28.09.2022

SMALL BUSINESS IS ON THE EDGE OF SURVIVAL

Analysis of the specialist

Millions of small and medium-sized businesses in the European Union are wondering how to make ends meet. Rising energy and commodity prices, galloping inflation, shaky supply chains, geopolitical tensions, and more are too much of a challenge for small businesses.

Bulgarian small and medium-sized enterprises also complain that they are on the brink of survival, but some analysts say that their fears are exaggerated and that the danger for them is less than for others in the EU.

It is important to know that small and medium-sized enterprises make up 99% of companies in the Union, provide two thirds of jobs in the private sector and contribute to more than half of the total added value. So Brussels cannot ignore the "backbone of European business", targeting aid primarily to save large companies and handing out cash to households.

Costs are unpredictable

The European Commission intends to amend the temporary framework for state aid in October, allowing for state guarantees while maintaining a level playing field. It is obvious that the community does not currently have many funding options and will rely mainly on the recovery fund. As of August, €100 billion had been paid out to member states, meaning €700 billion is still free and can be used for investment and saving jobs. This does not at all mean that the money in the fund should be wasted on patching holes. It is imperative that some of them be invested in promising business models to help smaller businesses, so that they do not have to be rescued in two months.

Meanwhile, Romanian MEP Niku Stefanuta, from the Renew Europe group, who is the rapporteur on the EU's 2023 budget, has warned that the European coffers are empty. After all, on June 7, the European Commission presented a draft proposal for financing important reforms such as green and digital transition, health care, scientific research and small and medium-sized enterprises with almost 300 billion euros. Those numbers sounded good at the time, but now they are completely inadequate with inflation, high energy prices and border warfare making costs unpredictable.

A week ago, the chairwoman of the commission, Ursula von der Leyen, promised to propose a package of measures to support small and medium-sized enterprises, which includes reducing bureaucracy and better access to the common market. Emphasis will also be placed on family businesses. This is expected to happen in the next month. The measure is a bit late, but the delay can be excused with the pressing issues, such as the rounds of Asia and Africa in search of gas.

The labor market ran out of staff

Small and medium-sized businesses face another serious problem - the lack of personnel. We are talking about people with low qualifications to those with higher education. Businesses everywhere are complaining that they can't find workers and that the labor market is tight to historic levels. Some of them are offering higher wages, and others are looking for staff outside the union, because more than 50% of Eastern European workers who returned to their home countries because of the pandemic no longer want to return.

According to Eurostat, around 193 million Europeans were looking for work in the first quarter of 2022, and around 74.5% of people in the EU aged 20-64 were working. This means that the unemployment rate is lower than ever. It is no coincidence that the French Association of Employers announced that 94% of recruitment companies reported that they often find it difficult to find the right staff, and sometimes any candidates. There is currently a hunger in Western Europe for truck drivers, waiters, airport staff, carers, engineers and IT professionals. Workers are also wanted for construction, tourism and catering.

How is Bulgarian business doing?

A number of Bulgarian manufacturers claim that they are on the verge of bankruptcy. It has been reported that, for example, in the dairy sector, many small businesses are closing due to unaffordable prices. Their problems are understandable, since our biggest trading partners are in Europe, and if there is a recession there, it will inevitably come to us as well.

According to business, the state is not doing enough to support businesses. At the beginning of September, the employers' organizations requested the Cabinet to urgently adopt a decree to continue the compensations for the high electricity prices for October, November and December. Entrepreneurs also warned that the delay of this decision will lead to a severe liquidity crisis for a large part of the companies, which will cause production stops and job cuts in the middle of winter.

However, more and more economists claim that Bulgaria is one of the countries with the most generous compensation for business.

"The business is subsidized so that prices do not rise. If this does not happen, this scheme for state support must be seriously reconsidered," noted economist Lachezar Bogdanov.

Bulgarian companies are somewhat benefited by the fact that our country is a producer of electricity, and one of the biggest factors for inflation at the moment is energy prices.

The good news is that by the end of the year, BGN 735 million will enter the Bulgarian economy from Brussels, which is mainly intended for small and medium-sized enterprises. The other European funds that businesses can rely on is a BGN 30 million program for information and communication companies and cyber security. This will be entirely grant aid for about 1400 companies. A program for investments in photovoltaic plants and batteries with a budget of BGN 200 million is also planned. From next year, the Ministry of Innovation and Growth will have BGN 7 billion for business support under the structural funds of the European Union.

There remains to be control over the distribution and spending of these funds, because Bulgaria has been receiving money from the European funds until now, but the results are known.