Newsletter, December 2014
The more than 20 million SMEs in the EU represent 99% of businesses, and are a key driver for economic growth, innovation, employment and social integration. The European Commission aims to promote successful entrepreneurship and improve the business environment for SMEs so as to allow them to realise their full potential in today’s global economy.
What does the EU do?
The European Commission works on broad policy issues affecting entrepreneurship and SMEs across Europe, and assists SMEs through networks and business support measures. It helps existing and potential entrepreneurs to grow their businesses, giving special attention to women entrepreneurs, crafts and social economy enterprises.
The Small Business Act for Europe (SBA) embodies the EU’s commitment to SMEs and entrepreneurship. Member States have committed to implementing the SBA alongside the European Commission in an effort to make the EU a better place to do business.
Since SMEs have to be supported at local level, the Commission helps Member States and the regions to develop policies aimed at promoting entrepreneurship, assisting SMEs at all stages of development, and helping them to access global markets. The identification and exchange of good practices are key elements of this policy.
The European Small Business Portal gathers together all the SME-related information provided by the EU, ranging from practical advice to policy issues, from local contact points to networking links.
Commission gathers proposals for single market and digitalising business,
On 26 November the Commission will hear from its “Enterprise and SME Policies” Group on their ideas on how to consolidate the single market and digitalise business and industry.
The expert group meetings will enable the Commission to discuss with Member States their views on how they think the development and deepening of the Single Market should be taken forward in the areas of both products and services. The European Single Market has been a huge driver of growth over the last twenty years. In the face of a challenging economic environment for the EU, developing and deepening this market is needed to drive competitiveness across the Union and support growth and jobs.
The joint meeting of the Enterprise Policy Group and the SME Envoys will also discuss ideas for actions to support the digitalisation of business and industry. The new Juncker Commission has put jobs and growth at the top of its agenda, with a strong emphasis on investment and competitiveness. The digital economy is a matter of priority, as the huge potential of digital technologies to spur growth and foster competitiveness remains under-exploited in Europe. At the meeting, representatives from German and Swedish governments will present their views and the President of the Strategic Policy Forum on Digital Entrepreneurship will give a business perspective.
The “Enterprise and SME Policies” Group was established to gather advice on enterprise, SME and industrial policies, and has two sections; the ‘Enterprise Policy Group’ and ‘The Network of SME Envoys’. The “Enterprise Policy” Group consists of Directors Generals from Member States’ public administrations who are responsible for industrial and enterprise policy issues. The “SME Envoys” group consists of government representatives from each member state who are charged with providing an active interface with the SME business community to ensure their specific interests and needs are considered in both national and EU programmes and policies.
Access to finance: still a barrier for growth within EU companies
The EU’s small businesses are increasingly optimistic about their growth prospects but many are still concerned about the lack of access to finance, according to a survey published today by the European Commission. Between April and September 2014, the SMEs’ demands for financing were not always fulfilled – this was especially true of smaller and younger companies.
More than a third of the SMEs surveyed did not manage to get the full bank loan financing they needed. While SMEs reported a welcome fall in interest rates for loans, they also experienced tightening in collateral and other requirements. In response, the Commission aims to increase uptake of its new programmes to support access to finance.
Access to Finance survey findings:
Growth expectations: Between 2009 and 2014, the proportion of SMEs that expected to grow rose from 47% to 61%. This optimism is in line with the Commission’s autumn forecast, which prognosticates a gradual strengthening of economic activity in the course of 2015 and 2016. It is not surprising that SMEs already report an increased demand for equity financing, trade credit, credit lines and bank loans.
Concerns about access to finance vary: Access to finance remains the most important concern of 13% of the EU’s SMEs. It is perceived as most pressing for SMEs in Cyprus, Greece and Slovenia. Small companies in construction, micro enterprises and more innovative enterprises experience the strongest problems when obtaining finance.
Lack of financial knowledge narrows financing options: Many SMEs are not confident about their ability to discuss financing with banks or investors. One SME out of three is not confident about talking with banks and only 20% are comfortable in negotiations with equity investors and venture capital firms. In particular, smaller and non-innovative firms have less confidence in their own financial competences. This knowledge gap can hamper the use of new financing options.
