Small companies create 85% of new jobs
85% of net new jobs1 in the EU between 2002 and 2010 were created by small and medium sized enterprises (SMEs). This figure is considerably higher than the 67%-share of SMEs in total employment. During this period, net employment in the EU’s business economy rose substantially, by an average of 1.1 million new jobs each year. These are the main results of a study on the essential contribution of SMEs on job creation presented by the European Commission today.
With 1% annually, the employment growth for SMEs was higher than for large enterprises with 0.5%. A clear exception is the trade sector, in which employment in SMEs increased by 0.7% annually, compared to 2.2% in large enterprises. This is due to the strong increase of large trade enterprises, in particular in sales, maintenance and repair of motor vehicles.
Within the SME size-class, micro firms (less than 10 employees) are responsible with 58% for the highest proportion of total net employment growth in the business economy.
Secondly new firms (younger than five years) are responsible for an overwhelming majority of the new jobs. New enterprises operating in business services create more than a quarter (27%) of the new jobs, while the new firms in transport and communication contribute least (6%).
Commission Vice-President Antonio Tajani, responsible for Entrepreneurship and Industry said: “In this critical time for European economy, we see small enterprises delivering and confirming their role as main generators of new jobs. Their significant share in job creation highlights the greater than ever economic relevance of SMEs and the need to support them at all levels. The small and new enterprises are clearly the key for restoring economic growth”.
More information can be found on the webpage of the SME Performance Review:
Main effects of the crisis: smaller enterprises report negative impacts more often
According to the results of the survey, the economic crisis has left its mark on enterprises from all size-classes, with micro firms being particularly vulnerable. As a result of the 2009/2010 economic crisis the number of jobs in the SME-sector has on average decreased by 2.4% annually, as against 0.95% annually in the large enterprises sector. Employment developments are still negative in 2010, but expectations for 2011 were improving at the time the survey was held. The share of firms that expected to lay off employees in 2011 was smaller than the share of firms that actually laid off employees in 2010.
Besides the employment effects, by far the most important negative effect of the crisis on firms is the overall decline of total demand for their products and services (mentioned by 62% of companies), followed by the increase in customer payment terms (mentioned by 48% of firms) and finally the shortage of working capital, which affected 31% of the respondents.
Innovativeness is a weapon against the crisis
Innovation seems to have a positive effect: innovative enterprises, as well as enterprises from more innovative countries, more often report employment growth and have higher employment growth rates.
The survey underlines that innovative SMEs or companies operating in more innovative economies suffered less from the economic crisis. For example, while the decline in overall demand is mentioned by 70% of enterprises in countries that are considered modest innovators2, the corresponding figure is 45% for countries which are innovation leaders.
Job quality in SMEs
The study distinguishes two broad dimensions of the job quality: employment quality and work quality. On average it is true that jobs in small enterprises are less productive, less remunerated, and less unionised than jobs in large enterprises. However, microenterprises report that they have a competitive advantage over their competitors as far as ‘soft’ aspects of the human resource aspects of an enterprise are concerned: working climate, work-life balance, working-time arrangements.
The study is part of the SME Performance Review project and based on a survey of enterprises conducted at the end of 2010 and covering the 27 EU member states and 10 other countries participating in the Entrepreneurship and Innovation Programme, namely Albania, Croatia, the Former Yugoslav Republic of Macedonia, Iceland, Israel, Liechtenstein, Montenegro, Norway, Serbia, and Turkey.
2: This classification is based on the results of the 2010 Innovation Scoreboard which classifies countries into four performance group, depending on their performance across 24 innovation indicators: (1) Innovation leaders; (2) Innovation followers; (3) Moderate innovators and (4) Modest innovators