SMEs represent more than 99% of all businesses in the EU. They are the backbone of its economy. They generate 2 out of every 3 jobs. They stimulate a sense of entrepreneurship and innovation, helping to foster European competitiveness, economic growth and employment. Consequently, micro-enterprises represent 92.8% of all businesses in the EU in average.
For more information visit the web-page of the European Commission
Micro enterprises are part of the group of enterprises named under the acronym SMEs (Small and Medium Enterprises)
The Micro enterprise
fewer than 10 employees and an annual turnover (the amount of money taken in a particular period) or balance sheet (a statement of a company's assets and liabilities) below €2 million.
The Small enterprise
fewer than 50 employees and an annual turnover or balance sheet below €10 million.
The Medium-sized enterprise
fewer than 250 employees and annual turnover below €50 million or balance sheet below €43 million.
The most comprehensive and encompassing initiative on SMEs to date was brought forward by the Commission in June 2008, in the form of a communication on the Small Business Act (SBA) (COM(2008) 0394). The SBA aims at creating a new policy framework integrating the existing instruments and building on the ‘European Charter for Small Enterprises’ and the ‘Modern SME Policy for Growth and Employment’. It takes a ‘political partnership approach with Member States’ rather than proposing a fully fledged Community approach. The SBA aims to improve the overall approach to entrepreneurship in the EU by ‘thinking small first’.
On what the SBA is based on?
At the heart of the SBA for Europe, there is the belief that a truly favorable environment for SMEs depends first of all on the recognition of entrepreneurs by society. The general climate in society has to lead individuals to look attractive to starting their own business and to recognize that SMEs make a substantial contribution to employment growth and economic prosperity. The entrepreneurial spirit and the willingness to take risks associated with it should be stimulated and supported by policy makers and administrations.
What are SBA key points?
The main priorities of the SBA are to promote entrepreneurship, improve access to finance, reduce the regulatory burden and improve access to markets and internationalisation. These priorities are set out in 10 principles designed to guide the design and implementation of policies at EU and EU country level:
– create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded;
– ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance;
– design rules according to the ‘think small first’ principle;
– make public administrations responsive to the needs of small and medium-sized businesses (SMEs);
– adapt public policy tools to SMEs’ needs: facilitate SMEs’ participation in public procurement and better use State aid possibilities for SMEs;
– facilitate SMEs’ access to finance and develop a legal and business environment supportive to timely payments in commercial transactions;
– help SMEs to benefit more from the opportunities offered by the EU’s single market;
– promote the upgrading of skills in SMEs and all forms of innovation;
– enable SMEs to turn environmental challenges into opportunities;
– encourage and support SMEs to benefit from the growth of markets.
What’s the principle Think small first? The Small Business Act aims to improve the global political approach to entrepreneurship, irreversibly underpin the principle Thinking Small first in decision-making processes – from formulating standards to public service and promoting SME growth by helping them tackle the problems that continue to hamper the development.
The definition of the “Think Small First” principle implies that SMEs should be considered by public authorities as being their “prime customers” as far as business regulation is concerned. The principle relies on the fact that “one size does not fit all” but a lighter touch approach can also be beneficial to larger businesses. Conversely, rules and procedures designed for large companies create disproportionate, if not unbearable burdens for SMEs as they lack the economies of scale. The application of the “Think Small First” principle aims at ensuring that SMEs voices are heard, that their interests are taken on board by policy makers and that the business environment is favourable to the development of SMEs.
Sources: Eur-Lex //eur-lex.europa.eu/ EU Commission //europa.eu/rapid/press-release_IP-08-1003_en.htm
The general framework of the productive structure of the Italian economy is characterised by the persisting financial crisis which caused a dramatic fall in the number of enterprises. Although the number of enterprises per 1,000 inhabitants decreased, their average size in Italy remained stable in 2014 at about 4 employees; micro-enterprises therefore still play a non-negligible role in the entire productive system. Micro-enterprises in the service sector are indeed the indisputable leaders in the Italian economy that, similarly to the more advanced economic systems, shows a contraction of industrial activities in favour of more complex, medium-sized organisations.
The vocation and role of entrepreneurs remain strong. The indicator used to measure this situation is represented by the percentage of self-employed workers present in enterprises and its value was nearly 30 percent in Italy. As to business demography, characterised by the degree of dynamism of the Italian economy and the endurance of new initiatives on the related market, the gross turnover rate did not increase in 2014 for the first time after three years and remained stable at 2013 value; at the same time, there was a new reduction of the five year-survival rate after the one experienced in 2013.