Bank loans: Bank loans remain the favourite form of external financing for 62% of all SMEs and, with the exception of micro firms, they were perceived by most SMEs as having increased availability. However, 13% of SME bank loan applications were rejected – a slight increase from 11% in 2013.
Loan conditions: With the exception of micro companies, SMEs reported a net fall in interest rates. In contrast, collateral requirements imposed by banks were considered by SMEs to have increased in all EU countries.
New EU programmes address access to finance problems
From 2014 to 2020, new EU programmes will help bridge the market gap in the provision of SME financing.These initiatives are included in the Competitiveness of Enterprises and SMEs programme (COSME), Structural Funds, and theSME instrument and InnovFin components of the Horizon 2020 programme for research and innovation.
EU assistance for companies seeking access to finance is channelled through selected financial institutions, such as banks, leasing companies, mutual guarantee societies or venture capital funds. EU programmes are designed to catalyse financing for SMEs through loan guarantees, equity investments and other risk-bearing mechanisms. The Commission is also working on fostering the SME’s access to non-traditional forms of financing, such as crowdfunding.
In parallel, through the local offices of the EU business support service, the Enterprise Europe Network, provides free information and direct services to companies looking for partners, funding, data on new markets, EU programmes or legislation. Online information is available at the EU’s Access to Finance portal.
COSME: The European Commission and the European Investment Fund sign an agreement that will boost funding opportunities for SMEs
As a result of an agreement signed today between the European Commission and the European Investment Fund (EIF), small and medium-sized enterprises (SMEs) in Europe will soon have access to up to €25 bn of additional finance. The signing ceremony of the agreement will be hosted by the newly-appointed Commissioner for Industry and Entrepreneurship, Ferdinando Nelli Feroci.
Thanks to the €1.3 bn allocated in the COSME budget for SME financing, it will be possible to mobilise up to €25 bn via leverage effects from financial intermediaries over the next seven years. The agreement paves the way for providing equity and debt financing for SMEs under the EU Competitiveness of Enterprises and SMEs (COSME) programme by the end of 2014. Following the signature of the agreement, the EIF will open a call for expression of interest to which eligible financial institutions (banks, guarantee institutions, funds etc.) can apply. After a thorough due diligence process, the EIF will select financial intermediaries which can then make the new finance available to European SMEs across all sectors.
Ferdinando Nelli Feroci, Commissioner for Industry and Entrepreneurship, said: “Thanks to COSME, European SMEs will soon have access to up to €25 bn in additional finance in the form of both loan guarantees and equity. This is an important part of the EU’s response to overcome the well-known difficulties SMEs face in obtaining access to credit. The signing of this agreement today shows that the European Commission is firmly committed to help EU SMEs thrive: they are the backbone of the EU economy, and are responsible for the creation of 85% of all new jobs.”
Pier Luigi Gilibert, Chief Executive of the EIF said: “Through COSME, the EIF will be able to support even more SMEs across Europe over the next 7 years. Building on the successes of the Competitiveness and Innovation Programme, COSME’s predecessor, which has enabled SME financing of approximately €20 bn and helped to support more than 1 million jobs, we aim to further improve the access of finance for SMEs and to contribute to growth and employment in Europe.”
€21 bn of guarantees for SMEs
COSME will operate by way of funding guarantees for banks in order to help them provide more loans and finance leases to SMEs. The impact is substantial as, due to the leverage effect of the COSME Programme, €1 invested in a loan guarantee enables up to €30 of financing to SMEs. These guarantees will typically help many SMEs who might otherwise not be able to obtain funding due to lack of sufficient collaterals.
It is expected that up to 330,000 SMEs will receive loans backed by COSME guarantees, with the total value of lending reaching up to € 21 bn. Based on the experience of the COSME predecessor programme, the Competitiveness and Innovation Programme (CIP), it is expected that 90% of the beneficiaries will have 10 or fewer employees with an average guaranteed loan of about €65,000. This is precisely the category of SMEs who are currently facing the most difficulties getting a loan.
