Small and Medium-sized Enterprises (SMEs) are the backbone of Europe's economy, playing a crucial role in job creation and value generation. According to the European Commission's definition, SMEs are enterprises with fewer than 250 employees and an annual turnover of less than €50M or a balance sheet total of less than €43M.
According to the European Commission's Annual Report on European SMEs, in 2023, approximately 25.8 million SMEs operated in the EU-27, making up an astounding 99.8% of all enterprises in the non-financial business sector (NFBS). These SMEs provided employment for 88.7 million people (65.2% of total), underscoring their importance in the labor market.
Although SMEs represent nearly all enterprises in the NFBS, they accounted for little over half of its value added. This is because larger enterprises benefit from economies of scale, which allow them to produce goods and services more efficiently and at a lower cost per unit. As a result, large firms generate more value-added compared to their smaller counterparts. Despite this, SMEs play a crucial role in economic diversity, innovation, and resilience. They provide flexible business models that can meet niche market demands and contribute to local economies.
Overall, SMEs are integral to Europe's economic structure. Their significant presence and contribution demonstrate the essential role these enterprises play in sustaining and enhancing Europe's economic vitality.
