The EU Craft and SME Barometer 2011/H1

Transcription

1 The EU Craft and SME Barometer 2011/H1 EU SME business climate index above neutral, reaches 72.1 But increasing imbalances across Member States create concern The UEAPME SME Business Climate Index (Chart 1) for the European Union increased for the fourth consecutive semester, jumping up by nearly seven percentage points to reach With this, European SMEs stand above the 70-points barrier which we assume to represent a neutral business climate (dashed blue line) for the first time since the recession began to unfold during the second half of On average, the SMEs across the EU have seen a stronger than expected economic performance in the last half year, in line with the upward correction of the last interim economic forecast of the European Commission Chart 1 The biggest worry about the recovery is its unbalanced nature: the countries the hardest hit by the crisis lag behind the others, causing the former to drift further apart. This becomes clearer if we filter the European responses. The results 64.1 from our last edition did not reveal any significant divergence from the European average per country group. This time, the UEAPME Business Climate Index for the Portugal, Ireland, Italy, Greece and Spain is not only six points worse than the EU average (64.1 v. 72.1), it is also worse than the EU result of last semester (65.5). SME Business Climate Index 07/H1 07/H2 08/H1 08/H2 09/H1 11/H1 The index is calculated as an average of companies that have reported positive or stable business situations and expect a positive or stable development for the next period. Therefore the index can range from 100 (all positive or neutral) to 0 (all negative). This means that the increase in the index stemmed solely from the rest of the EU (on its own at 75.9), not relieving but reinforcing imbalances. This asymmetric evolution poses a threat to an economy as interdependent as the EU s. The focus should be now on urgent reforms to address these imbalances, reduce uncertainty, and restore the confidence of market participants. UEAPME STUDY UNIT MAISON DE L'ECONOMIE EUROPEENNE - RUE JACQUES DE LALAING 4 - B-1040 BRUXELLES TEL +32 (0) FAX +32 (0) g.huemer@ueapme.com

2 Introduction to the EU Craft and SME Barometer The EU Craft and SME Barometer builds on the results of surveys that are conducted by UEAPME Member Organisations twice or four times a year in different regions all over Europe. The survey is based on about 120 questionnaires, with 30 answers received. The data for this survey were collected between December 2010 and February 2011, which gives a quite recent picture about the development and the expectations of SME owners all over Europe. At European level, we are able to provide data for size classes (micro, small and medium-sized enterprises) and for four economic sectors (manufacturing, construction, business and personal services), which may show different developments over business cycles and may react differently to external effects. For each of these groups the Barometer provides balanced figures on the following categories: overall situation, turnover, employment, prices, investment and orders, where balanced means the difference between businesses that answered the questions about their expectation in these six categories in a positive or negative manner (balance = positive answers negative answers). In order to get European figures from different national surveys, national results have been weighed with employment figures (see Table 1 and 2 in the Annex). This Barometer presents the results (experiences) for the second half of 2009 () and both semesters of 2010 ( and ) as well as the expectations for the first half-year of 2011 (). UEAPME issues its EU Craft and SME Barometer twice a year, ahead of the European Summit in spring and autumn. Furthermore, UEAPME provides twice a year a European SME Business Climate Index (see page 1), which is calculated as the average of the current situation and the expectations about the next period and sums positive and neutral answers as regards the overall situation for the business. Finally, UEAPME will only present European figures and will not disclose country specific data. This is due to the fact that we have not data for all Member States that are significant enough from a statistic perspective and furthermore, the presentation of national data from SME surveys is a prerogative of our national organisations, which are collecting these data. For further information on this document, please contact: Gerhard Huemer, Study Unit Director UEAPME Rue Jacques de Lalaing, 4 B-1040 Brussels Tel: g.huemer@ueapme.com Mario Gronert, Study Unit Economist UEAPME Rue Jacques de Lalaing, 4 B-1040 Brussels Tel: m.gronert@ueapme.com 2

3 Main Results of the EU Craft and SME Barometer 2011/H1 The general situation for Europe s SMEs improved markedly in the second half of Chart 2 shows the balance of positive vs. negative answers received regarding situation, turnover, employment, prices, investments and orders over the last three semesters as well as the expectations for the current half-year. The number of respondents viewing the situation positively outweighed pessimists for the first time since the first half of 2008, when the UEAPME Barometer started recording the voice of SMEs in Europe, reaching a balance of 3.1 up from -20 at the beginning of the year. Chart 2 balance +/ SME Main Results Situation Turnover Employment Prices Investments Orders The results for turnover also turned positive, but less so (0.6). Moreover, the betterment was not as strong (up 3.4 from -2.8). Our employment indicator improved by 4.3 percentage points (pp), yet remained negative (-2). Prices followed a similar pattern, standing now at Investments edged forward slowly by 2pp but remain largely negative at -11.1, while orders jumped up 8.4pp to reach 4.6. Still uncertainty about the future This analysis has excluded expectations for their patchy behaviour. In previous editions we had already noted how actual investments usually turned out to be better than expected. This time, as can be seen form Table 1, the expectations for the first half of 2011 are sometimes better than the result of 2010, sometimes worse it seems independently of the development before. There are two likely explanations for this unclear pattern in the expectations. First is the reigning uncertainty. Entrepreneurs of Europe s smaller firms of even fast-growing economies will read and see in newspapers and on television of a debt crisis, of insolvency, illiquidity and the inability to pay. Such a degree of incertitude about the future growth path turns SME employers, whose livelihood often depends on their business, into cautious, potentially over-cautious entrepreneurs. Second are inflation expectations, since, if entrepreneurs expect across the board their prices to rise (up 9.7pp to 7.1 for ), inflation should surge. 3