€4 bn for equity to help SMEs to grow and expand
A part of the COSME budget will also be invested in funds that provide venture capital for the expansion stage of SMEs, in particular those that operate across borders. The fund managers will operate on a commercial basis to ensure that investments are focused on the SMEs with the greatest growth potential. It is expected that some 500 firms will receive equity, with the overall investment volume reaching up to €4 bn and attracting further finance by co-investments from other public and private sources.
Access to EU finance
The Access to finance portal provides easy, complete and up-to-date information on how entrepreneurs and SMEs can access over a total of €100 bn of EU financing through various EU programmes during the next seven years. The portal provides detailed information on how SMEs can apply for finance supported by the EU, via one of approximately 1,000 banks and other financial institutions. The portal is accessible in all EU languages and for all EU and candidate countries.
COSME is the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (SMEs) running from 2014 to 2020 with a planned budget of €2.3 bn with a leverage effect able to provide up to €25 bn. The programme will support SMEs in the following areas: better access to finance for SMEs, access to markets and promotion of the entrepreneurial culture. The COSME programme builds on the success of the Competitiveness and Innovation Framework Programme (CIP) which helped to mobilise more than €16 bn of loans and €2.8 bn of venture capital to over 328 000 SMEs in Europe from 2007 to 2013.
About the EIF
The European Investment Fund’s (EIF) central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. EIF’s total net commitments to private equity funds amounted to over €7.9 bn in late 2013. With investments in over 435 funds, EIF is a leading player in European venture due to the scale of its investments, especially in high-tech and early-stage segments. EIF’s guarantees loan portfolio totalled over €5.6bn in over 300 operations at late 2013, positioning it as a major European SME guarantees actor and a leading micro-finance guarantor.
More information at: www.eif.org
SMEs have to adapt their recruitment procedures to principles of reverse female discrimination
The implementation of reverse female discrimination brings about changes for SMEs. Personnel managers must adapt to the new rules their ways of recruiting, promoting, providing career opportunities and tailoring working hours. 3,500 medium-sized companies that are either obligated to co-determine or stock exchange listed will have to set themselves new goals when hiring female managers from 2015 onwards.
Manuela Schwesig, the Federal Minister for Family Affairs, has billed the implementation of reverse female discrimination as an important step towards greater parity. The new law will bring about a ‘change of culture in the professional world’ and to societal changes.
The minister had largely actioned her requests the day before. These requests stipulate that from 2016 the supervisory boards of around 100 stock exchange listed companies that are fully obligated to co-determine will be 30% female. The fact that there will be no exceptions flouts the Union’s requests.
If no suitable female candidate is found, the post will have to stay vacant. BothSchwesig and Heiko Maas, the Federal Minister of Justice, firmly thought that there would be no vacant posts at the end of the day. Maas (SPD) said he would bet anything that this would happen.
From 2015 onwards, 3,500 medium-sized enterprises that are fully obligated to co-determine or stock exchange listed will have to set their own objectives for putting women into leading posts. The rule that the number of female leaders must not fall short of the 30% mark will continue to obtain.
Medium-sized companies have to undergo profound changes. The employers’ leader Ingo Kramer had criticised reverse female discrimination; he said it fostered serious economic problems and that reverse female discrimination favoured women simply because they were women. He was quoted by http://www.tagesspiegel.de/politik/frauenquote-wenn-maenner-mauern/10983886.html as saying that those women who were needed did not exist. Thomas Sattelberger, who was personnel manager at the German Telekom from 2007 to 2012 and who had already implemented reverse female discrmination, holds different views: If the flexi quota entered medium-sized companies – which is what Minister Schwesig desired – ‘then especially medium-sized companies will have to profoundly reform the way they treat their personnel. Recruitment, promotions, career opportunities and working hours will be affected.’
One way of compromising with the Union will be to make reverse female discrimination affect both employers and employees. ‘If they agree to set 30% as a benchmark, they can certainly do that,’ says Schwesig.
During the general debate at the Bundestag, Chancellor Angela Merkel said that reverse female discrimination has been agreed upon and will be implemented. She added that the cabinet would deal with that matter on 11 December and that ‘we can’t do without the competences of women’.
