Business economy - size class analysis
From Statistics Explained
- Data from April 2013. Most recent data: Further Eurostat information, Main tables and Database.
This article presents an overview of structural business statistics for the European Union (EU) analysed by enterprise size class, with a particular focus on small and medium-sized enterprises (SMEs). It belongs to a set of statistical articles which analyse the structure and characteristics of the economic activities within the non-financial business economy.
SMEs may be viewed as important players in the well-being of local and regional communities, in terms of meeting customers’ needs and providing employment. As such, they can play an important role in Europe’s 2020 strategy, contributing to the economic health of the European economy; this numerous and disparate subpopulation of enterprises is the focus of this article.
Main statistical findings
SMEs in the non-financial business economy
The overwhelming majority (99.7 %) of enterprises active within the EU-27’s non-financial business economy (Sections B to J and L to N and Division 95) in 2010 were SMEs (employing fewer than 250 persons) — some 21.7 million. Perhaps the most striking phenomenon of SMEs is their contribution to employment. More than two thirds (67.5 %) of the EU-27’s non-financial business economy workforce was active in an SME in 2010, some 89.6 million persons. Across the whole of the EU-27’s non-financial business economy, SMEs accounted for 57.5 % of the EUR 5.95 billion of value added generated in 2010. The contribution of SMEs to non-financial business economy value added was 9.9 percentage points lower than their contribution to non-financial business economy employment, resulting in a lower level of apparent labour productivity.
More than 9 out of 10 (92.4 %) enterprises in the EU-27’s non-financial business economy were micro enterprises (employing fewer than 10 persons); their relative share of the non-financial business economy workforce and value added was considerably lower at 29.9 % and 21.2 %. As such, micro enterprises accounted for the second highest share of employment and value added among the four enterprise size classes that are distinguished in Table 1. Their relatively high weight in terms of their contribution to employment and value added was countered somewhat by the fact that they recorded the lowest level of apparent labour productivity, at EUR 31.8 thousand per person employed.
By contrast, there were 42.4 thousand large enterprises (employing 250 or more persons) active within the EU-27’s non-financial business economy in 2010. Together they generated EUR 2.52 billion of value added, which equated to 42.3 % of the non-financial business economy total — by far the most important share among the four enterprise size classes. Their relative weight in the EU-27’s non-financial business economy workforce was lower, at just under one third of the total (32.5 %). As such, the apparent labour productivity of large enterprises was, at EUR 58.3 thousand per person employed, higher than for micro enterprises, small enterprises (employing 10 to 49 persons) and medium-sized enterprises (employing 50 to 249 persons). Indeed, using this measure, the labour productivity of large enterprises was EUR 20.1 thousand per person employed higher than the average for SMEs within the EU-27’s non-financial business economy in 2010 — as shown in Figure 1.
Figure 2 provides an analysis of the relative importance of SMEs in the different sectors (at NACE section level) that compose the non-financial business economy, in terms of the contribution of each activity to the total SME population and the SME workforce.
More than one quarter (28.6 %) of the SMEs within the EU-27’s non-financial business economy in 2010 were active within the distributive trades sector (Section G); this sector also provided work to more than one quarter (26.3 %) of the SME workforce in the EU-27’s non-financial business economy. The manufacturing sector (Section C) recorded the second highest share of SME employment within the EU-27’s non-financial business economy in 2010, employing just over one in five persons (20.1 %). The construction sector (Section F) and the professional, scientific and technical activities sector (Section M) were the only other activities to record a double-digit share of the SME workforce within the EU-27’s non-financial business economy.
The number of SMEs across the EU-27’s non-financial business economy was particularly concentrated within distributive trades (6.2 million enterprises); this was almost twice the number of SMEs within professional, scientific and technical activities (3.7 million) or construction (3.3 million).
Some 23.5 million persons worked in SMEs in the EU-27’s distributive trades sector in 2010, 18.0 million in manufacturing, 11.9 million in construction and 9.1 million in the professional, scientific and technical activities sector; together, these four activities provided work to 69.8 % of the non-financial business economy workforce in SMEs.
An analysis of the relative shares of each sector in the non-financial business economy enterprise population and workforce can provide information relating to the average size of SMEs (as measured by the average number of persons employed per enterprise). This was clearly larger within the manufacturing sector (and other industrial activities), in contrast to the professional, scientific and technical activities sector and the real estate activities sector (Section L), both of which were characterised as having SMEs with a relatively small average size.
