September 14, 2016
Guest blog post by Gerhard Huemer, Study Unit Director at UEAPME
At the beginning of the current economic crisis in 2008, and during the debate about the Small Business Act, it became obvious that no accurate or forward looking data about SMEs existed in Europe. The only available information at EU level was past and outdated data provided by Eurostat. Furthermore, most of the economic indexes used in the public debate were and still are biased towards large enterprises as they have the resources to report on their data on a monthly basis.
For the above reasons and more, UEAPME (the European Association for Crafts and SME) and its national member organisations decided to elaborate an EU Craft and SME Barometer and an SME Business Climate Index. This unique survey was first published in March 2009 and subsequently issued twice a year since then. The SME Barometer differentiates between three size classes for SMEs (micro, small and medium) and four sectors (manufacturing, construction, business services and personal services) and presents results for all of these dimensions over the last semester as well as expectations for the current semester as regards overall situation, turnover, employment, prices, investments and orders.
Furthermore, the UEAPME Study Unit – the department conducting the surveys – designed an EU SME Climate Index that presents the overall sentiments of SMEs in the European Union and can be compared with the European Commission’s Economic Sediment Indicator or the Markit Purchasing Managers’ Index, which mainly represents large companies. For this index, UEAPME has data going back to the beginning of 2007, enabling this index to now cover a whole business cycle, including the two recessions during the current financial and economic crisis.
What are the main patterns we found over this cycle? Are there really any differences between SMEs of different sizes and large companies? If so, how can these variations be explained?
Here are a few findings to arouse your curiosity and entice you to read more in our publications:
- The first recession in 2008/9 was deeper than the one in 2012/14. However, SMEs were less affected by the first and much more by the second compared to large companies. Why is that? The first recession resulted from an external shock and mostly hit the export orientated manufacturing sector where SMEs are underrepresented. The second downturn was caused by the sovereign debt-crisis and a decrease in internal demand, which most affected the services sectors where SMEs are strongly represented. Here we could find clear differences between the Member States with significant problems and the rest of the EU. However, after successful reforms, the gap between south/periphery states and northern/central states is now closing.
- The differences in employment developments are also significant and the smaller the companies are, the smaller the amplitudes over the cycle have been. Micro and small enterprises show a tendency to hoard labour over a business cycle, in order to keep the business running and to keep qualified personnel.
- SMEs are planning investments only to a certain extent and the results for investments are generally higher than expected. Furthermore, investments in higher production capacity only takes place if SMEs see a clear positive outlook. This only becomes true with positive figures in the first semester of 2016.
- Lack of internal demand strongly impacts the services sectors, but even more so the construction sectors. Indeed, SMEs are mainly active in private housing and such investments are put on hold if households are faced with uncertainty.
These few findings show that SMEs are substantially different from large enterprises. Having forward looking data about SMEs can definitely contribute to better policy making. SME support programmes, access to finance measures and investment initiatives can be better targeted if politicians know more about the economic situation and the businesses’ expectations, especially of those representing 99.8% of companies, 2/3 of employment and about 60% of added value, i.e. the SMEs in the European Union. Therefore, we are very proud that several European and international institutions like the European Commission, the European Investment Fund and the OECD regularly use and quote the EU SME Barometer.
I hope I managed to entice you into looking into the results of our work and that you are already looking forward to our next edition published mid-October. This time round, it will be interesting to find out if the positive effects of strong internal demand in some Member States or the negative consequences of the BREXIT vote have had a dominant impact on SMEs in Europe.Blogactiv Team