Business economy - size class analysis

From Statistics Explained

Data from March 2011. 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).

Table 1: Enterprise size class analysis of key indicators, non-financial business economy, EU-27, 2008
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Table 2: Analysis of the number of enterprises by enterprise size class, non-financial business economy, 2008
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Table 3: Analysis of the number of enterprises by enterprise size class, EU-27, 2008 (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 1: Number of SMEs, EU-27, 2008 (1) (million)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 2: Number of persons employed in SMEs, EU-27, 2008 (million)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 3: Analysis of the number of persons employed by enterprise size class, EU-27, 2008 (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Table 4: Activities with high or low shares of persons employed in SMEs, EU, 2008 (1) (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 4: Analysis of the number of persons employed by enterprise size class, non-financial business economy, 2008 (1) (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Table 5: Business demography indicators for industry, construction and services, EU, 2007 (1)
Source: Eurostat (bd_9b_size_c)

Table 6: Business demography employment indicators, EU, 2007 (1)
Source: Eurostat (bd_9b_size_c)

Figure 5: Share of size class zero in total employment for industry, construction and services, EU, 2007 (1) (%)
Source: Eurostat (bd_9b_size_c)

Figure 6: Value added by SMEs, EU-27, 2008 (EUR 1 000 million)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 7: Analysis of value added by enterprise size class, EU-27, 2008 (1) (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 8: Analysis of value added by enterprise size class, non-financial business economy, 2008 (%)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Figure 9: Apparent labour productivity, EU-27, 2008 (1) (EUR 1 000 per person)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

Table 7: Analysis of apparent labour productivity by enterprise size class, EU-27, 2008 (EUR 1 000 per person)
Source: Eurostat (sbs_sc_ind_r2), (sbs_sc_con_r2), (sbs_sc_dt_r2), (sbs_sc_1b_se_r2)

SMEs may be viewed as important players in the well-being of local and regional communities, with considerable potential for employment creation. 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 special feature.

Main statistical findings

SME overview

The overwhelming majority (99.8 %) of enterprises active within the EU-27’s non-financial business economy in 2008 were SMEs – some 20.9 million – together they accounted for two out of every three jobs (66.7 %) and for 58.6 % of value added within the non-financial business economy – see Table 1.

More than nine out of ten (92.0 %) enterprises in the EU-27 were micro enterprises; their relative share of the non-financial business economy workforce and value added was considerably lower at 29.0 % and 21.8 %.

The relative importance of SMEs was particularly high in the southern Member States of Italy, Portugal and Spain (no data available for Greece). Some of these differences may be explained by the relative importance of particular sectors in the national economy or by cultural and institutional preferences for self-employment and/or family-run businesses – see Table 2.

While large enterprises only accounted for 0.2 % of the total enterprise population within the EU-27’s non-financial business economy in 2008, mining and quarrying, network energy supply as well as water supply, sewerage, waste and recycling each reported that more than 1 % of their enterprises were large; the same three activities also recorded the highest proportion of medium-sized enterprises (between 4.1 % and 5.5 % of the enterprise population) – see Table 3.

The number of SMEs across the EU-27’s non-financial business economy was particularly concentrated within distributive trades (6.1 million enterprises); this was almost twice the number of SMEs within professional, scientific and technical activities or construction – see Figure 1.

Focus on employment and self-employment

Perhaps the most striking phenomenon of SMEs is their contribution to employment. No less than two thirds of the EU-27’s non-financial business economy workforce was active in an SME in 2008.

Some 23.3 million persons worked in SMEs in the distributive trades sector, 19.5 million in manufacturing and 13.2 million in construction; together, these three activities provided work to 61.9 % of the non-financial business economy workforce in SMEs – see Figure 2.

Micro enterprises employed more people than any other size class in a number of service sectors – see Figure 3. This pattern was particularly pronounced for real estate services and the repair of computers, personal and household goods, where an absolute majority of the workforce was found working in micro enterprises.