After the two-year period 2012-2013, the Italian enterprise levels of wage-adjusted labour productivity stopped to decrease. In 2014 Italian enterprises produced about 125 euros of added value per employee per every 100 euros of unit cost of labour (+1.9 percent compared to the previous year), with the lowest values still recorded in the construction sector.
Micro-enterprises in Italy
Micro-enterprises (units with 3-9 employees) are using almost exclusively defensive strategies, while only a few are attempting to expand their range of products and services or access new markets. In 2011, one in four micro-enterprises took on staff, most of whom were not highly-qualified workers. Nearly a third of micro-enterprises invested in training, with both internal and external courses. Around a third of the units analysed introduced at least one innovation in the 2009-2011 period, in particular organisational innovations. Just under half the micro-enterprises saw internet use as unnecessary or useless for their business. Approximately one third used a web site, while a quarter used e-commerce. This is the situation revealed by the third in-depth report on the direct survey of businesses conducted by ISTAT as part of the activities for the 9th General Census of Industry and Services. The information, relating to the total number of enterprises with fewer than 20 employees and a wide sample of enterprises with between 3 and 19 employees, was in addition to that already on statistics records, allowing for a complete survey of enterprises with at least 3 employees (approximately 1 million and 50,000).
The results of the 9th General Census of Industry and Services confirmed the characteristics of our industrial system: highly fragmented in terms of business size, and with one of the lowest average sizes in Europe. This analysis focuses our attention on enterprises with 3-9 employees (approximately 837,000), 19% of the total number of enterprises in industry and services, responsible for employing more than 23% of workers (3.8 million). Micro-enterprises were particularly common in the services sector (around 70%), as well as real estate and professional services; moreover, they tended to provide services mainly to the regional market (63.3% against 36% of larger enterprises) and the majority were family-run (84.3% against approximately 70%. Source: Istat
Italy and its regions
Although all Italian regions showed values of the number of enterprises per 1,000 inhabitants over the Eu average, in 2014 there was a renewed decrease. Regarding regional distribution, there was a marked difference between the Centre and North area on the one hand, characterised by a high number of enterprises and a higher number of employees than the national average, and the South and Islands area on the other hand, with smaller enterprises. Calabria, Molise and Sicilia were among the regions with the smallest average size in terms of employees.
Conversely, a territorial analysis indicates a high propensity to entrepreneurship especially in the South and Islands area, where the number of self-employed reaches the highest value, compared to the lowest values recorded in the North.
The enterprise population in the South and Islands area is the least stable, with the highest birth and death rates and, consequently, the highest gross turnover rate. At the national level, the 5-year survival rates continued to fall. The Italian productive system is characterised by a large degree of fragmentation, together with a relative specialisation seen in the micro-enterprise service segment, accounting for over 30 percent of employment.
Regions in the North-west area had the highest levels of wage adjusted labour productivity, while values lower than the national average were recorded in the South and Islands area. The lowest values were recorded in the construction sector. The greatest difference between enterprises in the Centre and North and enterprises in the South and Islands area in terms of wage adjusted labour productivity were registered in the industrial sector excluding construction.
Italy within the European context
In Europe there are approximately 45.9 private industry and service enterprises operating per 1,000 inhabitants with extremely different densities among Eu28 countries. Although the Italian economy was more heavily affected by the financial crisis compared to the average European partners, Italy remains in the top positions among the countries with the highest density of private production activities.
The fragmentation of the productive system is more evident in Italy, where the enterprise size is much smaller than the European average. Among the major economies, Germany and the United Kingdom show a prevalence of large enterprises and a lower share of self-employed, indicating a preference for joint stock corporate forms. In Italy, the vocation and role of entrepreneurs remain strong, with values more than double the Eu average and preceded only by Greece. In terms of enterprise birth and death rates there are wide gaps between Member States, with Italy, France and Germany recording similar levels of gross turnover rate.
In general in Italy the productive system shows the same characteristics of some economies of the Mediterranean area, which remain closely linked to local forms of corporation, especially micro service enterprises, while the presence of industry is stronger in Eastern Europe.
