DG GROW´s EU SME Report 2018

  • SMEs remain the EU´s economic backbone: in 2017, SMEs in the EU-28 non-financial business sector accounted for:

•     almost all EU-28 non-financial business sector enterprises (99.8 %)

•     two-thirds of total EU-28 employment (66.4 %)

•     slightly less than three-fifths (56.8 %) of the value added generated by the non-financial business sector.

  • The EU SMEs’ strong recovery continues. Over the period 2008 to 2017, gross value added generated by EU-28 SMEs increased cumulatively by 14.3% and SME employment increased by 2.5%.

 

  • SMEs’ contribution to growth in value added and employment exceeded what would have been expected on the basis of their relative importance in the economy. In the EU-28 as a whole, SMEs contributed 13% more than expected to the recovery in value added based on their share of gross value added in 2009. At the level of the EU-28 economy, SMEs in the non-financial business sector contributed 14% more to the economy-wide employment recovery than would have been expected on the basis of their share of economy-wide employment in 2009.

 

  • Performance across the EU continued to vary, with six Member States generating SME value added in 2017 which was still below their respective levels of 2008. In six Member States the 2017 level of SME value added was still below its 2008 level (Croatia, Cyprus, Greece, Italy, Portugal and Spain). In 15 Member States the SME employment level in 2017 did not reach its 2008 level (Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, France, Greece, Ireland, Italy, Latvia, Lithuania, Portugal, Romania, Slovenia and Spain).

 

In five Member States (Bulgaria, Estonia, Lithuania, Luxembourg and Malta) the 2017 level of SME value added exceeded its 2008 level by 40% or more.

 

Employment level exceeded its 2008 level by 20% or more in only three Member States (Germany, Luxembourg and Malta).

 

The host country of this year´s SME Assembly also did very well. In 2013-2017, SME value added rose by 13.2% and SME employment by 4.8%. SME growth in 2016-2017 continued with SME value added increasing by 4.1% and employment by 1.9%.

 

  • Fuelled by the economic recovery, the number of high-growth firms in the EU increased by 24% between 2014 and 2016. In the EU-28, in 2016, there were 179,060 high-growth enterprises. The number of high-growth enterprises, i.e. firms with a three year-average growth rate in employment of at least 10%, is generally accepted as a proxy for scale-up firms.

 

  • The outlook for 2018 and 2019 remains positive but somewhat uncertain due to unsettled international trade conditions. EU SMEs value added in the EU-28 non-financial business sector is expected to increase by 4.3% in both, 2018 and 2019. EU-28 SME employment is projected to grow by 1.5% in 2018 and 1.3% in 2019. This positive outlook is subject to a number of risks, such as the further development of BREXIT or potential international trade conflicts.

 

SME internationalisation as the special theme of the EU SME report 2018

 

SME internationalisation has contributed to grow. EU-28 SME exports of goods have increased by about 20% since 2012. This was slightly faster than overall SME value added. In 2016, 36.1% of all goods exports by EU-28 enterprises came from SMEs. SMEs represented 88.3% of all EU-28 enterprises exporting goods. Both indicators went up during the period between 2012 and 2016. In absolute terms, the value of direct exports of goods by SMEs in the EU-28 was €1,757 billion (in current prices). On average, across the EU-28, SMEs exported €1.2 million in goods per exporting SME.

 

The Single Market is the key market for EU-28 SMEs. In 2016, almost 70% of all SME exports (in value) went to other Member States. 80% of all exporting SMEs were engaged in intra-EU trade, while less than half of exporting SMEs sold to markets outside the EU-28, and slightly more than a quarter of exporting SMEs sold to both markets.

 

The economic significance of the indirect contribution made by SMEs to exports is frequently underestimated. Even non-exporting SMEs can participate indirectly in the global economy by being upstream suppliers of exporting firms. Such indirect contribution of SMEs to Member States’ export performance is very significant. Anecdotal evidence suggests that SMEs can account for more than 50% of value added of exports, when indirect exports are taken into consideration.  SMEs that do not export and are not part of a global value chain also benefit indirectly from increases in foreign demand. This is because an increase in production and sales of exporting enterprises translates into a boost in domestic demand for goods and services.

 

SMEs in the goods sector are more likely to be exporters than those in the service sector.  While some industrial goods lend themselves more easily to trade than some services, this finding is also related to the more open internal market for goods than the one for services.

 

SMEs internationalise based on strategic choices. Available policy support can play a decisive role in influencing that choice. There are many useful instruments already in place to assist SMEs already active in international trade such as the Europe Enterprise Network (EEN).  In order to increase SME exports, policy support needs to zoom in on those SMEs which have not yet contemplated going abroad.

 

Contrary to the beliefs of some, SMEs stand to benefit as much from policies promoting open markets in and outside the EU as larger firms. Policies helping to complete the EU Single Market and supporting the reduction of international trade barriers are, therefore, crucial elements of any strategy supporting SMEs.

 

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