4 Largest SMEs made the strongest recovery differences narrowing In the previous edition of the UEAPME Barometer we analysed the lower employment volatility of micro enterprises compared to medium-sized firms. A threshold effect seemed the most likely reason for this. Below a certain (low) level of employees, hoarding labour becomes more attractive. Moreover, companies with few employees might, rather than continue working with two or three employees, cease operations, thus falling out of the survey. 1 Using the data we have accumulated over time, we can see how the differences are slowly ebbing away. Chart 3 shows the evolution of the employment balance since the beginning of 2008 until now for micro, small, and medium-sized companies. Chart SME Employment by size /H1 08/H2 09/H1 Micro Small Medium Starting from similar positions, as soon as the crisis started unfolding, medium-sized companies responded by decreasing employment heavily. They reported their worst balance so far (-21.5) already at the end of The difference between medium and micro firms then was a staggering 12.3pp. Soon after, things started turning around for the largest SMEs, while the employment indicators for the smaller ones were still worsening. Both small and micro companies reached their low in the second half of 2009, which was nonetheless 2.4pp and 7.5pp better than the dip in medium enterprises a year before. Since, improvement has been steady but stronger the larger the company. The expectations for the first half of 2011 finally foresee a narrowing of the gap in balances to 8pp. Differences by sector narrowing The sector analysis reveals few differences across industries. Chart 4 (next page) shows the balances for turnover rather evenly distributed around 0, where the numbers of optimists match the pessimists. Manufacturing, probably pushed by growth outside the EU, reports the best results: up 2.7pp to See page 5 of the edition for more information - 4

5 On the other side of the spectrum is the construction sector that keeps communicating the worst numbers, declining 1.4pp to Nonetheless, the difference between the worst and the best result (4.9 and -6.6) is, at 11.5 pp still far smaller than then same margin by size, between micro and medium companies, which stands at 18.8pp. 2 Business services turnover improved the most, from to Personal services report a less stark improvement from -6.8 to Chart 4 balance +/- Turnover by industry Manufacturing Construction Business Services Personal Services. The outlook into the first semester of 2011 is overall slightly bleaker: only personal services believe turnover will improve. This cautious forecast is in line with the general results presented in Chart 2. European Imbalances: Employment pattern uneven As mentioned at the beginning, the biggest concern over the recovery in Europe is its imbalanced nature. From the employment indicator (Chart 5) the worrisome developments become clearer. When asked whether they hired new workers or had to let somebody go 3, a majority of SME employers in Portugal, Greece, Italy, Ireland and Spain reported that they had had to reduce their personnel numbers (-9.7). The situation foreseen for the first half of 2011 is slightly better, but still negative (-6.2) Chart 5 balance +/- Employment - SME All Rest of the EU PIIGS 2 See Table 3 in the Annex 3 They are also asked whether their staff numbers stayed unchanged. The percentage of entrepreneurs ticking that option is not taken into account for the balance. 5

6 By contrast, SME firms in the rest of Europe have seen their employment increase (1.0) and expect those numbers to rise during the first semester of this year (2.9). The expected improvement for the PIIGS is, however, larger, with 3.5pp as opposed to 1.9pp. If employment in the troubled countries in Europe s periphery does not increase, domestic demand in those countries cannot be boosted. Certain reform proposals might raise consumption over the short term, but national incomes would still stagnate or might even decrease. Thus, growth in exports would be the only exit out of the imbalances. However, this requires firstly the internal market and the channels through which growth feeds through to other regions to function properly. It requires, secondly and maybe more importantly, for the periphery economies to increase their competitiveness. In other words: to produce goods and services other parts of Europe find worth their money. Else, any surplus generated in EU s core will not trickle down. This creates a climate of uncertainty on which we shall focus in the next section. What do SMEs expectations mean under the current uncertainty? European SMEs are, we read from the data, still unsure about where the EU economy is heading towards. Column 1 of Table 1 compares the actual results for the second half-year of 2010 with the expectations held six months prior. A positive value means results were better than expected; a negative one represents a worse than foreseen development. Column 2 compares the expectation for the first semester of 2011 with the results of the last six months. A positive number describes an optimistic outlook; a negative number states that the entrepreneurs believe this semester will not be as good as the last one was. Table 1 EU Average PIIGS Rest of Europe SME All e (1) (2) 11/H2e (3) (4) Situation Turnover Employment Prices Investments Orders For the SME average, the indicators for situation, turnover and investment report better than expected results for the second half of 2010, while the balances for employment, prices and orders turned out worse than anticipated. When we look in turn at the second column, we observe that whenever the last semester went beyond the entrepreneurs expectations, the outlook is negative but are more hopeful about the future when expectations were not met. It should further be noted that there is no clear pattern in this behaviour. Investments and turnover were, for example, similarly better than anticipated (1.5 and 1.2 respectively), yet the outlook is much worse for investments (-5.0) than for turnover (-1.9). 6

