added value added value added growth and SMEgrowth and SMEgrowth and SMEgrowth and SME

employmentemploymentemploymentemployment growth with SME employment growth being, on average, 03 percentage point higher forgrowth with SME employment growth being, on average, 03 percentage point higher forgrowth with SME employment growth being, on average, 03 percentage point higher forgrowth with SME employment growth being, on average, 03 percentage point higher for

each additional ; percentage point in SME value added growtheach additional ; percentage point in SME value added growtheach additional ; percentage point in SME value added growtheach additional ; percentage point in SME value added growth

8owever, there is a great deal of variation across Member States with some showing a considerably

stronger lin& between SME value added growth and SME employment growth .for e%ample, MaltaMaltaMaltaMalta andandandand4omania4omania4omania4omania/ and others a much wea&er lin& .for e%ample, -elgium, Gatvia-elgium, Gatvia-elgium, Gatvia-elgium, Gatvia and etherlandsand etherlandsand etherlandsand etherlands/

;3:4%

;1:0% ;1:0% ;0:7%

;0:3% ;0:3%

0:0% 0:1% 0:3%

0:7%

1:5% 1:8% 2:0%

2:1% 2:2% 2:2% 2:5%

2:7% 2:7%3:3% 3:3%

3:7% 3:8%4:1%

4:4% 4:6%

5:7%

6:8%

11:6%

CY SE HR EL IT CZ LU FI FR ES AT SK BE DK BG T EE HU LV EU28 NL IE DE LT SI L MT R! UK

/n 2014* SMEs in MT* +@ and theU; posted the stron"estcom#ined performance in valueadded and employment "rowth

/n contrast* SMEs in '* /T and ,/showed the weaest performance


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24

FigureFigureFigureFigure 8888: SME value added and employment growth (in %): SME value added and employment growth (in %): SME value added and employment growth (in %): SME value added and employment growth (in %) in 2014 by Member Statein 2014 by Member Statein 2014 by Member Statein 2014 by Member State


$mong the five &ey sectors, th$mong the five &ey sectors, th$mong the five &ey sectors, th$mong the five &ey sectors, the @business servicesA sector was the stare @business servicesA sector was the stare @business servicesA sector was the stare @business servicesA sector was the star performerperformerperformerperformer

across all three SME performance indicatorsacross all three SME performance indicatorsacross all three SME performance indicatorsacross all three SME performance indicators at the EU21 levelat the EU21 levelat the EU21 levelat the EU21 level (n particular, valueadded in this sector grew by more than C? in 20;> .Figure B/

!he other four &ey sectors and the @otherA sector also recorded good value added

growth ranging from 2=? to 3>?, but the employment growth performance of

these sectors was much wea&er, especially in @constructionA where employment

continued to fall in 20;> .despite an increase of 3>? in value added/ and

@manufacturingA where employment grew by a meagre 01?

FigureFigureFigureFigure 9999: Sector performance 2013 : Sector performance 2013 : Sector performance 2013 : Sector performance 2013----2014, EU282014, EU282014, EU282014, EU28

oteD )hanges in the number of enterprises can also depend on changes in the system for classification of SMEs by ational Statistical

5ffices


CY

SE

HR

EL

IT

CZ

LU

FI

FR

ES

AT

SK

BE

DK

BG

T

EE

HU

LV

EU28

NL

IE

DE

LT

SI

L

MT

R!

UK

SME -/+/-3 6 0.2721 : SME ;*+,- *- 6 < 0.0078

R= 0.2998

;2:0%

;1:0%

0:0%

1:0%

2:0%

3:0%

4:0%

5:0%

6:0%

;6:0% ;4:0% ;2:0% 0:0% 2:0% 4:0% 6:0% 8:0% 10:0% 12:0% 14:0%

G $ ' < . " - S M E ) * + ' , ) - . - 2 0 1 4

G$'


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25

How have EU28 SMEs fared since 2008How have EU28 SMEs fared since 2008How have EU28 SMEs fared since 2008How have EU28 SMEs fared since 2008?

European SMEs suffered serious setbac&s in the years folEuropean SMEs suffered serious setbac&s in the years folEuropean SMEs suffered serious setbac&s in the years folEuropean SMEs suffered serious setbac&s in the years following the 2001lowing the 2001lowing the 2001lowing the 2001

crisiscrisiscrisiscrisis (n particular, EU21 SMEs registered a ;0? drop in value added in

200B, followed by a limited recovery in 20;0 and 20;; $ second decline in

value added was e%perienced by SMEs in 20;2 which was followed by a

return to growth in 20;3 and 20;> !he pre!he pre!he pre!he pre""""crisis level of value added wascrisis level of value added wascrisis level of value added wascrisis level of value added was

finally surpassed for the first time since 2001, by almost 2C? in 20;>finally surpassed for the first time since 2001, by almost 2C? in 20;>finally surpassed for the first time since 2001, by almost 2C? in 20;>finally surpassed for the first time since 2001, by almost 2C? in 20;> .see

