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Growth Prospects for Small, Medium-sized Enterprises in Europe Called 'Encouraging'

This year is likely to mark a turning point for the small and medium-sized enterprises (SMEs) in the European Union, with total employment expected to increase by 0.3 percent and value-added by 1 percent as compared to 2012. Preliminary forecasts expect the positive developments further accelerating in 2014. After five years of an uncertain economic environment, 2013 is expected to be the first year since 2008 with a combined increase in aggregated employment and value-added of the EU’s SMEs.

These promising projections are backed up by other positive signals. Over the last three years, an increasing number of EU member states have seen their small business sectors returning to an expansion of employment and value-added, or at least a petering out of the decline.

European Commission Vice President Antonio Tajani, responsible for industry and entrepreneurship, said: “Our initiatives to help SMEs to make it through difficult times have paid off. After five years of sluggish development, I am glad to see that SMEs are about to grow again. They are also starting to recruit more staff. Moreover, our indicators make it clear, that SMEs can grow further in 2014. SMEs are the lifeblood of our economy as they are now dragging us out of the most severe crisis of EU economy in the past 50 years."

Remarkable resilience of SMEs

Viewed against the unparalleled depth and complexity of the crisis, such a turn-around would be remarkable testimony to the resilience of the EU SMEs. In 2012 alone SMEs suffered a loss of jobs in the order of 610,000 jobs or a 0.7-percent decrease compared to 2011. Moreover, SMEs’ contribution to GDP declined by 1.3 percent from €3.44 trillion in 2011 to €3.39 trillion in 2012. A further consequence of the crisis was that the distribution of losses in employment and value added was very unevenly distributed among the member states.

About half of the 27 EU members created new employment in 2012, adding roughly 0.5 million net jobs to the employment stock in their respective sectors. The losses of jobs in SMEs are heavily concentrated in the more vulnerable states still affected by the sovereign debt crisis. However, even in their case the decline has slowed down significantly, indicating that the small businesses are bottoming out. 

European SMEs were significantly more resilient than large enterprises at the beginning of the crisis, i.e., in the period 2008-2011. However, as the crisis wore on SMEs were slower to recover than larger firms. The difference in performance of SMEs and large enterprises over the entire period of the crisis reflects the weakness in domestic demand, which is a key market driver for SMEs, while large enterprises benefited from a better export performance.

Source: Hanovercomms

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