In 2013, Eu28 Member States produced an average of nearly 143 Euros of added value per every 100 euros of unit labour cost. The indicator highlighted the difficult situation of Italian enterprises which obtained the third last positions in the Eu ranking. The most competitive enterprises were located in Eastern Europe, where low salaries and low social security contributions resulted in a better ability to exploit low labour unit costs, while Sweden, France and Greece are less competitive.
The Lithuanian overview
Indicators of Entrepreneurship in Lithuania show that the number of legal entities per 1000 inhabitants is constantly growing – from 52,9 in 2011 to 71,7 in 2016. In 2016, compared to 2015, this indicator increased by 3%. points per year (from 68,7 to 71,7 units). This increased the number of legal entities (5,7 thousand units, or 2,9% per annum) goes in line with decrease of the country population. Similarly, there is an indicator of operating enterprises per 1000 inhabitants and the number of active small and medium enterprises in the 1000 population change – the first increased from 27,6 in 2015 up to 29,2 in 2016 , and the second – from 27,5 in 2015 up to 29,1 in 2016. 10,2 thousands of new legal entities were established at the end 2015, as far as 10,5 thousands in 2016. The growth of the number of bankruptcies increased by 3.7% in the 2016 (11,8 thousand bankrupted companies).
The economic environment is an important factor for the establishment of a new business and the development of existing ones. Countries‘ real GDP increased by 2.3% in 2016 and in 2017 its growth accelerated (in the first and second quarter of 2017 it grew by 4% per year). These trends are driven by a rapidly growing domestic demand and significant growth of export. The European Commission forecasts that the main driver of economic growth in 2017-2018 there should be a fast-growing domestic demand. In such an economic environment, it is reasonable both to create a new one and expand the existing business. However, there are also risk factors taken into account. The rapid growth of salaries in recent years forecasts that the trade development may be hampered by the situation on the labor market – lack of qualified employees is noticeable. Source Enterprise Lithuania
Micro enterprises in Lithuania
In Lithuania, as in many other countries of the world, big attention is paid to small and medium-sized enterprises. The accounting requirements are simplified, tax incentives applied and their activities through other (non-taxable) incentives promoted for these companies. One of the main reasons for the use of these benefits is greater competition in the market for small and medium-sized enterprises – they compete with the business of the shadow economy. It is also more difficult for these companies to access external sources of funding; these funds are often needed to increase the operational efficiency or business development. Small enterprises are more dependent on fluctuations in the business cycle than they are, and therefore, with limited access to external sources of finance, the various benefits of the preferences help these companies to continue their business and the years of economic downturn.
► The companies operating in Lithuania are dominated by small enterprises (with 0-9 employees); they account for more than 80% of all operating companies in Lithuania. Thus, these companies are very important for the development of the Lithuanian economy, and their share over time has a tendency to increase. The share of enterprises with 10-19 employees is about 10%, with 20-49 employees – about 6%, with 50-249 employees – about 3%, and those with 250 and more employees – less than 1%.
► Although small enterprises (with 0-9 employees) represent more than 80% of the population of companies and employ more than 20% of the country’s employees, they account for only about 15% of the value of the country’s production. This shows that small enterprises in the country’s economy are less productive than bigger ones, but their productivity indicators are improving in recent years. Most of the production value (almost 37%) is created in large enterprises (with 250 and more employees) in Lithuanian enterprises. They employ more than 25% (231 thousand) of all employed persons, although their share in the economy is less than 1%. Source Enterprise Lithuania
Lithuania and its regions
In terms of entrepreneurial tendencies (the number of small and medium-sized enterprises per thousand inhabitants), there are positive trends. In 2015, compared to 2012, the number of small and medium-sized enterprises per thousand inhabitants in Lithuania has increased by 25%. The level of entrepreneurship has increased in all counties. However, according to entrepreneurship, three counties – Vilnius, Kaunas and Klaipėda – are clearly in the lead. They have an entrepreneurial level above the national average when in other countries the level of entrepreneurship is quite significantly behind the national average – for example, in Marijampolė and Utena counties, the level of entrepreneurship is still almost twofold behind the national average.
Lithuanian indicator of entrepreneurship records that country is lagging behind other EU countries in terms of entrepreneurial tendencies in the EU countries according number of to self-employed persons. (//www.lpk.lt/wp-content/uploads/2015/12/LPK_metine_ataskaita_2015-2016.pdf) .