Table 4 provides a more detailed breakdown of employment by size class, confirming the prominent role of SMEs as employers within many areas of the non-financial business economy. Micro enterprises employed more people than any other size class in a number of sectors — see Table 2a. This pattern was particularly pronounced for real estate services and the repair of computers, personal and household goods (Division 95), where an absolute majority of the workforce was found working in a micro enterprise; this was almost the case for the professional, scientific and technical activities sector too, as micro enterprises employed 49.1 % of the total workforce. Furthermore, micro enterprises also employed more people than enterprises in any other size class for construction, distributive trades, accommodation and food services (Section I), and professional, scientific and technical activities.
By contrast, a range of activities characterised by network supply and minimum efficient scales of production reported a higher proportion of their respective workforces occupied within large enterprises — this was particularly true for network energy supply (Section D), mining and quarrying (Section B) and administrative and support services (Section N), where the majority of the total workforce was found to be working for a large enterprise. Otherwise, large enterprises employed more people than enterprises in any other size class in the water supply, sewerage, waste and recycling (Section E) sector, as well as for transportation and storage (Section H) and information and communication (Section J).
Among the four enterprise size classes, small enterprises or medium-sized enterprises never accounted for the highest share of the EU-27 workforce within any of the NACE sections that compose the non-financial business economy. The accommodation and food services sector recorded the highest proportion of its workforce employed by a small enterprise, some 27.9 % of the total in 2010, just ahead of the construction sector (27.7 %), although in both cases a higher proportion of the workforce was employed by micro enterprises. Medium-sized enterprises accounted for more than one in four (28.3 %) of the EU-27 workforce in the water supply, sewerage, waste and recycling sector, slightly higher than the share of medium-sized enterprises in the manufacturing sector’s workforce (25.3 %); in both cases a higher proportion of the workforce was employed by large enterprises.
Table 2b provides a complementary analysis of the relative importance of the different enterprise size classes, providing information on the breakdown of EU-27 value added. SMEs generated a majority of the added value in 2010 within 8 of the 13 sectors that compose the non-financial business economy. Their highest share was for real estate activities, where SMEs accounted for 85.5 % of total value added in 2010. The relative weight of SMEs was also high in the construction sector and for the repair of computers, personal and household goods, as SMEs also accounted for in excess of 80 % of the added value generated within each of these two sectors.
By contrast, large enterprises accounted for the highest share of total value added within the five remaining sectors that compose the non-financial business economy. Their relative weight was highest within the EU-27’s network energy supply sector, where large enterprises generated 76.7 % of total added value in 2010, while large enterprises were responsible for upwards of 60 % of the added value generated within the EU-27’s mining and quarrying sector and the information and communication sector.
As noted above, the contribution of SMEs to the generation of value added within the non-financial business economy was lower than their contribution to the non-financial business economy workforce, resulting in a lower level of apparent labour productivity. This pattern was particularly prevalent among activities where large enterprises tended to play an important role, for example, in the manufacturing sector or for information and communication services. However, it was also observed across most other activities (and across most of the EU Member States) suggesting that the inherent characteristics of SMEs played a role — for example, their inability to benefit from economies of scale, their relatively low level of capital intensity, or their lower propensity to innovate. There were nevertheless some exceptions, as large enterprises in the EU-27 did not record the highest apparent labour productivity ratios for the following sectors: mining and quarrying; network energy supply; water supply, sewerage, waste and recycling; distributive trades; real estate activities; administrative and support services; or the repair of computers, personal and household goods.
The relative importance of SMEs was particularly high in the southern Member States of Cyprus, Italy, Portugal and Spain (no data available for Greece or Malta), as well as the Baltic Member States and Bulgaria. In each of these countries, SMEs accounted for more than three quarters of the non-financial business economy workforce in 2010, peaking at more than 8 out of 10 persons in Cyprus and Italy. Some of these differences may be explained by the relative importance of particular sectors in each national economy, or by cultural and institutional preferences for self-employment and/or family-run businesses — see Tables 3a and 3b.
By contrast, less than two thirds of the non-financial business economy workforce was found to be working for SMEs in Romania, Sweden, France, Germany, Finland and the United Kingdom in 2010. The structure of employment in the United Kingdom was quite different to that displayed in the other EU Member States, as SMEs accounted for 52.8 % of the non-financial business economy workforce, almost 10 percentage points lower than in Finland — where the second lowest share was recorded (62.6 %).
Table 3b provides a similar analysis, based on a breakdown of non-financial business economy value added between the different enterprise size classes. Among those EU Member States for which data are available, SMEs accounted for more than two thirds of the value added generated within the non-financial business economies of Italy, Latvia, Portugal, Estonia and Cyprus (where the highest share was recorded, at 76.0 %). At the other end of the range, SMEs accounted for half of the non-financial business economy value added generated in Poland and the United Kingdom, the other half being accounted for by large enterprises.