7 It seems that SME entrepreneurs are being cautious under a climate of uncertainty: hopeful about what turned out to be not as good as expected, but at the same time wary of sudden betterments. Given the current state of the economy, too good news are too good to be true, they seem to think. The situation for prices is probably the most revealing. Results were much worse than anticipated (-7.2). However, entrepreneurs believe their previous expectation will be surpassed in first half of Hence, even though their expectations were corrected downwards, SME entrepreneurs await rising prices. This positive shift despite a worsening outlook on both the overall situation and turnover seems strange at first. The most likely answer to this is that increases in prices, though technically inducing a positive response, need not necessarily improve the situation of the enterprise. Individually, companies anticipate a spike in input prices that their increase in retail prices will probably not be able to offset. Furthermore, if we extrapolate individual behaviour, a rise in prices across the board could in turn be troublesome because of a looming upward inflation spiral. If we distinguish between the outlook for the countries of the periphery (Column 3) and that of the rest of Europe (Column 4), we see how the former believe their situation will improve more than that of the latter. 5 This could mean, on the one hand, that things are turning around for Europe s laggers. The outlook on employment, as mentioned in the previous section, expects a stronger betterment. The outlook on the overall situation foresees a relative improvement (2.1), while the one for the rest of Europe awaits a small setback (-1.2). On the other hand, this could be only due to subjective perceptions. Coming from a low point, the situation for the periphery countries cannot but improve, entrepreneurs believe. SME employers from the rest of Europe, who have made way in the recovery, have much more to lose, by contrast. Watchful of the shaky upswing they are just being more reserved. The reigning uncertainty could in turn lessen demand in all countries. The biggest boost to Europe s recovery would thus come from making sure businesses have a safe and reliable planning horizon. Policy implications In order to achieve a more stable planning horizon, UEAPME firmly believes in moving ahead balancing national budgets and consolidating stability programs. This is needed to raise confidence in financial markets and to ensure the long term sustainability of essential public expenditure blocs such as health, pensions and education. Furthermore, dialogue on labour market reform must continue. The goal should be to create European, open, and flexible markets, where wages move generally in line with productivity in both the private and the public sector, thus averting a dangerous wage-price spiral. 4 This is the case since the outlook differential (second column) is larger than the comparison in the first column. Hence has to be 2.5pp higher than e (for = 2.5). 5 With the exception of Prices. 7

8 Annex Employment for the non-financial business economy broken down by enterprise size class and sector 2005 (%) Table 1 / EUROSTAT BE BG CZ DK DE EE EL ES FR IE IT CY LV LT 1 to EU Share to EU Share to EU Share SME EU Share LU HU MT NL AT PL PT RO SI SK FI SE UK EU 27 1 to EU Share% to EU Share% to EU Share% SME EU Share% Table 2 / EUROSTAT Business Sector EU Share % Manufacturing Construction Business Services Personal / Social Services SME 10 8

9 Results European Crafts and SME Barometer 20 Table 3 / UEAPME Study Unit Balance between positive and negative answers / weighted by number of employees SME Micro Enterprises Small Enterprises Medium-sized Enterprises Situation , , , Turnover , , , Employment , , , Prices , , , Investments , , , Orders , , , Manufacturing Construction Business Services Personal Services Situation -28, , , , Turnover -27, , , , Employment -18, , , , Prices -18, , , , Investments -24, , , , Orders -25, , , ,

10 Table 4 / UEAPME Study Unit Difference between the balance expected and the in retrospect reported balance SME Micro Enterprises Small Enterprises Medium-sized Enterprises e e e e e e e e Situation Turnover Employment Prices Investments Orders Manufacturing Construction Business Services Personal Services e e e e e e e e Situation Turnover Employment Prices Investments Orders

11 11 Results European Crafts and SME Barometer 2011/H SME All micro enterprises small enterprises medium enterprises

12 SME manufacturing SME business services SME construction SME personal services