Research made in the 1st quarter of 2016 (AB Swedbank) explores, that the biggest part of e-commerce business was located in Vilnius and Kaunas counties. The leader – Vilniaus county, fixes more than a half of all Lithuanian e-commerce companies (52%). Kaunas county entrepreneurs established 24 percents of Lithuania e-shops. Further goes Klaipėda (8%), Šiauliai (5%) ir Panevėžys counties (3%). Latest e-commerce lining recorded in Tauragė, Telšiai and Utena counties (1%) (AB Swedbank).
Lithuania within the European context
The prestigious business publication Forbes has ranked Lithuania 15th globally in its annual Best Countries for Business list. The Baltic country has climbed two places since last year and now sits above the likes of Switzerland, Germany, the USA and Israel. In the last three years, Lithuania has climbed more than 10 places. The list, which is compiled annually, rates countries based on the conditions for business they offer. Fact sheet of 2016 of European Commission describes Lithuania SME performance:
In 2010-2015, SME value added increased by more than 50 % and SME employment increased by almost 20 %. As a result, SME value added in 2015 was 9 % above, but SME employment almost 7 % below its pre-crisis level in 2008. In 2015, 8 274 new SMEs were registered, a drop of 32 % from 2014, while 5 598 SMEs were removed from the register: an increase of 13 %. The outlook for SMEs is mixed. Value added is expected to grow by 5 % annually in 2015-2017. Employment is predicted to remain static and not to return to its pre-crisis level by 2017.
Implementing the Small Business Act for Europe (SBA): Overall, Lithuania’s SBA profile scores well. The country performs above the EU average in the principles Entrepreneurship, ‘Responsive administration’, State aid & public procurement and Environment, while it is in line with the EU average in Access to finance and Single market. Its results are below those of most of the EU countries in ‘Second chance’, Skills & innovation and Internationalisation. Since 2008, the largest improvements occurred in Entrepreneurship, Single market and Environment, while the results for ‘Second chance’ and Skills & innovation have been steadily deteriorating. In 2015 and the first quarter of 2016, Lithuania has adopted 16 policy measures addressing nine SBA principles, the most important and numerous ones in the fields of ‘Responsive administration’, Skills & innovation and Entrepreneurship.
SME policy priorities: In ‘Second chance’, more emphasis should be given to measures aiming to encourage honest entrepreneurs to re-start. In Skills & innovation, despite the efforts of the government, low innovation and lack of ICT skills remain the weakest points of SMEs. More investments in human capital are needed. Skills shortages should be addressed by more labour market relevant education. In addition, the uptake of new technology should be strengthened by a better coordination of innovation policies and alternative means of financing. In Single market and Internationalisation, the recent market shocks should be absorbed by facilitating market entries to other countries. Source: EU Commission
The expectations of the development of companies in the Baltic countries are conservative. Small and medium-sized enterprises in Lithuania focus on their competitive proponents – maintain stability of investments, plan to renew business model and improve goods and services, (SEB Bank’s survey of small and medium-sized enterprises in the Baltic States.) Survey of small and medium-sized enterprises in the Baltic States last year shows that the business forecasts were worse than a year ago. Lithuanian business keeps the greatest optimism from all the Baltic countries – the largest share (81 percent) of Lithuanian small and medium-sized enterprises expect their turnover grow in 2017, with only about a fifth (19 percent) Lithuanian businessman believes that sales turnover will be lower in 2017. The biggest pessimists Latvians, even 61%. Latvia believes that their business turnover will decrease, only a bit more than one third expect sales growth. Optimism is also not recorded in Estonia – one third (31%) is set to decline in turnover.
SEB Bank research has shown that in the last five years (2017-2022) almost half (45%) of Lithuanian small and medium-sized enterprises are planning investments, of which almost every fifth business owner plans to invest more than 30 thousand euro, and every fourth – up to 30 thousand euro. Latvian and Estonian entrepreneurs are less determined – even 40% Latvians do not plan any investments this year, Estonian investments will be more modest and many will be up to 30 thousand euro Survey shows that Lithuanian entrepreneurs are most prepared for innovation – seeking better solutions for goods and services, improving the business model and investing in employees, i.e. – 62 percent of Lithuanian small and medium enterprises plans to use various tools to increase staff loyalty and reduce turnover rate. Neighbor countries plans innovation more cautiously- 45% (Latvia) and 58% (Estonia). Source (SEB bank)
The Spanish overview
As for Spanish SMEs in the non-financial business economy have not yet recovered from the crisis. SME value added and employment in 2015 are still 28% and 22% respectively below their 2008 levels. However, Spain came out of recession in 2014 and the SME sector experienced growth for the first time since 2008. Value added in 2015 was 3% higher than in 2013, while employment increased by 5% during the same period. SMEs are expected to grow by 5% in value added and 3% in employment between 2015 and 2017, creating around 240 000 new SME jobs.
