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Young, innovative and internationally-active SMEs driving job-growth in Europe

News   •   Feb 08, 2016 08:00 GMT

(Dublin, Ireland): Small and medium-sized enterprises that are largely young, innovative, internationally-active and run by skilled managers are driving significant job growth across the European Union. But research from Eurofound highlights that while SMEs were responsible for a massive 71% of employment growth in the non-financial business economy in 2014, there is urgent need for further tailored support if a more rigorous recovery is to be realised.

These are some of the findings of the European Restructuring Monitor (ERM) annual report for 2015, which looks specifically at the issue of job creation in SMEs. The report identifies which types of SMEs are dynamic job creators and determines their main drivers and barriers for job creation. SMEs, defined by the European Commission as companies with fewer than 250 employees and an annual turnover of up to €50 million, are hugely significant to Europe’s economy, accounting for 67% of total employment across the EU28.

Employment in Europe has been growing exponentially in areas in which SMEs are dominant, notably in professional and administrative services. The diverse nature of SMEs has previously made it difficult to pinpoint their specific potential for growth and job creation. However, the report has used the research available to identify the transversal profile of SMEs that have a strong potential to create jobs. Youthful ambition was identified as a generally positive factor, with ambition and strategic risk-taking paying dividends both in terms of performance and growth. There is also an important place for experience, with knowledgeable and qualified managers driving internal and external performance.

The report also sets the performance of SMEs in the broader business environment. There must be sufficient access to finance and suitable public support for the growth of the business itself. Businesses also tend to succeed in environments that entrepreneurship is regarded positively and a favourable legislative and taxation regime is in place. In terms of the labour market, there should be a sufficient labour supply, a coherent match between skills and business requirements, and more manageable labour costs.

The data in the European Restructuring Monitor helps policymakers, researchers and businesses to understand the strong performance of SMEs over the past three years. It is also important in order to put policy measures in place that will help copper-fasten Europe’s economic recovery and close the gap with other developed countries outside Europe where a more robust post-crisis recovery is already in place.

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