Huge challenges for SMEs

Huge challenges for SMEs

Support measures aimed at offsetting the impact of successive lockdowns may have averted the collapse of tens of thousands of small and medium-sized enterprises (SMEs), but the challenge of their medium-term sustainability remains as they generally have low competitiveness and productivity rates.

An Alpha Bank analysis on Thursday showed that 58% of Greek SMEs had access to state support, compared to an average rate of 33.6% among the member-states of the Organization for Economic Cooperation and Development (OECD). One in three Greek SMEs took a subsidy or a grant, while a significant share of companies benefited from credit issued and the suspension of dues.

Through that support, Greek businesses appeared resilient against the pandemic: In the second half of 2020 the number of new enterprises dropped 26.2% from a year earlier, but in the third quarter it grew 18.6% year-on-year. In total in 2020, 22.7% fewer enterprises shut down compared to 2019, and even though turnover shrank dramatically (down 52% in accommodation and food service, for instance), the loss of jobs was far milder (10% in the above two sectors).

Still, once the pandemic is over, small businesses will come up against the structural problems that hamper its competitiveness. Productivity in terms of gross added value amounts to just €7,000 per worker in the very small enterprises (with up to 10 employees), against €22,000/worker for medium-sized enterprises and €44,300/worker for large companies.

At the same time, these low-competitiveness enterprises employe one in every two workers in Greece, against a 29% rate on average among OECD states, which practically means that their course has a huge effect on the overall prospects of the Greek economy.

This is why the increase of the size of those SMEs and the utilization of the opportunities offered by the Next Generation EU fund constitute a major challenge for Greece, according to the Alpha analysts. After all, bigger companies (through mergers and cooperations) will also mean easier flow of bank credit to them, they add.

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