Small and medium-sized companies (SMEs) make up more than 99% of European businesses and account for about two thirds of private sector employment. SMEs are subject to change as large businesses, but public and policy discussions on restructuring is mainly focused on large-scale restructuring because of the greater immediate effects, often neglecting specific characteristics and needs of SMEs. Eurofound has carried out comparative research to highlight the challenges facing restructuring in SMEs in Europe, specifically in the area of policy and support measures. This package of research, which includes a database of 85 company case examples, is presented to members of the European Parliament in Brussels, Belgium, today.
Restructuring in SMEs is less visible and less publicised than that in larger firms, which makes headlines almost on a daily basis. Yet, SMEs are the backbone of the European economy, accounting for more than 99% of European enterprises and about two-thirds of private sector employment. Restructuring is likely to have different manifestations in SMEs than in larger firms and until recently little has been known about the details of restructuring in SMEs and its outcomes.
Eurofound has now carried out an EU-wide research study which investigated the relevance of different forms of restructuring for SMEs, the drivers of change, the main characteristics, success factors and constraints of SME restructuring as well as the effects of restructuring on companies and employees. The research found that internal restructuring, business expansion and (avoiding) bankruptcy/closure are the most common forms of restructuring in SMEs, and restructuring in SMEs tends to be carried out in a reactive, unplanned way and without formal restructuring plans.
Restructuring in SMEs is driven by a combination of company external and company internal factors, hardly ever by a single event. While company external factors are in general the same as for large firms, the company internal factors are very specific for SMEs. These are related to the strong role of the owner/manager in the firm, and the limitations in terms of human resources and financing, and the often prevalent dependency on a few key clients and suppliers.
Common for SMEs is that once restructuring is underway, decisions are taken quickly and flexibly. The owner/manager has a core role in SME restructuring, supported by various internal and external stakeholders. It is not common for staff representatives to be involved, however, as the majority of SMEs have no formal staff representation structure.
The research findings suggest that policymakers should consider improvements in the support services to SMEs, by offering more comprehensive packages, easier access through one-stop-shops, reframing eligibility criteria; and prioritising access to finance, and the anticipation of change within the company.
An overview report, with an executive summary, national reports from all 27 EU Member States and a database with 85 company cases, are available at http://bit.ly/12upDZA
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NOTES TO THE EDITOR
The European Foundation for the Improvement of Living and Working Conditions (Eurofound) is a tripartite EU Agency which provides social partners, governments and EU decision makers with relevant, timely and unbiased research results so that the lives of European citizens can be improved.
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