While a few large listed companies recorded a 90% increase in profits in 2022, small and medium-sized companies see a decline in turnover
The economic growth of the 2022-23 biennium was not shared proportionately across society. By vehicle the energy inflation and the inflation of greed divided at the expense of the workers and for the benefit of the companies. This results from the data of a recent report by the Institute of the European Trade Union Confederation (ETUC), which uses data from the Commission’s Directorate-General for Economic and Financial Affairs, which showed that in the two years 2022-23 real wages in Greece decreased by 9.4% while operating profits increased by 9.3%. However, the distribution was not proportional among the companies either. In 2022 the few dozen large Greek companies listed on the Athens Stock Exchange had a 90% increase in profits and although for 2023 we do not yet have complete data, according to a European Central Bank report the trend has not changed for the first half of the year.
On the other hand, however, the situation is different for small and very small businesses, which represent 99.6% of Greek businesses. Despite the breath they took in 2022 with the return of the market to normal operation after the pandemic, from the end of 2023 they began to “feel” in their declining turnover the slowdown in growth and face the future with pessimism.
This pessimism was reflected in the first six-monthly survey of the year on the economic climate conducted by the Small Business Institute of GSEVEE on a nationwide sample of 801 small and very small businesses (0-49 employees), in the period 1-14 February 2024, which between others showed:
First, that the situation of small and very small enterprises in the manufacturing, trade and service sectors has entered a progressive decline due to the insecurity caused by the economic slowdown on the one hand, and the introduction of presumptive taxation on the other for which six out of ten enterprises they believe it will lead to new locks.
Secondly, that one in two small and very small businesses have not overcome the suffocating liquidity problems created during the pandemic, with 25.5% of businesses stating that they have zero cash on hand and 25.1% stating that they have cash on hand which are sufficient for a maximum of one month (25.1%). Catering businesses still have the most serious problem, of which 61.3% have no cash available.
Thirdly, that the percentage of businesses with overdue debts to banks, tax authorities, insurance funds, accounts, rents, suppliers remains high. Specifically, 30.6% of businesses reported overdue debts, 7.4% said they had up to two overdue debts and 10% said they had three or more overdue debts. The biggest over-indebtedness problem is faced by catering businesses, 14.7% of which have three or more overdue debts, businesses without staff (13.2%) and very small businesses with an annual turnover of up to 50,000 euros (15.5% ).
Fourth, that the increase in operating costs for the vast majority of businesses has reached 35% over the last two years, largely due to the increase in energy costs and other price increases brought about by the increase in energy prices.
Fifth, in terms of turnovers, that in the second half of 2023 there was a slight drop in the turnover of small and very small businesses compared to the first half of 2023 but also to the second half of 2022. Specifically, for the second half of 2023 three out of ten businesses (29.1%) stated that they had an increase in turnover, while 34.2% stated a decrease. 34.6% said turnover remained unchanged.
Two positive items with asterisks
GSEVEE’s research also highlighted two relatively positive elements.
First, that six out of ten companies or 57.3% stated that they had profits in 2023, a percentage increased compared to 2022, where 51% of companies reported profits. The largest companies declared profits at a rate of 87.1% and the smallest at a rate of 35.9%.
Secondly, that a significant percentage of businesses, specifically 37.2%, made investments in the second half of 2023. However, for one in two businesses (49.1%) the investments made were small-scale, up to 5,000 euros, as more than eight out of ten companies (84.2%) had to finance them from their own funds, only 5.7% managed to finance them through NSRF and 3.7% through bank loans.
“The lack of liquidity is a noose”
Small businesses excluded from bank lending, NSRF and Recovery Fund, stresses Giorgos Kavvathas
“The government says that the economy is doing well but we find that the benefits and growth go to a very small part consisting of a few large companies and do not spread to the whole of society, to the small, medium, small and micro enterprises and the self-employed, which make up the vast majority of the members of the chambers” commented the results of the six-monthly survey of the Institute of Small Businesses of GSEVEE, its president Giorgos Kavvathas.
In Documento’s request to prioritize the factors that strangle small businesses, Mr. Kavvathas identified the lack of liquidity as the number 1 problem. “One in two companies has no liquidity at all. This is because banks do not lend at all to small businesses. The Hellenic Banking Association itself has announced that only 49,500 companies out of a total of 800,000 are creditworthy and can give them loans. And when they give them, they ask for an interest rate of 2.5% higher than in larger companies, i.e. close to 8% to 9%, so small companies are unable to borrow,” he adds.
The inability to finance does not only concern the banks, but also the funds of the Recovery Fund and the NSRF, he notes. “According to the latest report of the GSEVEE Institute, in 2023 only 6.5% of children had access to the NSRF. You know, the NSRF has cutters, of two, three or ten work units, i.e. the employment of two, three or ten workers on an annual basis. This means that in order to enter the NSRF a business must employ at least two workers if it is a continuous operation or more if it is seasonal, so all the self-employed are automatically excluded from the NSRF, i.e. 400,000 professionals and all sole proprietorships without employees or with one employee . In fact, this only happens in Greece because in other European countries the professional who is employed in his business counts as an employee, but in us he is exempt”, explains Mr. Kavvathas.
On top of that, the exclusion of small businesses from the Recovery Fund is complete: “The government says it has earmarked €1.7 billion in funds for small and medium-sized businesses, i.e. businesses with 50 to 250 employees, and has announced 186 investment projects of the order of 15 million euros each. But these plans are very big and no company can take them”, he concludes.
“For there to be development for all and not for a few” points out G. Kavvathas “changes must be made. To remove the cutters from the NSRF and to review the Recovery Fund in order to create resources for the small and very small businesses that the country has and to include both small and individual businesses in the digital transition and green economy programs. Some countries have done it. We ask for it too, but the government doesn’t listen to us.”
As No. 2 factor of suffocation of small businesses, the president of GSEVEE prioritizes the large increase in operating costs, by 35% on average in the last two years. The combination of rising operating costs and the absence of funding ultimately leads to debt, he tells Documento. “In 2023 alone, according to our data, businesses created new overdue debts of 5.5 billion euros to the former OAEE and 15 billion euros in total to EFKA. They also created 5.7 billion euros of new arrears to AADE from taxes, KBS fines and surcharges.”
“In other European countries, the governments help small businesses,” emphasizes G. Kavvathas. “For example, the Meloni government in Italy amended the Recovery Fund, transferring resources of €1.5 billion to small and micro-enterprises to self-produce electricity and reduce their energy costs. Italy has many small family businesses like us and wanted to support them.”
“On the contrary, our own government seems to want to implement the Pissarides plan which said to reduce the number of small businesses. The day before yesterday, the Minister of National Economy, Kostis Hatzidakis, speaking at an event, said that the large number of small businesses that exist in Greece is not only against the competitiveness of the economy, but also against the small businesses themselves. GSEVEE replied that this point of view, which treats the number and size of small businesses as a problem, is completely anachronistic. He even overlooks that not only in Greece, but also in Europe, 93.3% of businesses are very small businesses. In Greece again, small and very small businesses represent 99.4% of the total, they exceed 800,000, but they have 87% of employment, i.e. more than 2 million workers and operate from the most traditional to the cutting edge of technology. It is not possible to deny them any future because they are young.”
“In a word, the disappearance of small businesses cannot appear as a condition for development, on the contrary, they must be supported with the right development policies. If we leave the small ones without funding, without incentives for the development of partnerships, without support in the fields of technology and innovation, we logically end up with a miserable and problematic image, which, however, came as a result of a specific political choice” concludes the president of GSEVEE.
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