EY Research: Investors are paying attention to the SME ecosystem

A key factor for attracting investment, but also more generally for the attractiveness of the Greek economy, is the ecosystem of small and medium enterprises. In particular, in the research of the consulting company EY that has been made public on the subject of “EY Attractiveness Survey Greece 2022”, more than one in four (27%) participants in the research included this year the strengthening of small and medium enterprises (SMEs) among the sectors where they must focus the country’s efforts to enhance its attractiveness. Ranking this issue fourth among the top priorities, up from eighth last year.

As stated in the individual findings of the EY survey, which was carried out by Euromoney, it may be surprising why foreign investors attach importance to supporting SMEs. It is a fact, however, that the existence of a healthy ecosystem of modern small and medium-sized enterprises, through which enterprises will be given the opportunity to develop partnerships, is an important supporting factor for the success of an investment

It is characteristic that this issue is characterized as a priority by 48% of large companies (revenues > 1.5 billion euros) and to a lesser extent by small and medium-sized companies. SMEs in Greece currently represent 99.9% of the total number of enterprises, employ 83% of the workforce and contribute 56.7% of total value added, significantly higher than the EU average of 65.2 % and 53% respectively.

However, they present high fragmentation, low productivity and limited extroversion. EY, as mentioned in the research, through a series of related researches, has proposed a model for the development of SMEs which is based on the growth of businesses, through organic growth, mergers and acquisitions or other forms of cooperation. This growth will create economies of scale, and boost productivity, but also extroversion, creating a self-reinforcing virtuous cycle that will allow SMEs to reach their full potential and play a more meaningful role in the growth of the economy.

The National Recovery and Resilience Plan provides a unique opportunity to finance investments by SMEs, and, at the same time, to modernize and reorient them towards sectors that currently present strong growth prospects. However, at pan-European level there is concern that the RRF is geared more towards the needs and capabilities of large businesses.

Although the RRF, at pan-European level, like the National Recovery and Resilience Plan in Greece, will undoubtedly have a positive impact on small and medium-sized enterprises as well, the policy makers, in Greece, but also in Brussels, should study with greater attention to the needs and challenges faced by SMEs and to adjust funding programs accordingly, the EY survey estimates.

Possible actions include, but are not limited to:

1. Incorporation of smaller scale programs for SMEs, which will aim to utilize funds under the Recovery Plan.

2. Improving the transparency regarding the financial information provided by SMEs to strengthen the timely and reliable assessment of credit risk by banking institutions, while simultaneously simplifying and speeding up the application and credit assessment procedures.

3. Reduction of bureaucracy for participation in financing programs, with the aim of avoiding waste of resources and opportunities by SMEs.

4. Supporting SMEs’ access to capital markets and private capital as alternative sources for financing their investment projects.

5. Providing facilities, such as legal and tax incentives, to promote mergers and acquisitions and partnerships, with the aim of creating larger corporate structures and a positive impact on the competitiveness and resilience of the Greek economy.

6. Tax reliefs for significant investments by SMEs in technology and infrastructure in order to strengthen the possibility of implementing investment plans, as well as their financing capacity.

7. Incentives to shift the productive base to a more extroverted profile and to higher value-added products and services, thus facilitating the raising of capital for further growth.

8. Strengthening the culture of cooperation among entrepreneurs to create larger cooperative schemes, while attracting specialized management personnel.

9. National information campaign regarding the available options and the benefits of SME access to the available financing programs.

The main conclusion of the EY research is that the attractiveness of Greece as an investment destination is proving to be resilient, in an environment of increased uncertainty in Europe, but also the whole world, with 37% of companies planning to invest or expand their activities in the country during the next year, while three out of four investors (75%) estimate that the attractiveness of Greece will improve further in the next three years.