Fabian Demicoli

EU SME Association survey finds business confidence slides down as recession hits SMEs

SMEs have moved from high uncertainty to downright pessimism as the economic
outlook has worsened towards a full-fledged recession, according to a survey
conducted by UEAPME, the European craft and SME employers' organisation, and
its members.

Since the beginning of the year, the proportion of entrepreneurs
expecting a positive or neutral economic environment has decreased by 3
percentage points, with UEAPME's "SME Business Climate Index" down from 70.5 to
67.5,  going back for the first time in
the last two years below the 70 points barrier that is seen as a neutral
business climate. The confidence gap between Portugal, Ireland, Italy, Greece
and Spain combined with the rest of the EU is still significant, found the
survey, which also recorded a lower confidence index for the Euro zone (66
points) than for the other EU members (70.6 points). All the measured economic
indicators declined compared to the first half of the year, with the balance
between positive and negative answers reaching double-digit negative figures
for turnover and orders. Micro enterprises are the hardest hit at the moment,
according to our statistics, which in addition revealed negative turnover
results across all economic sectors, a clear sign of a decrease in the
aggregate internal demand.

terms of economic indicators, the balances between positive and negative
answers are particularly worrying for the expectations on turnover (-10.8) and
orders (-15.3), explained UEAPME representative Gerhard Huemer. Prices also
turned negative, as SMEs were forced to lower them in order to stay on the
market.  Some timid improvements are
foreseen for the second half of the year for the overall situation, turnover
and orders, but no positive developments are to be expected for employment and

overall situation worsened for all size classes in the first half of 2012.
Small and medium-sized companies showed similar results, hovering around minus
7 points, but it is definitely micro enterprises employing fewer than 10
persons that are suffering the most at -10.5. The results for all the three
categories are even lower than the already negative expectations collected
during the second semester of 2011. A glimmer of hope can be seen in the
expectations of medium-sized companies, which foresee improvements in all indicators
for the second half of 2012, particularly for orders. "Larger SMEs are usually
faster movers in both directions, and these expectations can be the first signs
of a recovery", said Mr Huemer.

as far as business sectors are concerned, construction, business services and
personal services recorded double-digit negative figures for turnover, while
after four semesters of positive results manufacturing also showed the first
downturn and a slightly negative performance (-2.2). "This is a textbook
example of a decrease in the aggregate internal demand", commented Mr Huemer.
"As European SMEs rely mostly on the EU markets, the recession will not be
overcome without a quick re-establishment of a new climate of confidence for
private households and private businesses."

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