The Confederation of Small and Medium Enterprises (Cepyme) has just launched the Indicator on the Situation of SMEs, which has the purpose of “measuring the strengths and vulnerabilities of the Spanish business fabric, made up mostly of SMEs”, they affirm in the organization. And the main conclusion of this indicator is that the Spanish small and medium-sized company “is going through the most difficult situation that the business fabric has experienced since 2014”, despite the fact that the number of companies is recovering the level prior to the pandemic and the rebound of employment. The 2021 indicator stands at 5.4 points out of 10, the same level it had eight years ago.
According to the Indicator’s conclusions, although there is more activity, it is much less profitable. This situation is further aggravated at the beginning of 2022 due to the sharp rise in inflation. In conclusion, SMEs are being dragged down by the high costs that employers have to face, a significant loss of productivity and, in general, by lower profitability. According to Cepyme, the worsening of the conditions of the companies has been especially significant -and has been extended in the first months of 2022- in factors such as:
– Reduction of business margins. “The increase in total costs, especially supplies and energy, is faster than that of sales,” they say at Cepyme. For SMEs as a whole, total costs rose by 23% in the first quarter of 2022 while sales grew by 19.8%. This reduces business margins and results in a worsening of the company’s liquidity and competitiveness.
– The largest increase in labor costs in years. Labor costs in SMEs grew by 5.1% in 2021 (eliminating the effect of ERTEs). During the first quarter of 2022, this trend worsened, with labor costs increasing by 5.7% on average. In addition, the small ones are the ones that suffered a greater increase with a rise of 6.3% compared to 4.1% of the medium ones. It should be noted that social contributions have also risen exponentially in recent years.
– High levels of indebtedness. In 2021, the liabilities of SMEs over their net worth grew by 10 percentage points, to 96%, which represents a clear weakness in the face of the rising interest rates in the making and the tightening of credit that is already beginning to be recorded.
– The profitability of SMEs has plummeted. It stands at levels of six years ago. Specifically, the net return on assets, which had begun to recover in 2013, fell again with the start of the pandemic. The first quarter of 2022 saw the eighth year-over-year decline in net return on assets. In 2019 it was at 3.7% and has dropped to 3%.
“This scenario drawn by the Cepyme Indicator reflects a negative trend that began between 2017 and 2018 and that the pandemic has aggravated”, they affirm in the business organization, so that the Spanish productive fabric “is undercapitalized and in worse conditions than the companies from other European countries to cope with the economic slowdown”. The lack of effective direct aid, its smaller amount and bureaucracy have been some of the reasons that have led Spanish SMEs to suffer worse health than those in the rest of the EU.
Cepyme highlights that, according to the latest ECB surveys, Spanish companies are among the most vulnerable of the large euro economies. These structural problems largely explain why the Spanish company is 30% smaller than the European one. In addition, in terms of size, the Spanish company is regressing more and more as a synthesis of its structural problems and has once again fallen in number of employees below the level it had in 2018.
From Cepyme “urgent action (tax, regulatory and credit) is urged to facilitate the adaptation of SMEs, where almost 9 million people work, to an economic environment that will tend to be complicated by the evolution of the financial situation, the end of the bankruptcy moratorium or the chronification of inflation due to the second-round effects generated by the transfer of the CPI to wages”.
Another problem faced by SMEs is the high salary costs. Cepyme explains the rise in the average salary in small companies for three factors: the increase in the minimum wage, from 655.2 euros in 2016 to 1,000 euros in 2022 (52.6%); the annual revaluations of salaries agreed in the agreement, and the upward pressure that the lack of workers to occupy certain positions supposes in salaries.
Small companies have a lower average productivity, which is why their wages are lower than in large companies. “This lower productivity makes a general rise in wages, as is happening now, more difficult for SMEs to bear,” they say in the organization. In fact, they explain, in many companies the wage rise is made at the expense of reducing margins: sales per employee, in medium-sized companies, are, in the first quarter of 2022, similar to those of 2015, when wages are almost 9% higher.
From the Confederation, the Government is urged to carry out policies that promote greater productivity and competitiveness in companies, such as promoting greater growth in business size, for example, to achieve increases in wages, instead of opting for short-term measures that penalize business activity.
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