SMEs face an uncertain 2023 with weak consumption and more expensive credit

“We are unique in Europe. Only Greek companies are smaller than ours.” This assessment was made just a few days ago by Angel Gavilan, Director General of Economics and Statistics at Bank of Spain, in the framework of a conference organized by Cepyme. Within the Spanish ecosystem, SMEs account for more than 96% of the productive fabric, about 62% of total value added (GVA) and 66% of total employment in business, according to data managed by the Ministry of Industry, Tourism and Trade.

The latest statistics for companies registered with Social Security also reveal that the vast majority, 85%, are small and medium-sized businesses, given that they have fewer than 10 workers. Most of them belong to sectors such as Commerce, vehicle repair, hospitality, construction or manufacturing, and professional activities, among other things. Their activity is closely related to the retail customer and this makes them more vulnerable to the uncertain environment that comes at the economic level.

Less volume means Less power to deal with weak economy Which tend to give the first alarm sound in consumption. The war in Ukraine and the energy crisis and Both inflationary SMB costs overall are up 24.4%, and they’re growing faster than sales that have lost ground. Under that, salary costs increased 6.2% year over year and energy costs more than 100%. This situation raises concern about the drift that may occur in the latter period of the year and, above all, starting next year, when activity slows down and smaller companies are forced to borrow more to cover costs. His debt ratio already exceeds 100% of his net worthAccording to the data that the employer deals with.

Heavy reliance on bank credit with high interest rates

In the midst of the upward trend in interest rates, the situation of small and medium enterprises, which Rely more on bank credit to operate, is also more vulnerable, particularly in a scenario where funding is key to overcoming potential liquidity tensions. If the lack of visibility for the second and third quarters of next year is causing headaches for larger companies, in the case of SMEs, the uncertainty is greater (they have less room to plan and less ability to develop contingency plans).

There are also concerns that deteriorating economic conditions could lead large companies to do so Raising the payment period for its small suppliers When you can’t bear the default. “The slowdown in the recovery of the Spanish economy and the negative impact of inflation on business accounts continue to negatively impact the development of business defaults,” they explained from the Confederation of Employers. This problem is a major problem for small and medium businesses.

The SME Status Index prepared by employers reflects the widening economic gap between SMEs. Sales of mid-sized businesses grew more (17.3% compared to 13.4%), and while their rate of expansion is the highest in 15 years (7.1%), the number of small businesses is barely growing at 2.5%. With regard to employment, the situation is very similar: it rose by 8.1% in the April-June period by 8.1% compared to the same period of the previous year in medium-sized companies, while it increased by 5.9% in the case of small and medium-sized companies. Its indebtedness doubles and its productivity falls even more strongly.

Part of this productivity loss has to do with the difficulties companies face when it comes to scaling up. According to Cepyme, there are over a hundred regulations that prevent this growth. They are finance, accounting, employment, finance and competition. The organization calculates that if a Spanish company is equal in size to the EU average About 1.2 million jobs will be created, GDP will increase by 5.2% And the foreign sector will come out stronger, as overall exports will rise by 5.2%.