The EU is planning a huge investment funds with tax money
In three years the EU Commission will want to supply investments worth €63 bn via tax money. The sums are supposed to lure private investors. President Juncker expects a fifteenfold leverage effect, meaning that in 2017 over €315 bn will be invested in traffic, energy, information technology and in the European SMEs. The risk will be borne by taxpayers.
The EU Cmmission wants to enlist the help of private investors in order to implement investments worth €315 bn during the next three years. On Tuesday the Commission decided to establish a fund worth €21 bn; the fund is supposed to create one million jobs.
President Jean-Claude Juncker wants to present the European Funds for strategic Investments (EFSI) to the EU Parliament on Wednesday. The Commission assumes that within three years the programme will increase the EU’s economic power by 0.75% at least and by 1% at most.
EU experts say that the funds will be available for investment from mid-2015 onwards. Investments in the realms of traffic, energy, information technology and smaller companies will be prioritised. Enterprises are currently wary of investing because of the weak conjuncture.
This sum might increase if EU member states were ready to pour some of their own money into the EFSI. These sums would still count as national money and not be included in the computation of the deficit. This initiative is an important milestone of Juncker’s plans to increase growth within the EU.
The EU estimates that the €21 bn will have a leverage effect that will allow the European Investment Bank and the European Investment Fund (EIF) to use €63 bn within three years. This will set free investments that are five times as large. The Commission believes that this fifteenfold leverage effect is realistic.
The proposal that the EIB, which is being financed by the EU member states, take the risk for the private investments may become a bone of contention. The assurance that losses will be borne primarily by the EIB is supposed to lure investors. The Bank will also provide 5 of the €21 bn. The other 16 bn will be deducted from the EU household.
The OECD issued a cautious agreement. ‘The €315 bn have been taken from the stars,’ said chief economist Catherine Mann. Yet she admitted that this sum could help pave the way for private investments.
The deputy CDU/CSU leader Hans-Peter Friedrich has criticised the Commission’s proposals. On Tuesday evening he said to the news agency Reuters, ‘The Commission wants state-organised programmes for investments that are too risky for investors but that have to be borne by taxpayers in Germany and Europe.’ He added that structural reforms were needed. ‘No one invests in countries that have antediluvian structures and where economic activities are being hampered by bureaucracy and public donations,’ the CSU politician warned.
Friedrich is especially critical of the EIB’s liabilitiy, which is borne by all member states. He also criticised the demand that more risky projects be financed. ‘In this situation it is sheer poison to implement the EU’s plans: tax money or – as a first step – bail sums are supposed to lure investors to places that nobody would invest in under normal conditions,’ he said.
The EU wants ‘electricity-intensive’ companies to give back subventions
The European Commission says that the subventions given to electricity-intensive industries were too high. The EU wants these companies to give back some of their subventions. It does not want competition to become “falsified”.
The Europaen Commission wants to claim back a couple of too-high subventions that were given to German companies on the basis of the Law on Renewable Energies (LRE) from 2012. On Tuesday the Commission criticised that “a small part” of the discounts for electricity-intensive companies was higher than the level permitted by the EU help laws.
According to the European Commission, the concerned companies have to pay back these sums, as the too-high help sums have “falsified” competition. The requests concerned the years 2013 and 2014 only.
The Commission emphasised that a large part of the help sums for electricity-intensive companies complied with the EU help laws. Thousands of electricity-intensive companies are largely exempt from the EEG apportionment, which covers the costs for the development of eco-current.
Bafin warns off giving too many credits to SME
Bafin, a bank controller, is warning about the risks that arise from a growing number of credits given to SME. ‘We’re worrying about the herd drive,’ says Röseler, a Bafin employee. This means there are not enough opportunities for growth in this segment.
‘Once we have reached the limit, the conditions of the company credits will cease to reflect the risks appropriately. The light is yellow,’ Röseler said.
He also said that Bafin was alert to the dangers and ready to intervene. ‘We won’t stand idle and watch. We can require that banks support the risks they have taken with larger capitals. That makes business more expensive.’ By contrast, the risks that arise from a real estate bubble materialise only rarely. ‘The finances are still rather solid,’ says Röseler.
