SME, the backbone of EU industry

SMEs are defined by the European Commission as enterprises whose sizes fall within set employment and financial limits. Specifically, the Commission (European Commission 2003) talks about medium-sized enterprises when the number of employees is less than 250 and the turnover does not exceed € 50 million; small enterprises when the number of employees is less than 50 and the turnover does not exceed € 10 million; and finally micro enterprises when the number of employees is less than 10 and the turnover does not exceed € 2 million. Eurostat, the European Office of Statistics, highlights how 23 million SMEs, representing 99% of EU companies, constitute the backbone of EU industry, providing 67% of jobs in the private sector with over 90 million employees, and generating € 3900 billion in added value (over 90% of the total) created by European businesses.

SMEs are also characterised by some other specific factors: they do not require significant capital investments; they are flexible and quickly rotate fixed capital and the range of products they are able to offer, rapidly adapting to the economic cycle and market demand; they are frequently suppliers of semi-finished products or services to one or more large enterprises; and they have a high capacity to cluster by product sector, creating highly specialised local production systems (districts).

SMEs are part of a European industry framework characterised by high levels of competitiveness in both low-tech sectors (food, textiles, furniture, etc.) and high-tech sectors (IT, biotechnology and biomedical, materials), as well as in the chemical industry, where it is the world leader (raw chemical industry, with Germany and France, and fine chemicals, particularly relating to pharmaceuticals and consumer goods, with the UK and Italy).

In all these sectors, except the raw chemical industry, SMEs are able to occupy a significant space and are often the main players. It isn’t by chance that the European Commission developed a broad initiative to support SMEs through the Small Business Act (SBA), which created a policy framework aimed at supplementing existing economic and financial instruments with new EU economic policy devices aimed at employment and growth. In summary, the SBA simplifies bureaucratic formalities and procedures for SMEs, guarantees them better access to credit through the granting of loans, guarantees and risk capital (through EIB and EIF channels), gives greater flexibility to member states in the granting of state aid to SMEs (up to € 7.5 million), and establishes networks of support services (Enterprise Europe Network, Solvit, SMEs and the environment, etc.) and for the promotion of innovation and research (IPR Helpdesk, SME Technoweb). In the context of the specific programme on innovation and research for 2014-2020 (Horizon 2020), it also gives SMEs access to bridge the funding gaps in the initial, high-risk stages of research and innovation activities. There has also been the launch of a programme specifically aimed at the competitiveness of SMEs (COSME), which according to the Commission’s forecasts should support 40,000 SMEs a year, creating or maintaining around 30,000 jobs and launching 900 new products, services or production processes.

According to the European Commission (2018 SME Report), from 2008 until 2017, the number of SMEs in the EU grew by almost 14%, with a 14% contribution to GDP in the Union. Figures which are testimony to the vitality of the SME sector and its economic recovery following the 2008 financial crisis, even if for every 9 new SMEs set up between 2012 and 2015, 9 ceased trading.

Start-ups, focusing on innovative products, have particularly benefited from the economic recovery. Two-thirds of this type of SME are located in six member states: Germany (23.9%), United Kingdom (14.4%), Spain (8.6%), France (8.4%), Italy (7.6%) and Poland (6.4%). SMEs account for more than 88% of exporting European companies, and the value of goods exported by them has grown by 20% since 2012. In 70% of cases, these goods are exported within the EU, with the remaining exported to non-EU countries.

The European Commission estimates that the added value generated by SMEs grew by 4.3% in 2018, and will grow at a similar rate in 2019. Meanwhile, the employment rate for these enterprises will increase by 1.5% for both years, even if these forecasts are subject to numerous uncertainties (in particular, Brexit and the USA-China trade war), whose impact is difficult to assess at the moment.