Figure ;0/

5n the other hand, employment levels of SMEs followed a slow decline in

the period 2001"20;3 in what is often termed @'obless recoveryA 8owever,

20;> saw a mild inversion in the trend evertheless, the 20;> SME

employment level was still ;3 percentage points below its 2001 level

!he number of SME enterprises followed a different pathD after a drop in 200B, the number of SMEs

grew steadily thereafter e%cept in 20;0 !he number of SMEs in 20;> is almost 2C? higher than in!he number of SMEs in 20;> is almost 2C? higher than in!he number of SMEs in 20;> is almost 2C? higher than in!he number of SMEs in 20;> is almost 2C? higher than in

2001200120012001

FigureFigureFigureFigure 10 10 10 10: Number of SMEs in the non: Number of SMEs in the non: Number of SMEs in the non: Number of SMEs in the non----financial business sector, value added generated by these SMEs and financial business sector, value added generated by these SMEs and financial business sector, value added generated by these SMEs and financial business sector, value added generated by these SMEs and

number of persons employed by these SMEsnumber of persons employed by these SMEsnumber of persons employed by these SMEsnumber of persons employed by these SMEs ---- EU28, 2008 to 2014 (2008=100)EU28, 2008 to 2014 (2008=100)EU28, 2008 to 2014 (2008=100)EU28, 2008 to 2014 (2008=100)

oteD Slova&ia is not included in the EU aggregate due to a brea& in the series )hanges in the number of enterprises can also depend on

changes in the system for classification of SMEs by ational Statistical 5ffices


The crisis did not affect all sectors equally

• @)onstructionA and, to a lesser e%tent, @manufacturingA are the only@)onstructionA and, to a lesser e%tent, @manufacturingA are the only@)onstructionA and, to a lesser e%tent, @manufacturingA are the only@)onstructionA and, to a lesser e%tent, @manufacturingA are the only

two sectors which, at the EU21 level, showtwo sectors which, at the EU21 level, showtwo sectors which, at the EU21 level, showtwo sectors which, at the EU21 level, showedededed losses in value addedlosses in value addedlosses in value addedlosses in value added

and employment over the period 2001and employment over the period 2001and employment over the period 2001and employment over the period 2001""""20;>20;>20;>20;> SMEs in @constructionA

recorded an ;1? drop i n value added and lost ;=? of 'obs from

2001 to 20;> AManufacturingA also e%perienced a decline in value

added .">?/ and in 'obs .";;?/ from 2001 to 20;> SMEs firms in

these two sectors also decreased in number ."=? and "C?

respectively/

• (n 20;>, the EU21 @wholesale and retail tradeA@wholesale and retail tradeA@wholesale and retail tradeA@wholesale and retail tradeA sector was 'ustrecovering from the 2001K200B financial and economic crisis

• (n contrast, the EU21 @accommodation@accommodation@accommodation@accommodation and food servicesAand food servicesAand food servicesAand food servicesA and the

@business servicesA@business servicesA@business servicesA@business servicesA sectors performed strongly over the period

100

98.%

100.8101.!

102.7 102.4

103:6

100

90.!

94.4

98.497.%

99.2

102.4100 99.%

98.%

98.798.0

97.5

98:7

2008 2009 2010 2011 2012 201 2014

Enterprises (2008=100) Gross Value Added of SMEs (2008=100) Employment in SMEs (2008=100)

EU28 SMEs finally achieved

a full recovery in 2014

from the 2008709 economic

and financial crisis* with

value added 2?4! hi"her

than in 2008

.owever EU28 SME

employment in 2014 is still

1?%! #elow its 2008 level

SMEs in construction* and toa lesser e:tent* in

manufacturin"* were hard

hit #y the economic and

financial crisis and had not

yet fully recovered in 2014

/n contrast* SMEs in

accommodation and food

services and #usiness

services showed dou#ledi"it "rowth from 2008 to

2014


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26

2001"20;>, posting double digit growth in value added and employment !he performance of