The Internet changes procedures for clients and companies
Next year the number of interconnected devices will rise to around 5 bn. In 2020 there will be 25 bn interconnected devices. The Internet changes home technology, the car industry, and the state. Businesspeople have to adapt their procedures to these new conditions. Interconnection is not everthing: it is important to generate new added value.
Those things that can be interconnected will be interconnected. Market scientists expect the market of internet things (IoT) to rise by 30% during the next year. There will be 4.9 bn interconnected things in 2015. According to analyses carried out by American IT provider Gartner, there will be 25 bn devices in 2020. Next year the market volume will rise to around $70 bn. In 2020 the market will rise to around $263 bn.
These developments will have far-reaching consequences. The daily lives of people will change. New enterprises and products will be created. Existing enterprises are facing the challenge of exploring the newly established markets and pitting themselves against competitors.
Interconnected devices are constantly generating data. But the value is not in the data themselves; it rests in their interpretation and in the underlying procedures. These are established dynamically and supposed to orientate themselves to the clients’ wishes. Interconnection must not be an end in itself – according to a report published by THE Journal, Steve Prentice, vice-president and partner at Gartner, said it was important to develop new business models and added values. At first, the Internet of things changes the industry. Creation processes change according to the development of revolutionary production processes like the 3D printing technique. Factories morph into intelligent factories. Observers are talking about the next industrial revolution. The buzzword industry 4.0 can be heard everywhere.
Security is an important topic for the progressing interconnection of things. The interface between data security, IT security and physical protection measures demands a new market with new products. Gartner estimates that by 2020 one-fifth of all companies will have equipped their procedures with security measures in order to forestall potential damages caused by data thefts or data losses.
Cars are becoming smartphones that drive and roll autonomously. Gartner estimates that the market for interconnected cars will double next year. This development opens up a huge economic potential for companies in realms like the car industry, the supplying industry, or the information and communication industry. At first, however, there is considerable need for devices that aid scientific research and development. ‘The car of the future will possess energy-efficient and environment-friendly car technologies up to the electric mobility with intelligent information and communication systems,’ says Matthias Hein of the Thuringian Innovation Centre Mobility (ThIMo). ‘Such systems are supposed to make driving more comfortable and especially to render the interconnection and reliable interaction with the car’s environment more secure.’
According to Computer Week, the insurance industry is showing great interest in those data that can collect interconnected vehicles. “Activity Trackers” will help to draw conclusions about the individual way of driving and life changes of potential clients and to infer the cause of acfcidents.
The industrie that supplies energy direly needs new technology. The energy revolution demands modern electricity networks that can cope with enormous voltage fluctuations. This not only concerns the use of energy within a country like Germany, it also concerns the transnational availability of energy. Smart-Grids – that is, intelligent electricity networks – are supposed to guarantee the stability of the security of supply. The transition to renewable energies and the increasing renunciation of coal, gas and electricity that is generated by nuclear power poses an enormous challenge for the infrastructure of the energy supplies.
Household technology, too, will undergo profound changes. Household can manipulate their heating with a smartphone, the washing machine communicates with the clothes and the lamps recognise automatically how many people there are in a room.
The state will not be able to escape these developments, either. There may be investmenst in intelligent road systems, and people may cover the streets with solar modules to shed heat and light on to the roads.
Whether German companies can keep up with these developments on an international level or whether they will become leading forces depends on their willingness to invest. The foundation and promotion of start-ups will be of central importance.
Weak conjuncture: Companies hold back investments
Substantial domestic demands and good export statistics are saving the German economy from recession. In the third quartal there was a minimal increase of 0.1%. But that development will not last. Companies are providing against worse times and postponing investments.
This summer consumers and exporters saved the Germany from recession. On Tuesday the Federal Statistic Office reported that between June and September the gross domestic product had risen by 0.1% compared to the preceding quarter. The Federal Statistic Office thereby confirmed the first estimates that were ventured in mid-November. Those consumers who extended their spending by 0.7% (which is the strongest rise in three years) were especially instrumental in nurturing this economic upswing. The foreign commerce, too, was accelerating the economy, as the exports were rising by 1.9%, which was stronger than the rise in imports (1.7%). By contrast, the reluctance of some companies to invest hampered the economy.