SMEs performed particularly well in the accommodation and food service sector. In 2013-2015, SME value added grew by 7% and employment by 6%. While value added remained 5% lower than in 2008, SME employment reached its pre-crisis level in 2015. This positive development can be attributed to the rising number of visitors to Spain. In 2014, the total number of foreign visitors was more than 107 million, 4% more than in 2013. Of these visitors, 65 million were tourists, an increase of 7% on 2013 and representing 14% cumulative growth since 200810.
Spain’s economic recovery is also evident in recent business demographics. According to the Spanish National Statistical Institute, 399.458 new companies were registered in 2015, an increase of 16% on the previous year. At the same time 329.304 companies were deregistered, a fall of 13%. An even sharper fall can be observed in the number of bankruptcies, which is a quarter lower than in 2014. This is likely to be the result of a reform of the bankruptcy law in 2014 aimed at helping companies in financial difficulty to avoid liquidation.
The positive trend for SMEs which started in 2014 is predicted to continue into 2015 and beyond. In 2015-2017, SMEs are expected to grow by 5% in value added and 3% in employment, creating around 240.000 new SME jobs.
Spain within the European context
Spain ranks 16th among EU countries and below the EU average. Despite an increasing number of Spaniards going online, basic and advanced digital skills levels remain below the EU average. Only 53% of individuals between 16 and 74 years old have basic digital skills (56% in the EU) and ICT specialists represent a lower share of the workforce (2.4% compared to 3.5% in the EU). Spain is performing well as regards graduates holding a STEM (Science, Technology and Mathematics) degree with 21 graduates per 1000 individuals.
As part of the measures to improve skill match and integration of university graduates to the productive sector, the Ministry of Education, Culture and Sports (MECD) in collaboration with the Social Security authority launched an Employability Map as a tool to match supply and demand. This Employability and Employment of Spanish Graduates Map crossed data registration with Social Security records. Additionally, a Survey of Labour Access of University Graduates (EILU) was published recently analysing the university and job transition process. Regarding teachers’ digital competences, the Digital Skills and Competence Framework based on the Digital Culture plan have been launched. Spain has also promoted the development of massive open online courses (MOOCs) and innovative teaching methods in higher education. Spain has put in place Erasmus+ to promote student-centred learning and soft skills. The Spanish National Coalition for Digital Skills and Jobs is expected to finally become operational during the second quarter of 2017.
Increasing the number of Spanish ICT specialists but also re-skilling the labour force is of the utmost importance to tap the full potential of the Digital Economy. In order to match the offer of STEM professionals and the demand of specialists that reflects the strong growth of the adoption of digital technologies in Spanish public and private sector, by the end of 2016 the Ministry of Energy, Tourism and Digital Agenda has launched an aid program to promote training and employment of young people in the Digital Economy. The program is endowed with 20 million euros and aims, on the one hand, to offer training to young people that meets the requirements of the digital industry and new business models, and on the other, facilitate their access to jobs related to these subjects.
Microenterprises in Spain
According to NCMC3, the turnover in electronic commerce in our country has increased by 20.3% in the second quarter of 2016, which means more than 5,948 million euros, thus chaining fourteen consecutive quarters to the rise. Specifically, the consultant estimates that in 2017 employment in ecommerce will grow by 8% compared to 2016, both in direct and indirect jobs, and the rest of the profiles related to logistics and transport, technology and in fact, according to the Adecco Logistics and Transport division, 2 out of every 3 jobs created in 2017 in the sector will directly or indirectly have online commerce. The companies that use e-commerce most are relationships with marketing services, the purchase or sale of newspapers, discotheques or books, relations with transport, fashion and accessories, the purchase or sale of tickets to shows Leisure and culture and other recreational activities, travel and tourism, and computer services.
