EU SMEs Contribute Largely in Terms of Total Production

Posted on September 11, 2010 by

According to European Association, there are about 20 million enterprises in the European Union in 2008. A vast majority (99.8%) of the enterprises are SMEs, while the large scale enterprises numbered about 43,000 only. Due to its vast majority, SMEs have also a major share in economy in terms of contribution prodcution and labor productivity.

The total turnover in the non-financial business economy in EU-27 was EUR 24 thousand billion, which means that on an average it is EUR 1.2 million per enterprise. For this year, two thirds of the total turn over was represented by total production. The share of SMEs in turn over is 58% whereas in total production value is 54%. the difference between the two is addition of purchase value of merchandise in turnover, but not in production value. Hence the share is higher in turnover in case of SMEs ad most of the SMEs are in trade, in which the value of merchandise plays an important role.

When value added is used as a measure of production– thus removing all double counting from the aggregate figures–, the total production in EU-27 non-financial business economy is more than EUR 6 thousand billion, when the value addded is used as a measure of production, thereby removing all the double counting from the aggregate figures. Of the total value added, SMEs contribution is 58% and LSEs contribution is 42%. Due to the inclusion of value of intermediate goods and services of the large scale industries, the share of large enterprises in value added is lower than their share in gross production (46%).

Due to the positive correlation between labor productivity and enterprise size class, the direct contribution of SMEs to value added is lower than their contribution to employment. The sectors such as construction, wholesale and retail trade, hotels and restaurants reported the lowest labour productivity in the non finacial economy. The differences in sizes within SMEs has nothing to do with the lower labor productivty as it is the inherent charcter of SMEs. This is because SMEs have less capital intensity, have large fixed labor costs, use less qualified work force, lower labor cost per employee, lesser ability to reap economies of scale.

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