Business dynamics Download chapter 1 of Key figures on European business in PDF format

Size of businesses

Business statistics cover industry, construction, distributive trades and most other services. It is important to underline that they exclude a range of economic activities, such as: agriculture, forestry and fishing; public administration; education; health and social work; arts, entertainment and recreation. Alongside these, financial and insurance activities are also frequently excluded, given their specific nature and the limited availability of statistics in this area.

In 2019, there were 23.2 million enterprises in the EU’s non-financial business economy. Collectively they employed 131.5 million people and created €6 852 billion of wealth as measured by value added at factor cost.

Data relating to enterprises that are active within the non-financial business economy can be presented according to enterprise size and measured in terms of the number of persons they employ. In 2019, the overwhelming majority (98.9 %) of EU businesses were micro or small enterprises employing fewer than 50 persons. Their economic weight was lower in terms of their contribution to employment or value added: micro and small enterprises employed just under half (48.4 %) of the EU’s non-financial business economy workforce, while they contributed just over one third (35.3 %) of the value added.

In 2019, there were 43 000 large enterprises (with 250 or more persons employed) in the EU’s non-financial business economy. These large enterprises represented just 0.2 % of the total number of enterprises. However, their economic weight was considerably greater: large enterprises employed more than one third (35.6 %) of the EU’s non-financial business economy workforce and generated an even higher share of its wealth (47.6 % of value added).

In 2019, micro and small enterprises contributed a relatively high share of the value added in the non-financial business economies of most of the southern EU Member States and Estonia. By contrast, large enterprises were responsible for approximately half of value added in the non-financial business economies of Poland and Sweden, 53.1 % in Germany and 57.2 % in France; this share peaked at 63.5 % in Ireland.

Entrepreneurship

Business demography is a term used for studying the characteristics of the population of enterprises. The creation (or birth) of new enterprises and the closure (or death) of enterprises are important indicators for business dynamics.

In 2019, the EU enterprise birth rate (as measured by the number of births as a percentage of the number of active enterprises) in the business economy was 10.0 %. This ratio ranged from highs of 19.4 % in Lithuania and 15.8 % in Portugal down to 4.8 % in Greece.

Enterprise deaths concern the permanent closure of an enterprise. The information shown here therefore excludes changes resulting from mergers, take-overs, break-ups or other forms of restructuring such as a change of activity. In 2019, the preliminary enterprise death rate in the EU’s business economy was 8.3 %, ranging from highs of 29.5 % in Bulgaria and 22.5 % in Lithuania down to a low of 1.0 % in Ireland (2018 data).

While business dynamics are important for the overall performance of an economy, individual entrepreneurs are more likely to be concerned by the development and survival of their business. In 2019, four out of every five enterprises born in the previous year in the EU’s business economy had survived their first year: the one-year survival rate was 82 %. This rate was particularly high in Sweden and Greece (97 % of newly-born enterprises survived one year), while 96 % of new enterprises survived at least one year in the Netherlands and Belgium. By contrast, 63 % of new enterprises in Lithuania survived their first year.

The EU five-year survival rate for enterprises born in 2014 and still active in 2019 was 45 %; in other words, less than half of all newly-born enterprises from the 2014 cohort survived until 2019. Five-year enterprise survival rates were less than 50 % for a majority of the EU Member States, with the lowest rate recorded in Lithuania (29 %). The highest rates were in Belgium and Sweden (both 62 %), followed by the Netherlands (59 %).

Enterprise creation and subsequent business growth can potentially have a considerable impact on employment.

In 2019, high-growth enterprises accounted for 11.5 % of all enterprises in the EU’s business economy. These enterprises were particularly common in the information and communication sector (17.9 %) and in administrative and support service activities (14.6 %). At the other end of the range, three capital-intensive activities – mining and quarrying (9.3 %; 2018 data), real estate activities (8.5 %), and electricity, gas, steam and air conditioning supply (8.2 %) – had the lowest proportions of high-growth enterprises.

Research and development

Business expenditure on R&D is a measure of intramural R&D. In contrast to global competitors such as Japan or the United States, business expenditure on R&D is relatively low in the EU. That said, the business enterprise sector usually accounts for the highest share of gross domestic expenditure on R&D when compared with the higher education, government and private non-profit sectors. Other than a slight reduction in 2009, EU business expenditure on R&D rose consistently (in current price terms) between 2005 and 2019. This generally upward development was not extended into 2020, as business expenditure on R&D fell 1.5 % to €205 billion.

Sweden, Belgium, Denmark, Austria, Germany and Finland had the highest rates of business R&D expenditure per inhabitant, alongside the highest overall levels of R&D intensity (R&D expenditure relative to GDP).

Business enterprise expenditure on R&D in the EU averaged €458 per inhabitant in 2020. This ratio stood at more than €1 000 per inhabitant in Sweden and Belgium but was less than €200 per inhabitant in 14 of the EU Member States, the lowest ratios were in Latvia and Romania.

Part of the globalisation phenomenon observed in recent decades has been the growing internationalisation of R&D expenditure. This can have benefits for host economies as well as for multinational enterprises that perform research abroad, especially in terms of a transfer of knowledge.

Within industry and construction, foreign-owned enterprises performed more than half of all intramural R&D expenditure in 2019 in seven of the EU Member States, namely, Sweden, Hungary, Austria, Poland, Czechia, Ireland and Slovakia. At the other end of the range, almost four fifths of total R&D expenditure in industry and construction was performed by nationally-owned enterprises in Denmark and Bulgaria, with an even higher share in Germany (81.8 %).

Innovation

The Community innovation survey (CIS) focuses on the innovation activities of enterprises. It concentrates on a set of core innovation activities and only covers enterprises with 10 or more persons employed. In 2018, there were 729 000 enterprises across the EU in this target population, of which approximately half (367 000) were innovation active.

In 2018, across core innovation activities more than three quarters of all large enterprises (with 250 or more persons employed) in the EU engaged in some form of innovative activity. By contrast, less than half of all small enterprises (with 10–49 persons employed) were engaged in some form of innovation.

Across the EU, in 2018 there appeared to be little difference between the share of enterprises within industry (53.1 %) and core innovation services (47.6 %) that were engaged in innovation.

In 2018, the proportion of industrial enterprises that were innovators peaked at 74.7 % in Estonia, while Belgium, Germany, Cyprus and Austria were the only other EU Member States to record shares of more than two thirds. By contrast, the lowest shares were recorded in Poland (26.1 %) and Romania (16.3 %).

In 2018, the proportion of core innovation service enterprises that were innovators peaked at 71.5 % in Estonia. The next highest shares – all within the range of 64–68 % – were recorded in Cyprus, Germany, Belgium and Sweden.