Now is the best time for SMEs, micro-enterprises and Spanish entrepreneurs to invest in ICT, because, after overcoming six years of recession, the light at the end of the tunnel begins to be seen in our economy. Although I would not dare to speak in the past of the crisis, I can say that Spain is, step by step, returning to the path of growth.
The speed with which entrepreneurs and SMEs are able to take advantage of the online window of opportunity that is now open, and which will remain open until 2020, will depend on the degree of 3 National Commission of Markets and Competition competitiveness that they will achieve. They will can, of course, start investing more lately, but you will have a lot of technological backwardness going back like this. Among small and medium businesses of 50 or more employees, eCommerce employs up to 16%. They also know that mobile workforce use helps communicate with customers, peers within teams, or when looking for information or sharing documents. However, only 54% of Spanish SMEs give mobile to it employees. It is a field where it can improve. And what do we know about the use of the cloud? That only 15% of small and medium-sized Spanish companies have any of their management tools there and 79% of those who do not use them admit that their problem is disinformation. They do not use it because they do not know what it is or what it is for.
Spain and its regions
Research made in the 1st quarter of 2016 show that e-commerce has already become the preferred method of purchase for many consumers. And is that the turnover of e-commerce in Spain has soared in the last year to reach 5.4 billion euros in the first quarter of 2016, 21.5% more than the previous year. It is constantly advancing with the introduction of new strategies, techniques and models that seek to optimize internet purchase and improve the customer experience.
E-commerce continues to mark a clearly upward trend. Currently, almost half of Spaniards make purchases through the ecommerce of companies. Therefore, the online stores are optimistic for the future. 30% of companies will open abroad in 2017. E-commerce and the Internet have diluted the geographical barriers between buyers and sellers. To increase their sales, Spanish online businesses must attract customers outside our borders. Imports in eCommerce continue to be greater than exports of products in our country, so there is still a great growth opportunity for those online businesses that want to sell internationally. In this sense, it seems that the Spanish online entrepreneur has lost the fear of opening their sales to other countries.
Spain within the European context
The percentage of SMEs selling and purchasing online has slightly decreased. However, the new indicator on the percentage of employed persons with ICT specialist skills puts Spain among the best performers in the EU. In the past, budget cuts have been a characteristic of policies in this SBA area. However, Spain’s recent economic recovery is steadily boosting investment in R&D projects. The CDTI invested EUR 170 million in 2014 to stimulate cooperation between research centers and technological firms in the form of ‘collaboration networks’. The CDTI also committed to invest EUR 900 million in innovation activities, with a focus primarily on SMEs. Furthermore, the ‘Direct line for innovation’, managed by the CDTI, allocated EUR 150 million, using EU structural funds, to SMEs to support their adoption of new technologies and innovative procedures. New measures during the reference period:
in September 2015 the CDTI adopted a Resolution which addresses the direct grants for the development of industrial technology; the measure of July 2015 by ‘Red.es’ is the resolution aimed to encourage SMEs to adopt cloud-based solutions;
in November 2015, the State Agency for Research was incorporated. The Agency aims to ensure efficient management of public R&D and innovation funding.
Overall, the 2015 EU Innovation Scoreboard classifies Spain among the moderate innovators. On skills, the country’s high level of qualifications is an asset, but its persistent skills mismatch remains a significant obstacle. While a multitude of crucial SBA-related policy measures have been adopted in the past several years, it is essential that these measures are implemented properly. Spain needs to still put into force a law adopted in 2015 introducing the ‘SME test’ and regulatory impact assessments (RIAs). Moreover, given the poor performance of Spanish SMEs in innovation, new support measures need to be implemented. These measures should boost innovative products and services, considering the need for improvement in infrastructure and resources, while also providing incentives for cooperation between universities, firms and research. There is still room for improvement on Access to finance and particularly on late payments. In addition, control mechanisms for public procurement and coordination of procurement policies across the different levels of government also need to be improved.