Data sources and availability
Structural business statistics are compiled under the legal basis provided by European Parliament and Council Regulation 295/2008 on structural business statistics, and in accordance with the definitions, breakdowns (level of analysis), deadlines for data delivery, and various quality aspects specified in the regulations implementing it.
Eurostat’s structural business statistics describe the structure, conduct and performance of economic activities, down to the most detailed activity level (several hundred sectors).
Structural business statistics cover the ‘business economy’, which includes industry, construction and many services (Sections B to N and Division 95); financial and insurance activities (Section K) are treated separately within structural business statistics because of their specific nature and the limited availability of most types of standard business statistics in this area. As such, the term ‘non-financial business economy’ is generally used to refer to those economic activities covered by Sections B to J and L to N and Division 95 and the units that carry out those activities. Structural business statistics do not cover agriculture, forestry and fishing, nor public administration and (largely) non-market services, such as education or health.
In structural business statistics, size classes are generally defined by the number of persons employed, except for specific data series within retail trade activities where turnover size classes are also used. A limited set of the standard structural business statistics variables (for example, the number of enterprises, turnover, persons employed and value added) are analysed by size class, mostly down to the three-digit (group) level of NACE. In addition, a set of derived indicators has been compiled: for example, per head ratios such as apparent labour productivity.
For statistical purposes, SMEs are generally defined as those enterprises employing fewer than 250 persons. The number of size classes available varies according to the activity under consideration. However, the main size classes used in this article for presenting the results are:
- small and medium-sized enterprises (SMEs): with 1 to 249 persons employed, further divided into;
- micro enterprises: with less than 10 persons employed;
- small enterprises: with 10 to 49 persons employed;
- medium-sized enterprises: with 50 to 249 persons employed;
- large enterprises: with 250 or more persons employed.
In June 2008, the European Commission adopted a Communication on SMEs referred to as the ‘Small business act for Europe’ (SBA). This aims to improve the overall approach to entrepreneurship, to irreversibly anchor the ‘think small first’ principle in policymaking from regulation to public service, and to promote SMEs’ growth by helping them tackle problems which hamper their development. The Communication sets out 10 principles which should guide the conception and implementation of EU and national policies to create a level playing field for SMEs throughout the EU and improve the administrative and legal environment to allow these enterprises to release their full potential to create jobs and growth. It also put forward a specific and far reaching package of new measures including four legislative proposals which translate these principles into action within the Member States and across the EU as a whole.
A review of the SBA was released in February 2011: it highlighted the progress made and set out a range of new actions to respond to challenges resulting from the financial and economic crisis. In doing so, it is hoped that the updated SBA will contribute towards delivering the key objectives of the Europe 2020 strategy — namely, smart, sustainable and inclusive growth.
In November 2011, the European Commission adopted a report outlining actions to adapt EU legislation for micro-enterprises (COM(2011) 803 final). In particular this aims to: identify possible exemptions or lighter requirements for micro enterprises in existing and new EU legislation; strengthen the processes by which micro enterprises and other SMEs are consulted when reviewing existing EU regulation and preparing new EU laws; produce annual scoreboards to evaluate the real benefits for businesses and to ensure a continuing focus on their needs and interests.
Further Eurostat information
- Enterprises by size class - overview of SMEs in the EU - Statistics in focus 31/2008
- European business - facts and figures (online publication)
- Key figures on European Business - with a special feature section on SMEs - 2011 edition
- SMEs were the main drivers of economic growth between 2004 and 2006 - Statistics in focus 71/2009
- SBS - industry and construction (sbs_ind_co)
- SMEs - Annual enterprise statistics by size classes - industry and construction (sbs_sc_ind)
- SBS - trade (sbs_dt)
- SMEs - Annual enterprise statistics by size classes - trade (sbs_sc_dt)
- SBS - services (serv)
- SMEs - Annual enterprise statistics by size classes - services (sbs_sc_sc)
Methodology / Metadata
- Business registers - Recommendations Manual
- Handbook on the design and implementation of business surveys
- Structural business statistics (ESMS metadata file - sbs_esms)
- Use of administrative sources for business statistics purposes
Source data for tables and figures (MS Excel)
- Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises
- Decision 1578/2007/EC of 11 December 2007 on the Community Statistical Programme 2008 to 2012
- Regulation 295/2008 of 11 March 2008 concerning structural business statistics