While we have been sounding the alarm about the state of the entrepreneurial economy in the US, its seems that the constriction of the small business sector has created even more dire circumstances across the pond in the EU.
From the Wall Street Journal:
As important as small businesses are to the U.S. economy, the problem
may be even more acute in Europe. Companies with fewer than 250 workers
account for 70% of the private-sector work force in the European Union,
compared with 49% in the U.S., according to EU figures.
Like the US, about 99% of employers are small businesses, but the total employment in small firms represents 67% of the EU workforce, which compares to 50% in the US (data from the US SBA and the European Commission).
The article in WSJ goes on to point out that funding for EU small businesses is even tighter than the US:
Business also
relies more on banks in Europe than in the U.S. where, at least for
bigger firms, capital markets are an important source of finance.
A 2009 report from the European Commission highlights the concerns EU entrepreneurs have about access to debt financing. This survey found that access to financing — typical bank financing — continues to be one of their top worries.
However, there are some glimmers of hope when you dig a little deeper into the EU survey.
Although 46% of EU small businesses report a deterioration of bank lending, 70% said that they were able to get all or at least part of the bank financing they were seeking. Only 15% said that they were fully rejected.
Times are certainly tough for small firms in the EU, with about half reporting lower profits.
But, as in the US, there is evidence that EU entrepreneurs are hunkering down and doing what they need to do to survive the recession.
(Thanks to Joe Ormont for suggesting this topic).
Did you see Krugman’s NY Times editorial about Europe this week?
It completely contradicted my own worldview, but I found his argument compelling.
http://www.nytimes.com/2010/01/11/opinion/11krugman.html
This part really jumped out at me:
“It’s true that the U.S. economy has grown faster than that of Europe for the past generation. Since 1980 — when our politics took a sharp turn to the right, while Europe’s didn’t — America’s real G.D.P. has grown, on average, 3 percent per year. Meanwhile, the E.U. 15 — the bloc of 15 countries that were members of the European Union before it was enlarged to include a number of former Communist nations — has grown only 2.2 percent a year. America rules!
Or maybe not. All this really says is that we’ve had faster population growth. Since 1980, per capita real G.D.P. — which is what matters for living standards — has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.”
And now with this post I see that in the EU, small businesses make up a larger percentage of overall employment than in the USA. That puzzles me too.