‘Germany has no consuming problem, which means it has no exporting problems, either,’ said conjuncture expert Christian Schulz from the Berenberg Bank. ‘These two economic pillars don’t shake.’ He added that things were quite different in the realm of investment. The manifold international crises (like the ones that occurred in Ukraine or in the Near East) had unsettled the companies, prompting them to archive certain plans. They spend 2.3% less on machines and capital, which is the strongest decrease since early 2013.
In spring the economy fell by 0.1%. If the sum of all produced goods and services lowers during two consecutive quarters, economists will call this phenomenon a recession. The companies are expecting positive things despite the conjunctural problems. After six consecutive declines the Ifo climate became more auspicious in November. Yet the recovery is still weak. Schulz expects the gross domestic product to stagnate during the current quarter.
Facebook is luring medium-sized enterprises with marketing strategies
Facebook is evolving fast. Its offers for medium-sized companies are supposed to entice businesspeople to publish on Facebook campaigns that have to be paid for. Employees, too, are supposed to obtain a page where users can sever private and professional contacts.
Facebook is constantly expanding its support for SME by organising conferences, providing personal advice, and by providing a program that is tailored to medium-sized companies. As a marketing platform Facebook wants to become more important for small and local companies as well.
A total of 30 million SME is represented on Facebook. They establish personal connections with people who are interested in them. This is how millions of companies manage to pursue their business on Facebook.
‘77% of the Germans on Facebook are linked to at least one medium-sized company – this is a total of more than 20 million people. It was time to create a forum that allows businesspeople to exchange experience and learn something new,’ says Arne Henne, SMB Program Manager EMEA at Facebook.
Facebook has been earning money with publicity for a short time only. The programme “Facebook Go” supports businesspeople in starting campaigns on Facebook and in spilling more money into the cash boxes. Companies that invest a daily sum of €20 into Facebook over 30 days receive a chance to obtain personal advice.
According to a newspaper article, Facebook is working on a new platform that allows users to separate their professional contacts from their private ones. According to the Financial Times, the new website “Facebook at Work” will strongly resemble the current Facebook wepage and compete with career networks like LinkedIn and Xing as well as for similar platforms that are run by Google and Microsoft. The newspaper cited no sources when it wrote that the new Facebook site would allow its users to communicate with their colleagues and keep up their professional contacts. Facebook was unavailable for comments.
Austria’s medium-sized companies invest less
99% of all Austrian companies are less inclined to invest. The conditions are bad; the economy is stagnant. But the bad situation is deceptive: In contrast to many huge companies that have suffered from the crisis, in recent years Austria’s medium-sized companies were able to increase their sales by 11%.
Over the last six months Austria’s medium-sized companies have become less and less willing to invest. According to a study published by Creditreform, during which around 1,700 SMEs were asked about their willingness to invest during the autumn of 2014, most companies are reluctant to invest in the face of the currently stagnant conjuncture.
Over the last few weeks more than one-third (35.9%) has planned to invest in machines and equipment. This means that the willigness to invest is even lower than the percentages recorded in 2009 (47.5%) and 2012 (44.3%). The highest number of companies that are willing to invest is located in the processing trade (this year: 43.6%, last year: 48.1%).
37.3% of the companies polled in the service industry wanted to implement a plan to invest (last year: 40.6%), while in the building sector there were 35.8% (last year: 33.0%). This means that the willingness to invest has increased only in the building sector.
The trade investments are least willing to invest; only 28.9% of all SMEs want to implement a plan to invest (last year: 38.7%). First and foremost the SMEs wanted to implement replacement investments (64.1%, last year: 58.5%). 45.9% of the SMEs polled want to expand their capacities (last year: 49.0%).
