Survey of Greek SMEs (First half of 2013)

The mild improvement in business sentiment for SMEs posted at the end of 2012 became more evident in the first half of 2013. More specifically, SMEs expectations for employment for the next 6 months suggest a trend toward stabilization, while their investment outlook is positive, particularly in the manufacturing sector.

Against this backdrop, the business confidence index shows an upward trend for all sectors, the largest improvement being in the component of the index concerning future demand. Notably, the majority of the larger SMEs state positive expectations, while the services sector shows the biggest improvement.

In terms of financing needs of the past 6 months, 41% of SMEs stated that they do not need financing, 26% of SMEs (corresponding to ¾ of SMEs that applied for financing) received financing, while the remaining ⅓ needed financing but have not been able to obtain it (mainly because they have not applied for it and, to a lesser extent, because their application was rejected).

SMEs are proving to be quite flexible as, despite the fact that the economic crisis led to a sharp fall in revenue, they have managed to contain labour costs and keep them broadly unchanged as a percentage of revenue. More specifically, the reduction in labour costs by over 50% over the period 2007-12 was achieved primarily through the reduction in the average wage (contributing 28%) and secondly through staff reductions (contributing 25%).

Average employment per SME has decreased by 25% over the past 5 years (40% in small and 23% in medium-sized enterprises), with the largest decline in the construction sector (52%) and the smallest in the services sector (5%). In addition, we note a trend towards part-time employment (and outsourcing, especially in manufacturing) and an average delay in wage payment of the order of 1½ months.

Average annual wage has decreased by 28% over the past 5 years (42% in small and 17% in medium-sized enterprises), with the largest decline in the services sector (47%) and the smallest in manufacturing (11%).

Productivity (adjusted for wages) has contracted by 12% over the past 5 years, with the largest fall in trade (18%), while there was a slight increase in manufacturing (3%).

Following the wave of restructuring in the labour market, SMEs indicate stabilization of employment for the following year, as just 20% continue to employ surplus personnel (a significantly lower percentage than the 44% that reduced their labour costs by layoffs over the past 5 years). It is also encouraging that only ½ of SMEs  state that they will change their labour costs in the coming year (vs. ¾ that changed labour costs in the previous 5 years). However, there is a need for further reductions in unit labour costs if Greek SMEs are to become more competitive.