Table 4 provides a more detailed breakdown of employment by size class, confirming the prominent role of SMEs as employers within many service sectors. In contrast, a range of activities characterised by network supply and minimum efficient scales of production (such as mining, air transport, postal and courier services, and the manufacture of motor vehicles or pharmaceuticals) reported a considerably higher proportion of their respective workforces occupied within large enterprises.

Business demography statistics provide information on the dynamics of the enterprise population and its workforce. Entrepreneurship and rapidly growing SMEs are often cited as drivers of job creation with particular attention paid to the potential for employment growth among enterprises with no paid employees (size class zero). These accounted for just over half (51.2 %) of all EU enterprises in industry, construction and services in 2007 and for 63.4 % of all new born enterprises – predominantly in deregulated service sectors with relatively low fixed costs for starting a business as a self-employed person. A total of 3.8 million persons were employed by newly born enterprises in 2007, with over a third (38.1 %) of these working on their own – see Table 5.

The relative contribution of size class zero enterprises to the industry, construction and services workforce was highest in Italy (20.4 %), the Czech Republic (15.9 %), Spain (12.4 %), Sweden (11.9 %) and Slovakia (11.3 %) – none of the remaining Member States reported self-employed entrepreneurs accounting for more than 10 % of the workforce – see Figure 5.

Focus on value added and apparent productivity

As with the employment analysis, SMEs within the EU-27’s distributive trades, manufacturing and construction sectors generated the highest levels of added value in 2008 – see Figure 1.6. Across the whole of the EU-27’s non-financial business economy, SMEs accounted for 58.6 % of the EUR 6 176 thousand million of value added generated in 2008.

The contribution of SMEs to total value added was lower than their contribution to employment (66.7 %), resulting in a lower level of apparent labour productivity. This pattern was particularly prevalent among activities such as manufacturing or information and communication services. However, it was also observed across most other activities and across most Member States – suggesting 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 inability to adopt or develop innovations). As a result, large enterprises tended to record higher labour productivity ratios than SMEs (Figure 9).

Data sources and availability

Structural business statistics are compiled under the legal basis provided by Parliament and Council Regulation 295/2008 on structural business statistics, and in accordance with the definitions, breakdowns, 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 now cover the ’business economy’, which includes industry, construction and many services (NACE Rev. 2 Sections B to N and Division 95); financial and insurance activities (NACE 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 in business statistics to refer to those economic activities covered by NACE Rev. 2 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.

SBS are available with an analysis by enterprise size class. In structural business statistics, size classes are 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) is analysed by size class, mostly down to the three-digit (group) level of NACE. 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 groups used 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.

Context

In June 2008, a Communication titled the Small Business Act (SBA) for Europe was adopted. This recognised ‘the central role of SMEs in the EU economy’ and aimed to strengthen the role played by SMEs and to promote their growth and job creating potential through alleviating a number of problems which are thought to hamper the development of SMEs. These included: alleviating administrative burdens; facilitating SMEs’ access to finance; supporting SMEs in their bid to access new markets; ensuring fair competition; promoting education and skills for entrepreneurship; protecting intellectual property; encouraging research and development; or supporting SMEs in a regional and environmental context. This ‘mainstreaming’ of SME policy is based upon a premise to ‘think small first’.

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.

Further Eurostat information

Publications

• Enterprises by size class - overview of SMEs in the EU - Statistics in focus 31/2008
• European Business: Facts and figures - 2009 edition
• 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

Database

• Structural business statistics (sbs), see:

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)

Dedicated section

• Structural business statistics

Methodology / Metadata

• 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

Other information

• Business registers - Recommendations Manual
• Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises

Source data for tables and figures (MS Excel)

• Business economy - size class analysis

External links

• European Commission - DG Enterprise and Industry, see also:

• Small and medium-sized enterprises (SMEs)
• Small and medium-sized enterprises (SMEs) - SME Envoy
• Small and medium-sized enterprises (SMEs) - Small business act
• Small and medium-sized enterprises (SMEs) - The European Charter for Small Enterprises

• European Commission - Europe 2020 strategy

See also

• All business economy articles by perspective
• Small and medium-sized enterprises - background article
• Structural business statistics - theme navigation page
• Structural business statistics overview