As monetary conditions tighten and fiscal support unwinds, firm bankruptcies are rising. How can policies empower SMEs to create a more resilient, green and digital future?
Government ministers responsible for small and medium-sized enterprises (SMEs) and entrepreneurship have endorsed a new OECD Declaration aimed at boosting policies for new and small businesses, empowering them to reach their full potential as part of broader efforts to build a more resilient, green and digital world economy.
SMEs remain under pressure due to the combined effects of economic uncertainty stemming from Russia’s continuing war of aggression against Ukraine, the lingering effects of the COVID-19 pandemic and other geopolitical tensions that have weighed heavily on SMEs and entrepreneurs, which account for a critical 99% of all firms and employ two-thirds of private-sector workers. Large-scale, temporary government support played a critical role in protecting the livelihoods of entrepreneurs and SME workers. However, as monetary conditions tighten and fiscal support unwinds, firm bankruptcies are rising, and SMEs again find themselves at risk.
The new OECD SME and Entrepreneurship Outlook 2023 shows that many SMEs are struggling to recruit in a tight labour market and must also cope with higher levels of debt following the pandemic. The struggle to access finance for much-needed investment could have critical implications for the green and digital recovery, underlining the importance of the new OECD Recommendation on Financing SMEs in unlocking alternative forms of finance – including venture capital, crowd funding and other sources of investment capital.
“SMEs and entrepreneurs are major drivers of economies, of growth and innovation,” OECD Secretary-General Mathias Cormann said. “To help them seize all the opportunities while better managing the many challenges in front of them, governments need to support policies that boost their resilience to shocks, harness untapped potential among potential entrepreneurs, and provide the enabling environment to optimise their contributions.”
Action is also needed to draw on all available talent by addressing barriers that hold back entrepreneurship in under-represented groups, including women and youth, which could help release the potential of an estimated 35 million missing entrepreneurs in OECD countries.
A further priority is to support SMEs in their efforts to reduce carbon emissions. With SMEs accounting for between 37% and 41% of all business sector greenhouse gas emissions in the European Union, Net Zero cannot be achieved without SMEs. SMEs – in particular, start-ups and scale-ups – are increasingly investing in tech-based solutions that will help to drive forward efforts to green the economy: one in 30 of all start-ups is a green start-up. Accelerating this will require governments to lower the barriers to green skills, improve access to finance for SMEs and start-ups, and connect small firms to knowledge networks, including universities and large firms.
SMEs can also play a stronger role in the digital transition, but a digital skills gap is holding them back. The share of SMEs using cloud computing services has doubled in less than six years. However, only 20% of small businesses used online orders in 2021, compared to 34% of larger firms, while only 45% of small firms have high-speed broadband compared to 81% of larger ones.
The OECD SME and Entrepreneurship Outlook 2023 contains 38 individual Country profiles, which provide insights on SME performance and entrepreneurial trends in OECD countries, and present national SME and entrepreneurship policy frameworks and recent policy initiatives to stimulate a more productive and dynamic SME economy.
For more information on OECD work on small and medium-size enterprises: http://www.oecd.org/cfe/smes/.
Source: OECD, news relaese, june 2023