5 Reasons Why SMEs Are Crucial for the EU Economy
Small and medium-sized enterprises (SMEs) are the backbone of the European Union (EU) economy. They account for more than 99% of all businesses, employ around two-thirds of the workforce, and contribute to more than half of the total value-added created by businesses in the EU. In this article, we will explore the definition of SMEs in the EU context, their role in export management, and their challenges and opportunities in the global market.
SME Definition in the EU
According to the EU, an SME is a business that meets the following criteria:
– It has fewer than 250 employees
– It has an annual turnover of no more than €50 million or a balance sheet total of no more than €43 million
– It is independent, meaning that no more than 25% of its capital or voting rights are owned by one or more entities that are not SMEs
These criteria are used to determine the eligibility of SMEs for various EU policies and programs, such as access to finance, innovation support, and regional development.
SME Role in Export Management
Exporting is a key strategy for SMEs to expand their markets, increase their competitiveness, and diversify their sources of income. According to the European Commission, around 600,000 SMEs in the EU export goods and services outside the EU, representing 13% of all SMEs. These exporting SMEs generate 34% of their turnover from exports, compared to 26% for large enterprises.
Exporting SMEs also tend to be more innovative, productive, and resilient than non-exporting ones. They invest more in research and development, employ more skilled workers, and have higher growth rates. They also cope better with economic shocks and crises, as they can rely on different markets and customers.
SME Challenges and Opportunities in the Global Market
Despite their potential, SMEs face many barriers and difficulties when exporting. Some of these include:
– Lack of information and knowledge about foreign markets, regulations, and standards
– High costs and risks associated with international trade, such as tariffs, transport, insurance, and currency fluctuations
– Limited access to finance and credit for export activities
– Difficulty in finding and retaining qualified staff with international skills and experience
– Competition from large enterprises and other SMEs in the global market
To overcome these challenges and seize the opportunities offered by globalization, SMEs need to adopt a strategic approach to export management. This involves:
– Conducting a thorough market research and analysis to identify the most suitable markets and customers for their products or services
– Developing a clear value proposition and a competitive advantage that differentiate them from their competitors
– Choosing the best entry mode and distribution channels for each market, such as direct sales, agents, distributors, or e-commerce platforms
– Building strong relationships with local partners, suppliers, customers, and authorities
– Adapting their products or services to meet the specific needs and preferences of each market
– Complying with the legal and regulatory requirements of each market, such as customs procedures, taxes, certifications, and quality standards
– Leveraging the support and assistance available from various EU institutions and programs, such as Enterprise Europe Network, COSME, Erasmus for Young Entrepreneurs, Horizon Europe, etc.
The Growth of SMEs in the EU
Small and medium-sized enterprises (SMEs) are defined in the EU as businesses that have fewer than 250 employees and either a turnover of less than €50 million or a balance sheet total of less than €43 million . SMEs represent 99% of all businesses in the EU and play a key role in adding value in every sector of the economy . In this blog post, we will look at some statistics that show the growth of SMEs in the EU and their contribution to the global market.
SMEs account for more than half of Europe’s GDP
According to the latest data from Eurostat, SMEs generated €7.3 trillion of value added in 2019, which is 56.4% of the total value added created by businesses in the EU . This means that SMEs contribute more than half of Europe’s GDP, which is remarkable considering that they only employ two-thirds of the workforce. The value added by SMEs increased by 3.4% from 2018 to 2019, which is slightly higher than the growth rate of large enterprises (3.2%) .
SMEs are expanding their presence in international markets
SMEs are not only important for the domestic economy, but also for the external trade of the EU. According to a report by the European Commission, SMEs accounted for 35% of EU exports and 34% of EU imports in 2018 . These figures have increased by 5 percentage points since 2012, indicating that SMEs are becoming more active and competitive in international markets. The report also shows that SMEs are diversifying their export destinations, with a growing share of exports going to non-EU countries, especially China, Russia and the United States .
SMEs are the backbone of Europe’s economy, generating more than half of its GDP and providing almost 90 million jobs. They also stimulate innovation and entrepreneurship, helping to foster European competitiveness and resilience. Moreover, SMEs are expanding their presence in international markets, increasing their share of EU exports and imports and diversifying their trade partners. The EU supports SMEs through various programmes and policies, such as the SME strategy, the Single Market Programme and the Late Payment Directive . These measures aim to improve access to finance, markets and skills for SMEs, as well as to reduce administrative burdens and enhance sustainability.
References:
http://seaf.com/wp-content/uploads/2014/10/Defining-SMEs-September-20081.pdf
https://single-market-economy.ec.europa.eu/smes/sme-definition_en
https://single-market-economy.ec.europa.eu/smes_en
https://ec.europa.eu/eurostat/statistics-explained/index.php/Structural_business_statistics_overview
https://trade.ec.europa.eu/doclib/docs/2020/june/tradoc_158779.pdf
https://ec.europa.eu/growth/smes_en
https://trade.ec.europa.eu/doclib/docs/2018/april/tradoc_156722.pdf
https://ec.europa.eu/growth/smes/access-to-markets/internationalisation_en
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