SMEs in Spain, the engine of the Spanish economy

Business start-up in Spain, Industries, Sustainability Leave a comment   Published on par Jonatan Carbonell

SMEs play a relevant role in the Spanish economy, did you know that if all SMEs were to close, the GDP and the economy would collapse? That is because SMEs without the pillar of the economy, generating between 60% and 70% of employment, producing 50% of the world’s GDP, according to the UN. But, if this is so, why do SMEs still have problems to grow and to be recognized? Here we will tell you all about SMEs in Spain and why they are so important for the local economy.

How did SMEs evolve after the impact of the pandemic?

The COVID-19 crisis dealt a heavy blow to SMEs in Spain and, above all, to microenterprises and those less than 10 years old. Taking into account that SMEs have been, for some years now, the engine of the economy, small and medium-sized enterprises experienced an extreme change as a result of the pandemic.

We can begin by mentioning the economic impact of the crisis on their sales: 52.6% of SMEs had to limit their sales, while 26.1% maintained them and another 21.3% increased them. Within the SMEs, the impact was greater for those that had to resort to an ERTE or ERE.

Although the age of the companies was not a factor that negatively affected revenues, it was a factor for the sector. In the face of the pandemic, the most affected sector was the industrial sector, followed by the services sector.

The negative impact was not only reflected in the reduction of sales and employment, but also in profitability and turnover. The latter affected 64.3% of SMEs, while profitability affected 62.2%. Both indicators are, by the way, very important measures.

As for debt and liquidity, it also had a negative review. The percentage was above 40%. The level of debt showed a negative value of 41.4%, while liquidity had 44.9%. Likewise, 49.9% of the SMEs were forced to reduce their investments considerably.

While it is true that most of this data is negative, there is a small percentage that experienced a positive impact. Only 18.6% of companies experienced a positive change, while 17.6% improved their profitability and 16.3% increased their turnover.

 

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SMEs in Spain and what they represent for the Spanish economy

Today, the commitment of SMEs to sustainable development is key, since they contribute value to society and, consequently, the company’s success depends on it.

You see, more than 99% of the companies that exist in the European Union are small and medium-sized enterprises, which employ approximately 94 million people and generate more than half of the value added of the entire business fabric.

In Spain, SMEs represent 62% of GDP and are responsible for 53.3% of total business employment. But, as we mentioned earlier, SMEs were considerably affected after the pandemic, having to adapt to the new scenarios.

Knowing these figures, we believe that it is no exaggeration to say that SMEs are the engine of growth of the Spanish economy. At Gestion Direct we believe that SMEs play an essential role, but they also face great difficulties.

Therefore, it is important for them to grow in order to improve their productivity and, therefore, become more competitive and ensure their survival over time. So in the following sections we will explain the importance of SME growth in order to recover the course of the Spanish economy, finally moving it away from the crisis.

 

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Why is the size of SMEs so important?

According to data provided by the Ministry of Labor, Migration or Social Security in 2019, Spain has a total of 2,884,795 companies, of which 99.64% are SMEs.

When we talk about SMEs, we do not refer to companies with between 1 and 250 workers, being micro-enterprises those with between 0 and 9 employees and are the most common in the country, reaching 86.5% of the total and generating 36% of employment.

This being so, the main reason why it is so important for SMEs to increase their size is because it would increase their competitiveness.

In fact, if we compare the economic situation in Spain with other more consolidated economies in Europe, it is easy to conclude that the weight of small and medium-sized companies, although enormous, is less than in Spain, where the average company has less than 5 employees.

Likewise, it should not be forced that, as a general rule, the larger the size of the company, the more productive it will be, since its size influences all the factors that determine its business success, as it facilitates its access to financing, contributes to its internationalization, favors employee training and offers a greater capacity to attract and retain professional talent.

It should be noted that growth is not only the responsibility of each company, but must be a joint effort of society, as well as of economic and political leaders who must prioritize this objective, finding measures to promote the expansion of SMEs.

That said, it should not be lost sight of the fact that having businesses that are allowed and supported to grow helps to create a business and productive fabric that is much more resilient to the challenges and adversities of the global economy. In addition, supporting local commerce in this way creates more jobs for citizens.

 

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SMEs in Spain are a reflection of a healthy economy

This is a very positive statement about SMEs and highlights their importance for economic growth. The UN itself, in its faculty, considers that small and medium-sized enterprises generate between 60% and 70% of jobs, so having a consolidated and strong SME structure is synonymous with economic growth for the country.

Even so, SMEs tend to be underfinanced, but this does not prevent them from having advantages that make them more competitive and agile; for example, they have the ability to adapt quickly to market changes, being more flexible and able to specialize in more specific niches.

 

To conclude, we believe that it is important that SMEs in Spain receive greater support to boost their growth. Since they do a great job, it should be the task of political and social entities to work on a growth strategy that contributes to their productivity, which will have a positive impact on the evolution of the Spanish local economy.

If you want to stay informed about the business reality in Spain, then you will love to subscribe to our blog where we constantly upload content about SMEs in Spain, procedures, legality and taxation to live in Spain and make your business idea prosper. Do you have doubts and need advice? Contact us at tasconsultoria@tas-sl.es and our professionals will be happy to help you.

Published on par Jonatan Carbonell

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