The report published by the medium-sized of the Federal Ministry of Science, Research and Economy describes the situation of SMEs in Austria. More than 313,700 companies (that is 99.6% of all companies) are SMEs. In 2012 these SMEs employed around 1.9 million people and generated 64% of the sales revenues (€450 bn) as well as around 60% of the gross value (€108 bn). Since 2009, which was an especially hard year, they have been able to create more than 90,000 jobs and increase their gross value by around 14%. ‘The SMEs also have 68,000 apprentices, which ensures a continuous supply of brainpower,’ the Minister of Finance Reinhold Mitterlehner stressed.
Between 2008 and 2012 the number of SMEs rose by 4.7%, whereas larger companies expanded by 0.6%. Whilst larger enterprises were unable to reach their pre-crisis level, SMEs expanded their turnover bei 11.1%.
The middle class report emphasises the important role of one-man enterprises (OME). In 2012 more than one-third (115,200) of all companies were OMEs, which generated €23.8 bn of turnover and €6.7 bn of gross value.
The youngest performance check conducted by the EU Commission according to the “Small Business Act” praises the local SME sector. This check concluded that Austria had one of the most competitive profiles within the EU. During the year the check was conducted, Austria exceeded the EU average in the realms of “single market”, “access to means of financing”, “competences and innovation”, “a second chance after bankruptcy”, “sustainability, environment and energy” and “internationalisation”.
Family businesses require more incentives for investments
Many people trust German family businesses, which have great responsibility in society. Businesspeople demand that the government provide incentives for more investments. The lack of professional brainpower and the parlous economic environment are hindering social engagement. People are clamouring for an economic moratorium.
Constant wins, considerable innovation power, good product quality, and the strong power of the German economy all explain why so many people trust family businesses. 70% of the people polled think that these businesses are the must trustworthy ones. ‘Family businesses, which make up a large part of Germany’s middle class, incarnate the keen business acumen of the entrepreneurs and the founders,’ says Susanne Marell, CEO of Edelman Deutschland. The company polled 12,000 people in 12 countries about the confidence and trustworthiness of family businesses. ‘People trust that these businesses have long-term successes, are reliable partners, and that they know their employees’ value.’
Yet family businesses are often accused of being too reticent towards the public. Most of the people polled in Germany (71%) and the world over (76%) expect the exact opposite of businesspeople and founders. They see family businesses as having the responsbility to be transparent about their activities. ‘Familiy businesses tend to communicate coyly because they want to protect their privacy,’ says Bernd Buschhausen, Head of Family Business at Edelman Deutschland. ‘In the long run this reticence can foster suspiciousness, while openness and transparency nurture confidence. Family businesses are facing the challenge of finding the right balance in their ways of communicating.’
Rainer Kirchdörfer, who heads the Stiftung Familienunternehmen (Family business foundation), has spoken up and demanded that the government provide more incentives for new investments. He added that after one year of socio-politically motivated government plans, the Union and the SPD had better agree on a joint agenda for strengthening Germany, where the investments would be constellated. ‘The re-introduction of a degressive amortisation for movable economic goods of the assets is an effective means of action for the government. During the 2009-10 financial crises the degressive AfA turned out to be an effective instrument when it came to fostering investments.’ Kirchhöfer added that this was not a subvention, for the state was getting the full sum of tax endowments, even though the state was getting them only after some time. A binding announcement from the government would give planning security to the businesses and bring about considerable incentives for investment.
Kirchhöfer added that the government should not be distracted from its plan to make economies, a plan it had set for 2015. The demand for more incentives for family businesses that the foundation was making did not quite fit the atmosphere in the business themselves: around nine out of ten businesses (88%) suppose that they will grow over the next five years. Twelve per cent were confident they would consolidate, whereas only 1% believed that their profits would lower. These estimates have been published by a study entitled ‘The future of family businesses – an anchor for the economy and society’ that was carried out by PwC.
The Germans tend to view the rules that govern the succession in family business with scepticism. According to the Edelman Trust Barometer, 58% of the people polled in Germany (and 67% of the people polled worldwide) opined that a business’ founder tended to elect the right candidates for his sucession. However, only 44% agreed that a member of his own family should succeed him.
