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Do SMEs create more and better jobs?

European Commission - MEMO/12/11   16/01/2012

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MEMO/12/11

Brussels, 16 January 2012

Do SMEs create more and better jobs?

The European Commission published today a study analyzing the important role small and medium sized enterprises play in creating more and better jobs. SMEs provide a vital contribution to the European economy, being responsible for more than two thirds of the total employment in the private sectors and 85% of the net job growth.

Given their importance in the European economy, they are also essential for the economic recovery and for reducing the negative employment effects of the crisis. A post-crisis informed and effective policy making process requires and should be based on an expert analysis of how the recent crisis has affected the creation of new jobs in SMEs, as well as the quality of existing ones. In response to these information needs, the study provides statistical evidence and analysis of:

  • the quantity of jobs SMEs deliver, and how it has changed over time, with a focus on the recent crisis.

  • the quality of jobs SMEs deliver, with a view to shed light on the nexus between the creation of jobs in Europe's SMEs and the simultaneous improvement of the competitiveness of the EU SME sector.

More highlighted findings and detailed figures

SMEs' contribution to more jobs by Member State

In 2010, there were 20.8 million enterprises in the non-financial business economy1, providing employment for 87 million people in the European Union. Between 2002 and 2010, the SMEs had a much higher employment growth rate (1% annually) than the large enterprises (0.5%).

On average, the annual employment growth rate of SMEs was also higher than the growth rate of the total EU population (about 0.4% annually over 2002/2010) and the corresponding growth rate of the total EU active population (0.8% for the same period).

24 out of 27 Member States have had positive employment growth over 2002/2010. In most of these countries, job creation by the SME-sector has been more than proportionate to its share in employment.

Average annual employment growth rates in the non-financial business economy, by Member State for 2002-2010

 

Micro

Small

Medium

sized

SMEs

Large

All enterprises

average annual change in %

Austria

1.8

1.0

1.0

1.3

0.8

1.1

Belgium

1.5

0.3

0.4

0.9

1.0

0.9

Bulgaria

3.7

5.0

1.9

3.5

-0.1

2.4

Cyprus

2.2

2.9

3.3

2.7

2.0

2.5

Czech Republic

-1.8

0.4

0.9

-0.5

-0.3

-0.4

Denmark

1.1

0.5

0.3

0.6

-0.1

0.4

Estonia

2.0

0.3

1.1

1.1

-0.2

0.8

Finland

1.6

0.8

0.5

1.0

-0.3

0.5

France

1.4

-0.4

-0.4

0.3

0.5

0.4

Germany

2.2

1.3

1.6

1.7

0.2

1.1

Greece

0.9

2.8

0.6

1.2

-1.5

0.6

Hungary

0.5

0.8

-0.3

0.4

-0.1

0.2

Ireland

3.4

0.6

0.5

1.5

0.1

1.0

Italy

1.0

0.5

0.5

0.8

0.4

0.7

Latvia

0.1

0.5

-0.6

0.0

-1.3

-0.3

Lithuania

6.5

1.7

0.9

2.8

-0.3

2.0

Luxembourg

2.9

1.9

1.7

2.1

-0.5

1.2

Malta

-1.8

1.6

1.5

-0.1

-2.9

-0.8

Netherlands

7.0

0.9

-2.7

1.9

0.5

1.4

Poland

1.5

2.2

2.5

1.9

2.5

2.1

Portugal

2.6

1.1

0.7

1.7

1.2

1.6

Romania

12.2

3.9

-0.1

4.9

-3.1

1.6

Slovakia

15.0

-0.7

-0.2

3.2

-1.0

1.2

Slovenia

2.5

0.5

-1.5

0.7

1.9

1.1

Spain

0.4

-0.4

0.4

0.2

1.8

0.5

Sweden

0.3

3.0

2.6

1.6

0.9

1.3

United Kingdom

2.4

0.1

-0.0

0.9

0.5

0.7

EU27

1.7

0.7

0.5

1.0

0.5

0.9

Source: EIM Business & Policy Research, based on European Commission: "Are EU SMEs recovering from the crisis? Annual Report on EU Small and Medium Sized Enterprises 2010/2011; data 2008-2010 estimates.

Note: the contribution of size classes to total employment growth is controlled for the population effect1.

Crisis: smaller enterprises report negative impacts more often

The main effects of the economic crisis reported by enterprises during 2009 and 2010 were the overall negative effect on total demand, the increase in customer payment terms and the problems with obtaining finance. Smaller enterprises more often mentioned negative effects of the crisis than larger enterprises.

Negative effects of current crisis during 2008Q4 - 2010Q4, by size class, for the EU business economy

Source: Enterprise Survey 2010, SMEs and EU Labour Market, EIM/GDCC (N=7559); conducted during the final quarter of 2010 (2010Q4).

Note: Questions regarding the negative effects of the current crisis referred to the effects in the past two years.

Innovation strengthens competitiveness

Being innovative has proved to be a good defence against the crisis. This conclusion holds at country level: innovative countries have experienced fewer negative impacts of the economic crisis. Due to a very strong correlation between the two characteristics, the same is true if competitiveness is considered. Thus, the results of the enterprise survey indicate that enterprises in more innovative economies have suffered less from the crisis than the ones in less innovative economies: in innovative economies, enterprises are less likely to mention a reduction in the demand for their products, more likely to report an increase in the demand for their products, and the labour market is still relatively tight.

Negative effects of current crisis during 2008Q4 - 2010Q4, by innovation performance, for the EU business economy

Source: Enterprise Survey 2010, SMEs and EU Labour Market, EIM/GDCC (N=7559); conducted during the final quarter of 2010 (2010Q4); Innovation performance is based on the results of the Innovation Union Scoreboard 2010.

Note: Questions regarding the negative effects of the current crisis referred to the effects in the past two years.

Use of publicly supported employment protection schemes

An enterprise's decision on whether (and when) to hire or fire employees depends on many different factors. These include the state of the economy as a whole and the competitiveness of the individual enterprise as well as the extent to which the labour market is regulated and employment is protected. During the crisis, several measures have been introduced (or were already in place) to encourage employers to retain their current employees and/or hire new employees. These measures include temporary short-time working arrangements, wage subsidies and non-wage cost reductions (two examples of such measures are included in Boxes 5 and 6). Many of these measures have been introduced or enlarged as a reaction to the crisis, and in 2010 all Member States had such measures in place but their use by enterprises varied a lot in between countries.

Share of enterprises using publicly supported employment protection schemes during 2008Q4 – 2010Q4, by country

Source: Enterprise Survey 2010, SMEs and EU Labour Market, EIM/GDCC (N=7559); conducted during the final quarter of 2010 (2010Q4).

Note: Questions regarding publicly supported employment protection schemes referred to the past two years.

The study was prepared by EIM Business & Policy Research with financial support from the European Communities, under the Competitiveness and Innovation Programme 2007-2013.

More information can be found on the webpage of the SME Performance Review:

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm

1 :

The 'non-financial business economy' covers enterprises in industry, construction, trade, and services (NACE Rev. Section C to I, K). It does not comprise enterprises in agriculture, forestry, fishing or the largely non-market services such as education and health.

1 :

For an explanation of the population effect, please see pg. 26 of the report 'Do SMEs create more and better jobs?'


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