Fact sheet of 2016 of European Commission describes Spain SME performance:
Spain has improved in this area since the launch of the SBA in 2008 and its overall score is now in line with the EU average. Spain has made progress since the previous year on the complexity of administrative procedures: in 2015 this posed a problem to 59 % of businesses, down from 66 % in 2014. In another improvement, 64 % of respondents in 2015 found fast-changing legislation and policies to be a problem, down from 76 % in 2013. On Entrepreneurship, Spain’s performance is below the EU average. The country has the fourth lowest score in the EU but has made some progress since last year on the individual indicators. For example, early stage entrepreneurial activity, which includes those who are about to start an entrepreneurial activity or who started it no more than 42 months ago, has slightly improved, in particular among women. Entrepreneurial activity driven by opportunity (as opposed to not finding another option for work) rose from less than 34 % in 2014 to over 44 % in 2015. The established business ownership rate — the percentage of the population that owns an operating business — has increased as well, but a lower share of adults (5.6 % in 2015 against 7.1 % in 2014) is intending to start a business within the next three years. In recent years, Spain has stepped up policy efforts to boost entrepreneurship, including through support programmes for female entrepreneurs and young entrepreneurs. These programmes were complemented by tax incentives for entrepreneurs. Other measures include strengthening of entrepreneurship education in basic schools, introduction of start-up grants and lower taxation on business transfers, although the impact of these measures on increasing of entrepreneurial activity has been limited.
The Czech Republic overview
The number of SMEs grew by 1 % from from 2015 to 2016, representing approximately 10 000 companies. Czech SMEs started increasing their output while keeping employment roughly stable. Both parameters remained below their pre-crisis levels though. The SME value added in 2015 grew by 6 % from the previous year, reaching 97 % of its 2008 level. SME employment increased slightly from 97 % to 98 % of its 2008 level (with 26 000 new jobs in absolute terms). The outlook for the next two years is mixed. SME value added is expected to grow by 4 % p.a., while employment is forecast to remain stable.
Implementing the Small Business Act for Europe (SBA): The Czech Republic’s SBA profile shows mixed results. The country’s strengths include State aid & public procurement and Environment. Notably, the result for public procurement is significantly influenced by a single indicator, measuring the participation of SMEs in public tenders. At the same time, the European Semester process has identified further quality enhancements to the public procurement process as necessary. Average scores were recorded in the areas of Entrepreneurship, ‘Second chance’, Access to finance, Single market, and Skills & innovation. The performance in ‘Responsive administration’ and internationalisation was below average.
Micro-enterprises in the Czech Republic
Since 2008 the country has made moderate progress implementing the Small Business Act. Policy measures put in place have addressed all SBA areas, although a number of individual SBA recommendations have yet to be implemented. The fastest progressing areas include State aid & public procurement, ‘Second chance’, Single market and ‘Responsive administration’. Significant policy efforts went to better anchor the ‘Think Small First’ principle in the policy-making process. Performance in the areas of Entrepreneurship, Skills & innovation, and Internationalisation actually deteriorated compared to 2008.
Challenges remain unchanged from the previous year. It is necessary to raise the profile and public appeal of Entrepreneurship. The application of the ‘Think Small First’ principle needs to be strengthened, in particular by systematically applying the SME test to new legislative proposals. Developing e-government solutions is extremely important to create a more favourable business environment and public administration needs to be made more responsive to SMEs’ needs. Last but not least, international trade, both in the Single market and with non-EU countries, appears to be the area where short-term gains should be the easiest to accomplish.
Czech Republic and its regions
There is currently 1,1 million of economically active enterprises up to 50 employees in the Czech Republic. Most of them – 860 000 – are entrepreneurs without any employees. Where are they located and what field they make their business in? You can find the answers in the interactive map at: //samizdat.cz/rozjezdy/
The map provides the basic information about the concentration and distribution of micro-enterprises according to the fields: The biggest rate among the micro-enterprises belong to restaurant, café or fast food operators (almost 50000), the second position belongs to the hairdressers and cosmetics salons – there are unbelievable 32421 of them in the Czech Republic. On the third position there are small grocery shops. Then wellness services, joiners, small shops with mixed goods and corn producers. It is obvious from the map that we are a nation of alcohol lovers – the spirit production is ranked as 7th (5196 enterprises). In the regional statistics they appear within the first 10 positions in all regions except Prague and Liberec region. The spirit production has achived the highest ranking (the fifth position) in 3 regions: Olomoucký, Karlovarský and Moramskoslezský region. In one half of regions we can find kindergardens within the first 10 possitions (mostly in Středočeský, Pardubický and Liberecký regions).