‘Succession is a procedure that needs to be implemented little by little. All participants – ranging from the employee to the business partner – have to be in the same boat,’ says Marell. ‘The good repute is not automatically ceded to the successors. The next management generation needs to gain confidence, just like its predecessors. They have to prove that they, too, have a sound business acumen and that they are reliable and responsible CEOs.’ It is important for them to show that they have not just climbed the career ladder, but that they have some achievements to their credit and that they are familiar with business matters. A clear, open and transparent way of communicating is also important.
70% of the people polled opined that the future CEO should apply himself to solidifying the business’ future. This gives a sense of constancy and security, two essential factors that have a good impact on the confidence that people place in the CEO and the business.
55% of the people polled wanted family businesses to accept responsibility for the social surroundings they operate in. Again, transparency is crucial. ‘Many family businesses have long started to assume social responsibility, but most of them have done so in silence,’ says Marell. ‘They ought to change that, for they will gain in confidence and boost their business’ profile if they are open about their responsibilities.’
The most important realms that family businesses can help promote are nature conservancy, social problems and education. Yet the social efforts of family businesses should not depend on their pecuniary interests (67%). 67% of the people polled said that businesses should focus on activities within the city of the business’ headquarters. Nearly as many people (62%) opined that family businesses should help to solve social issues in every market they were active in. Only 58% of the people polled demanded that the businesses’ employees support their social efforts.
In return for their social engagement, the family businesses demand a strain moratorium for the economy. ‘This means that when the real estate taxes are being reformed, no additional burdens will be allowed, for example by using the market value as the assessment base,’ says Kirchdörfer. ‘The rule should not lead family businesses to be confronted with a taxation of their hidden assets when the taxation laws remain secured in Germany.’
A strain moratorium would also have to affect all those rules that curtail the flexibility of the German labour market. ‘It is direly necessary to keep in mind the new prerequisites when re-checking the goals that were set in the coalition treaty back when the conjuncture was good. The federal government frequently stresses the need for helping family businesses to strive; more than 90% of all enterprises are family businesses. Now the government ought to improve the German investment conditions for these enterprises, which because of their self-concept are especially loyal to the place they operate in.’
Only every fourth company will hire new employees
According to an opinion poll, only 24% of all companies want to hire new employees. At the same time the companies that want to fire employees increase in number. Economists blame these developments on the dismal conjuncture.
Because of bleak professional perspectives, German companies are reluctant to invest or hire new employees. According to a poll that was carried out among 2,900 companies on Monday by the Institut der deutschen Wirtschaft Köln (Cologne Institute of German economy, IW), only around 24% of them want to hire new employees next year. In spring, the percentage of companies who wanted to hire new employees was 38%.
The percentage of companies that wanted to fire employees increased from 14 to almost 22%. In 2015, only 30 instead of 44% of all companies wanted to invest more. 23% of all companies wanted to shorten their spending; in spring, the percentage of companies wanting to do so was 15%.
‘The German economy is heading for a prolonged recession,’ says Michael Hüther, the director of the IW. The halting recovery in the euro zone, the dispute between Russia and Ukraine and the weaker dynamics in the emerging countries worsen the export perspectives. In the face of this, Hüther cautioned politicians against putting even more strain on the German economy: ‘During the last twelve months there have been some developments that have harmed the companies, such as retirement at age 63 and the minimum wages.’
In a monthly newsletter that was published on Monday the Bundesbank referred to the bleak business perspectives and stagnant number of incoming orders. All this was referring to ‘stagnant economic development in Germany until at least late 2014.’ While made-in-Germany-goods were being asked for in the world markets, strong impulses in the global market were lacking.
There was also a lack of recovery in the big partner countries within the euro zone. ‘However, there is a chance that other extra-economic factors like the strong devaluation of the euro and the fast-decreasing oil prices will have gradual and small vitalising effects,’ the Bundesbank economists added. The good job market situation, the strong immigration numbers and the palpable increases in wages will continue to provide good perspectives, and the consumers’ spending will continue to support the conjuncture.
During the summer quarter the German economy very narrowly avoided a recession. The gross domestic product increased minimally – to wit, by 0.1%. The economy was prevented from shrinking by consumers who loved to buy and by increasing exports. In spring, the gross domestic product had lowered by 0.1%. Economists refer to the occurrence of two consecutive minus quarters as a recession.