SMALL COMPANIES CREATE 85 PER CENT OF NEW JOBS IN EU, EUROPEAN COMMISSION SAYS

Eight-five per cent of net new jobs in the European Union between 2002 and 2010 were created by small and medium sized enterprises (SMEs), the European Commission said on January 16 2012, quoting a study it had commissioned on the contribution of SMES to job creation.
 
This figure is considerably higher than the 67 per cent share of SMEs in total employment, the Commission said.

During this period, net employment in the EU's business economy rose substantially, by an average of 1.1 million new jobs each year.

With one per cent annually, the employment growth for SMEs was higher than for large enterprises with 0.5 per cent.
 
A clear exception is the trade sector, in which employment in SMEs increased by 0.7 per cent annually, compared to 2.2 per cent in large enterprises. This is due to the strong increase of large trade enterprises, in particular in sales, maintenance and repair of motor vehicles, the Commission said.

Within the SME size-class, micro firms (less than 10 employees) are responsible with 58 per cent for the highest proportion of total net employment growth in the business economy.

Secondly new firms (younger than five years) are responsible for an overwhelming majority of the new jobs. New enterprises operating in business services create more than a quarter (27per cent) of the new jobs, while the new firms in transport and communication contribute least (six per cent).

European Commission Vice-President Antonio Tajani, responsible for Entrepreneurship and Industry said: "In this critical time for European economy, we see small enterprises delivering and confirming their role as main generators of new jobs. Their significant share in job creation highlights the greater than ever economic relevance of SMEs and the need to support them at all levels. The small and new enterprises are clearly the key for restoring economic growth".
 
According to the results of the survey, the economic crisis has left its mark on enterprises from all size-classes, with micro firms being particularly vulnerable. 
 
As a result of the 2009/2010 economic crisis, the number of jobs in the SME-sector has on average decreased by 2.4 per cent annually, as against 0.95 per cent annually in the large enterprises sector.

Employment developments are still negative in 2010, but expectations for 2011 were improving at the time the survey was held. The share of firms that expected to lay off employees in 2011 was smaller than the share of firms that actually laid off employees in 2010.

Besides the employment effects, by far the most important negative effect of the crisis on firms is the overall decline of total demand for their products and services (mentioned by 62 per cent of companies), followed by the increase in customer payment terms (mentioned by 48 per cent of firms) and finally the shortage of working capital, which affected 31 per cent of the respondents.

Innovation seems to have a positive effect: innovative enterprises, as well as enterprises from more innovative countries, more often report employment growth and have higher employment growth rates, the European Commission said.

The survey underlines that innovative SMEs or companies operating in more innovative economies suffered less from the economic crisis. For example, while the decline in overall demand is mentioned by 70 per cent of enterprises in countries that are considered modest innovators, the corresponding figure is 45per cent for countries which are innovation leaders.

The study distinguishes two broad dimensions of the job quality: employment quality and work quality.

On average it is true that jobs in small enterprises are less productive, less remunerated, and less unionised than jobs in large enterprises.

However, microenterprises report that they have a competitive advantage over their competitors as far as "soft" aspects of the human resource aspects of an enterprise are concerned: working climate, work-life balance, working-time arrangements.