Despite Economic Difficulties, SMEs in Europe Strengthen Their Position

COMMERCEDespite Economic Difficulties, SMEs in Europe Strengthen Their Position

In recent years, small and medium-sized enterprises (SMEs) have faced challenges such as the pandemic, high inflation, high-interest rates, and changing consumer preferences. Despite these, the level of customer spending in European SMEs remained resistant to these phenomena over the past three years.

SMEs represent a major economic force

Small and medium-sized enterprises (SMEs) play a crucial role in the EU economy. According to Eurostat data, they comprise a significant majority of companies operating on the European market and employ nearly two-thirds of the workforce.

In 2022, consumer spending in EU SMEs outstripped amounts spent in large corporations. This was primarily due to the growing popularity of online shopping and increased spending on services, especially on hotels and restaurants. As pandemic restrictions eased, consumers started using local tourism and gastronomy services more frequently. SMEs then accounted for 82% of turnover and 86% of jobs in the hotel and restaurant industry.

In 2023, during the rapid inflation growth, small and medium-sized companies suffered the most, experiencing a drop in margins. Expenditure in this sector was growing slower than in large corporations. However, with the significant slowing of inflation and decreasing interest rates in 2024, financial pressure on smaller companies, and consumers declined. Currently, consumer spending in SMEs exceeds that of large corporations. In Europe, expenditure in the food sector has particularly increased in smaller businesses. Inflation of food and non-alcoholic beverage prices fell from the highest level of 19.2% in March 2023 to 1.6% in July 2024.

“Data from the Mastercard Economics Institute shows that small and medium-sized enterprises adapt to changes in the economic environment and changing consumer needs. This ability has allowed SMEs throughout the European Union to remain competitive in the economically difficult period of recent years. Data from most European Union countries indicates that small and medium-sized companies will become even more competitive in retail in 2024 – especially in food, consumer electronics, travel and entertainment industries,” says Natalia Lechmanova, Chief Economist at the Mastercard Economics Institute.

The Polish SME sector

MEI data shows that in Poland, small and medium enterprises account for the largest share of consumer spending in industries such as restaurants and hotel industry (in both cases nearly 70%), and professional services (over 40%) – significantly outpacing expenditure in this sector in countries like Slovakia, Italy, Denmark, and Czech Republic. However, sectors such as consumer electronics or the food industry remain dominated by large corporations in Poland (SMEs’ share is 10% and 20% respectively). Over the past year, the proportion of consumer spending in SMEs in individual industries has not significantly changed in Poland. The largest increase occurred in the travel agency sector – by 5.59 p.p.

How is it in other countries?

Spending in European SMEs shows regional diversity, reflecting the specifics of local economies and showing dominant sectors in individual countries. In Denmark, the largest expenditures were in the hotel, gastronomy, and clothing industry.

In France, these were restaurants, professional services, and hotels. Italy stood out with the largest share of SME spending on restaurants (80%), while the highest proportion of spending on professional services offered by SMEs was in Austria – (60%).

The Importance of SMEs in e-commerce

The increase in small and medium enterprises’ share in online spending is visible in most European countries. In the tourism and entertainment sector, the largest growth was noted in Slovakia (13 p.p), the Czech Republic (9 p.p.), Italy (7 p.p.) and Denmark (7 p.p.), while Sweden and Portugal recorded the highest increase in the share of SMEs in online retail spending (sporting goods, electronics, and furniture) – by 4 p.p. In Poland, this indicator increased from 18% in 2021 to 19.5% this year. A small change also occurred in the tourism and entertainment sector in Poland – an increase by 1.3 p.p.

Source: https://managerplus.pl/pomimo-trudnosci-gospodarczych-msp-w-europie-umacniaja-swoja-pozycje-32299

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