Economic crisis hits small businesses hard

Small businesses employing fewer than 50 people are very important in Greece. They make up 99.6% of Greek enterprises. They have been hit very hard by the economic crisis, with nine out of 10 recording a further deterioration in trading during the first part of 2012. More than half said it was likely they would be forced to close down in the near future. More than half had experienced problems paying workers’ wages, almost a third reduced wages, and almost 40% had reduced working hours.

Background

A new survey in Greece has highlighted the devastating effect of the financial crisis on small businesses, which make up the vast majority of the country’s economy. The survey is the second conducted in 2012, and the eighth in a series carried out by the Institute of Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen & Merchants ( GSEVEE) in collaboration with market research firm Marc SA. The surveys have been conducted on a half-yearly basis since May 2009.

The nationwide survey of 1,200 very small and small enterprises with fewer than 50 employees was carried out between 3 and 11 July 2012. Its primary aim was to capture the economic climate in the small business sectors of manufacturing, trade and services, which constitute 99.6% of enterprises in Greece.

As in previous surveys, researchers wanted a clear record of the economic climate’s trends and to monitor key indicators in the operation of small enterprises during the first part of 2012. At the same time, it asked business leaders to predict issues likely to affect the second semester of 2012.

The survey data showed that the economic climate indicators were at their worst point since the surveys started.

Main findings

During the first half of 2012 almost nine out of 10 enterprises (88.1%) recorded a deterioration in their overall economic situation. More specifically, deterioration was reported in:

  • turnover, down by 85%;
  • demand, down by 83.1%;
  • the liquidity of enterprises, down by 86.5%;
  • orders, down by 85.4%;
  • investments, with 6.9% of enterprises recording an increase, 37.4% saying investment had decreased, and 52.6% describing their businesses as being ‘in a lull’.

A large percentage of businesses said there was a real possibility that they may face, sometime in the near future, a serious operational problem. Many said things were so bad that there was a possibility that they might have to close down (Figures 1 and 2). The proportion of companies that said they were ‘very’ or ‘fairly likely’ to go out of business was the highest ever recorded – 53.3% compared with 51.2% in January 2012.

Figure 1: Likelihood of facing a problem leading to business closure

Figure 1: Likelihood of facing a problem leading to business closure

Source: Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen & Merchants (GSEVEE) survey

Figure 2: Companies fearing an eventual business closure (%)

Figure 2: Companies fearing an eventual business closure (%)

Source: Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen & Merchants (GSEVEE) survey

Impact on the workforce

The impact of the crisis on the size and characteristics of employment continues to follow the same unfavourable trend as in previous surveys. More specifically, this latest study revealed:

  • a reduction of personnel during the last semester by 18.7% of enterprises, while an increase was reported by only 3.2% of enterprises;
  • in absolute figures, a net job loss during the first part of 2012 estimated at 78,000 people;
  • forecasts for the second semester of 2012 predicting the loss of 110,000 jobs;
  • more than half the enterprises surveyed (53.4%) having difficulty paying wages on time, a percentage verified by the Labour Inspectorate.

Of those enterprises that predicted a reduction in their workforce, more than 60% said that given the poor state of the economy, they were willing to do all they could to maintain jobs as long as they received a subsidy to cover wage and non-wage costs. A similar subsidy program introduced through the Greek Manpower Employment Organization (OAED) a year ago is thought to have saved about 150,000 jobs.

Meanwhile, the survey showed just over 40% of enterprises had cut working hours or working days for some employees. This percentage was 37.4% in January 2012. A third of businesses (33%) were forced to cut the wages of some employees, against 28.6% in January 2012. In total, half of the enterprises with paid staff had reduced employees’ earnings either directly through wage cuts, or indirectly through reduced hours (Figures 3 and 4).

Figure 3: Companies which reduced the earnings of some employees (%)

Figure 3: Companies which reduced the earnings of some employees (%)

Source: Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen & Merchants (GSEVEE) survey

Figure 4: Companies which cut the working hours of employees (%)

Figure 4: Companies which cut the working hours of employees (%)

Source: Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen & Merchants (GSEVEE) survey

Just over a third of businesses (36%) believed that in the next semester they would have to reduce wages or cut hours. This was ‘a possibility’ for a further 29.4% of companies.

Businesses which employed paid staff said their biggest worries were operating costs (44.3%), social insurance contributions (41.3%) and the wage bill (9.9%). It is worth underlining that for the larger enterprises in the sample – those employing more than five people – social insurance contributions were considered the biggest issue (47.5%).

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE)

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