SMEs over the period 2001"20;> also varied widely by size class .Figure ;;/

6hile the number of micro firms increased by >;?, small and medium firms

decreased in number by ;1? and 2B? respectively !he strong growth in

the number of micro SMEs was almost entirely driven by growth in the

number of business with 0 employees .see -o% 2/, with some Member States

.for e%ample, FranceFranceFranceFrance and the etherlandsetherlandsetherlandsetherlands/ actively encouraging such

economic activity

!he largest gains in value added were e%perienced by medium"sized firms

.CC?/, while micro and small firms lagged behind .0


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8o&8o&8o&8o& $$$$

9ifting9ifting9ifting9ifting the veil of the microthe veil of the microthe veil of the microthe veil of the microenterprises dynamicsenterprises dynamicsenterprises dynamicsenterprises dynamics

ata on business demography published by Eurostat provide a brea&down on the evolution of the number of micro SMEs since 2001evolution of the number of micro SMEs since 2001evolution of the number of micro SMEs since 2001evolution of the number of micro SMEs since 2001 for

three class sizes based on the number of employees, namely 0 employees, ; to > employees and C to B employees !he information is only

provided for the sector I-usiness economy e%cept activities of holding companiesI and is only available up to 20;2 -ut, it allows one to

gain a better understanding of the importance of self"employment .ie businesses with zero employment/ in the micro SME segment and

as a source of business creation since 20015verall, in the EU21, businesses with 0 employees accounted for CB? of all micro SMEs (n a number of Member States .)zech 4epublic,

etherlands, Malta, France, -elgium and +oland/ this figure e%ceeds =0? while it is lower than >0? in only three Member States .)roatia,

)yprus and United Hingdom/ (n the case of the United Hingdom, the very low figure of ;C? reflects mainly the fact that very small

businesses are often not included in the S-S statistics .see endnotes for a detailed e%planation/

FigureFigureFigureFigure 12121212:::: Share of businesses with 0 employees in number of micro SMEsShare of businesses with 0 employees in number of micro SMEsShare of businesses with 0 employees in number of micro SMEsShare of businesses with 0 employees in number of micro SMEs ---- 2012201220122012

Source: Eurostat

(n particular, it is worth noting that, in most Member States, businesses with no employees account for all or the bul& of the changes in the

number of micro SMEs !his is the case irrespective of whether the number of SMEs increases or decreases (n fact, in C Member States

.etherlands, Gatvia, 4omania, France and -elgium/, the increase in the number of businesses with no employees is so large that it more

than offsets decreases in the two other micro SME size classes (n contrast, businesses with no employees account for the ma'ority in the

decline in the number of micro SMEs in > Member States .United Hingdom, 8ungary, )yprus, and +ortugal/

Moreover, in general, changes in the size class of C to B employees account for very little in the change in the number of micro SMEs from2001 to 20;2

TableTableTableTable 1111: Contribution: Contribution: Contribution: Contribution of different size classes to overall change (in %) inof different size classes to overall change (in %) inof different size classes to overall change (in %) inof different size classes to overall change (in %) in thethethethe number of businesses with 0 to 9number of businesses with 0 to 9number of businesses with 0 to 9number of businesses with 0 to 9

employeesemployeesemployeesemployees 2008200820082008----2012201220122012

Member StateMember StateMember StateMember State

)hange in ? in the number)hange in ? in the number)hange in ? in the number)hange in ? in the numberof businesseof businesseof businesseof businesses with 0 to Bs with 0 to Bs with 0 to Bs with 0 to B

employeesemployeesemployeesemployees """" 2001 to2001 to2001 to2001 to 20;220;220;220;2

)ontribution of size class to overall change .in ?/ to)ontribution of size class to overall change .in ?/ to)ontribution of size class to overall change .in ?/ to)ontribution of size class to overall change .in ?/ to the number of businesses with 0the number of businesses with 0the number of businesses with 0the number of businesses with 0to B employeesto B employeesto B employeesto B employees

0 employee ; " > employees C " B employees

G 3C


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The performance of EU, US and Japanese SMEsThe performance of EU, US and Japanese SMEsThe performance of EU, US and Japanese SMEsThe performance of EU, US and Japanese SMEs ---- aaaa

comparative analysiscomparative analysiscomparative analysiscomparative analysis

So far the analysis has focused on developments in the EU21 SME sector and how these developmentsdiffer across countries and sectors From a policy"ma&ing perspective, it is also interesting to compare

within"EU with developments in the US$ and apan, two other large industrialised economies, and e%amine

whether there are any stri&ing differences

$ comparison of SME performance is rendered somewhat more difficult due to the lac& of recent data

for the US$ and apan, and a structural brea& in 200B in the case of apan 5verall, the analysis,

therefore, can cover only the years 200B to 20;2 .see $nne% (;B for details/D

$ccording to the latest available data, the$ccording to the latest available data, the$ccording to the latest available data, the$ccording to the latest available data, the EU21 has the largest number of SMEs .more than 22 million/EU21 has the largest number of SMEs .more than 22 million/EU21 has the largest number of SMEs .more than 22 million/EU21 has the largest number of SMEs .more than 22 million/

and posts the highest level of SME employment among the three regionsand posts the highest level of SME employment among the three regionsand posts the highest level of SME employment among the

2015 sme annual report_final_12!11!15

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