Also traditions are obvious – the glass processing is concentrated around Nový Bor, jewelery production around Jablonec and Liberec, wine makers on the south Moravia. Some findings are rather surprising: the biggest concentrations of pawnshops ans second-hand shops is located in the area between Plzeň and Tachov and around Chomutov. Absolutely the highest number of subjects in hospitality industry are located along the country borders in the sparcely populated touristic areas.
Czech Republic in the European context
SMEs in the ‘non-financial business economy’ play an equally important role in the Czech Republic as they do in the EU — in both cases they represent 99.8 % of all businesses. Czech SMEs account for 55 % of total value added and 68 % of total employment, both of which are similar to the respective EU averages. Among Czech SMEs, medium-sized firms produce the highest share of value added (20 %), while micro firms account for the largest share of jobs (32 %).
The single most important sector for SMEs is manufacturing, accounting for 29 % of both SME value added and SME employment. Wholesale and retail trade contributes the second highest shares of SME value added and employment, each share slightly exceeding 20 %.
In 2015, the Czech ‘non-financial business economy’ got back to its 2008 level of value added. And yet, the recovery was not evenly spread across different size-classes. The total SME value added in 2015 was 3 % below its 2008 level. Small companies delivered only 90 % of the value added they created back in 2008, while medium-sized firms slightly exceeded their 2008 level of output.
In 2015, overall SME employment was 2 % lower than in 2008, with no significant volatility during the preceding two years. Total SME employment appeared to be largely unaffected by the crisis. Job losses that affected small and medium-sized firms were largely absorbed by increasing employment in microenterprises, which in 2015 employed 8 % more people than in 2008. Employment in small companies and in medium-sized businesses was 10 % below its pre-crisis level.
SME value added in most sectors has fallen since 2008. Notable exceptions to this trend included real estate activities and accommodation and food service activities sectors. SMEs in real estate activities performed strongly and delivered an increase of 26 % between 2008 and 2015, despite high volatility of results. SME employment has similarly increased: by 12 % in the same period. Several factors contributed to the growth of this sector, among which the gradual deregulation of rents from 2006 onwards. The resulting rent increases led to a revival of the real estate market. The low interest rates that prevailed during the post-crisis period also boosted the market for real estate transactions. At the same time the low interest rates strengthened the preference of Czech people for ownership rather than renting. Furthermore, home ownership became more affordable following the increases in disposable household incomes over the past two decades.
Another sector which outperformed the wider Czech economy was accommodation and food service activities. SME value added in this sector grew by 24 % in the years 2010-2015, compared to 9 % in the overall ‘non-financial business economy’ during the same period. One significant growth driver was the strong increase in tourism and travel, reflected in a 25 % rise in international tourists to the Czech Republic in 2010-2014. The Czech National Bank supported this growth since 2013 with exchange rate interventions which stimulated foreign demand by artificially weakening the local currency. This sector also benefited from a rise in domestic demand, which usually accounts for approximately half of the total output of this sector. Despite the strong growth of SME value added in accommodation and food service activities, SME employment fell by 4 % in the years 2010-2015. This was due to the more competitive environment, which put pressure on companies to increase productivity. In 2012 productivity was significantly lower in this sector than in other sectors, and therefore offered considerable possibilities for improvement.
Despite the inconsistent pattern of evolution in business registration and de-registration, the number of registered companies rose consistently by roughly 5 % from 2008, to a total of 430 992 in 2015. Business registrations increased by 2 083 to 26 953 in 2014-2015. Since 2012, registrations have continued to rise, particularly in 2013-2015, when there was a sizable increase of more than 8 % annually. In 2014-2015, business de-registrations also increased, by 44 %, to 7 312. This was the highest total number of de-registrations in recent years. However, the annual number of de-registrations has fluctuated widely since 2008, ranging from decreases of 50 % to increases of 60 %.
The most important factor leading to this steady growth in the number of registrations was the introduction of various government policies aimed at promoting new business ventures. These included the 2015 launch of programmes to provide consultancy services to SMEs, and to fund new micro firms’ investments in technological improvements. The high number of de-registrations can be partly explained as a consequence of increased competition as more new businesses entered the market, which exerted strong pressure on existing firms, forcing those with the lowest productivity out of business. The 2016-2017 forecast for SMEs is for moderate growth, in line with the ‘non-financial business economy’ as a whole. While SME employment is expected to continue to stagnate, SME value added is expected to grow by 4 % annually in 2016-2017.
Source: 2016 SBA fact sheet, EU