Chart in focus
Business dynamics in Europe

March 24, 2014

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The crisis in the eurozone has left a strong imprint on the corporate landscape. As the chart shows, the number of active companies has fallen recently in most countries. Here, only companies with more than ten employees are illustrated; microfirms and self-employed with few or no employees are not included. One of the few exceptions in Europe which registered a slight increase in the number of companies since 2008 is Germany.

By contrast, the eurozone crisis countries were hit particularly hard. In Spain and Ireland the number of companies in the two years from 2008 to 2010 alone declined by over 20%. In 2011 the number of companies with more than 10 employees in Spain was only roughly 75% of the level of 2008, but in Portugal as well the percentage was only 88% and in Italy only 91.5%. In this context, information about the business development in Greece would also be interesting but neither Eurostat nor the national statistical office report these data. The strong decline in the number of companies in Spain is mainly related to the pronounced construction boom. The number of construction companies had more than doubled between 1999 and 2008 but the bursting of the real estate bubble caused such a massive correction that it is almost back to the level of 1999.

Differentiating by company size reveals that the medium-sized segment in almost all countries suffered bigger losses than large corporations and microfirms with less than ten employees. It is difficult to compare the latter to medium-sized companies; microfirms are often single person businesses – the EU average is just two employees. The difference between medium-sized and large companies is in part due to the fact that internationally oriented large companies were better able to make up for the weak demand in Europe by pushing up exports. Furthermore, they are in general less dependent on the lending of domestic banks. The financing difficulties of medium-sized companies are also reflected in the company survey SAFE ("Survey on the access to finance of SMEs in the euro area") carried out by the ECB. According to this survey, in the crisis countries one in three companies with 10 to 250 employees classifies its access to external financing as difficult or very difficult, in Greece it is even one in two companies. With the exception of Italy, this share is much lower as far as large companies are concerned. This is also due to the fact that loans for smaller companies in the Southern euro countries have become much more expensive than loans to large companies.




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