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EU industrial structure 2011 — Trends and Performance 50 ht mht mlt lt 1997 2007 1997 2007 1997 2007 1997 2007 Estonia 0.6 0.4 0.5 0.5 0.8 1.2 1.9 1.7 Finland 1.5 2.2 0.8 0.7 0.8 0.9 1.4 1.1 France 1.3 1.1 0.9 0.8 1.0 1.1 1.0 1.1 germany 1.2 0.9 1.3 1.4 0.9 0.9 0.8 0.7 greece 0.4 0.5 0.4 0.3 1.0 1.4 1.9 1.7 hungary 1.1 1.4 0.9 1.1 1.0 0.9 1.1 0.8 ireland 2.1 2.0 1.1 1.0 0.4 0.3 1.2 1.4 italy 0.8 0.6 0.9 0.8 1.1 1.2 1.1 1.1 latvia 0.5 0.3 0.3 0.3 0.5 1.1 2.4 2.1 lithuania 0.7 0.2 0.4 0.5 0.7 1.2 2.0 1.7 luxembourg 0.1 0.1 0.6 0.5 1.8 2.0 0.9 0.9 malta 1.3 1.5 0.8 0.9 0.9 0.9 1.2 1.1 netherlands 0.9 0.5 0.9 0.9 0.9 1.0 1.2 1.3 poland 0.5 0.4 0.8 0.8 1.1 1.2 1.3 1.3 portugal 0.7 0.2 0.6 0.5 0.9 1.1 1.6 1.9 slovakia 0.6 0.6 0.8 0.8 1.3 1.4 1.1 1.0 slovenia 1.1 0.8 0.8 1.0 1.0 1.2 1.2 0.9 spain 0.7 0.5 0.9 0.8 1.1 1.3 1.1 1.1 sweden 1.8 1.5 1.0 1.0 0.8 0.9 1.0 1.0 united Kingdom 1.4 1.4 0.9 0.8 0.9 0.9 1.1 1.3 Note: Bulgaria and Romania not available for lack of data. Source: own calculations using EU KLEMS and Eurostat data. II.3 Size distribution of enterprises The distribution of economic activity according to the size of the enterprises provides a measure of the degree of concentration and of the share of large and small enterprises in the economy. This is of interest in understanding sectoral performance, in analysing competitiveness, and for policy. The distribution reflects certain characteristics of sectors and, simultaneously, influences performance and competitiveness. Sectoral technology (e.g. economies of scale) and market size are some of the factors explaining the enterprise‑size structure of the sector, which, in turn, determines market power and sectoral performance and competitiveness. It is clear that the resilience or vulnerability of sectors and enterprises to certain market shocks is affected by the size of enterprises, which also plays a crucial role in innovation and the development of new activities and products. For these reasons, it is important to bear in mind the size of enterprises in the sectoral analysis, and to incorporate it into formulation of industrial policy. It is often argued that small and medium‑sized enterprises (SMEs) constitute the backbone of the EU economy. However, the share of SMEs varies significantly among industries. The figure below presents, in a decreasing order, the sectors where large enterprises dominate: large enterprises are those with 250 or more employees. The units underlying these distributions are enterprises. The concentration of value added in large enterprises that characterises some of the sectors does not necessarily imply economies of scale since enterprises, and more particularly the largest ones, may own several small plants. Large enterprises represent more than 80 % of value added in the industries producing tobacco, the communications sector, mineral oil refining and nuclear fuel, motor vehicles, air transport and other transport equipment. The first impression is that manufacturing sectors are generally formed by larger enterprises than services sectors. Indeed, 55 % on average of enterprises of the manufacturing sector are above 250 employees against 36 % on average in the services sectors. The sectors with more than 80 % of SMEs are real estate activities, recycling and construction. But, contrary to common belief that manufacturing enterprises are supposed to be large, decomposition of firm size distribution by sector reveals a more nuanced picture. Many manufacturing sectors are dominated by small firms, especially the industries producing leather and footwear, fabricated metal products, wood products, textiles, clothing, and furniture where between 72 % and 79 % of the firms have fewer than 250 employees, cf. Figure II.7. 35 35 According to the official EU definition of an SME, the number of employees is not the only criterion that matters. The definition also takes into consideration thresholds related to turnovers of balance sheet totals. Size distribution according to employment bands rather than turnover or balance sheet total was favoured because for data availability reasons.
ox II.4: SME definition FIgURE II.7: Distribution of value added by enterprise size in 2007 (%) Tobacco Communications Mineral oil rening and nuclear fuel Motor vehicles Air transport Other transport equipment Electricity, gas and water supply Radio and TV equipment; electronic components Basic metals Chemicals Oce machinery Electrical machinery Pulp, paper and paper products Research and development Supporting transport activities Food and drink Machinery and equipment n.e.c. Scientic and other instruments Non-metallic mineral products Retail trade Rubber and plastics Computer and related activities Inland transport Printing and publishing Water transport Other business activities Furniture; other manufacturing Clothing Textiles Renting of machinery and equipment Hotels and restaurants Wood and wood products Wholesale trade Fabricated metal products Sale and repair of motor vehicles Leather and footwear Construction Recycling Real estate activities MANUFACTURING SERVICES TOTAL ECONOMY Source: own calculations using Eurostat data. II.4 Services output of manufacturing An increasing number of manufacturing firms offer services along with their traditional physical goods. This tendency is coined ‘convergence process’ in the literature. 36 By offering complementary services manufacturing, firms can differentiate their products from the competitors’ and reduce price elasticities for their goods. Complementary services may also be a way to increase the qualities of the 36 European Commission, DG Enterprise and Industries (2011) forthcoming. European Competitiveness Report 2011. Chapter II — Changes in EU Industrial structure Enterprises qualify as SMEs if they meet certain employee ceilings (10, 50, and 250 employees) and one of the two financial ceilings (turnover or balance sheets). Eurostat currently collects data regarding the three employee ceilings but not data concerning the financial ceilings. 1–9 10–19 20–49 50–249 250 or more 0 10 20 30 40 50 60 70 80 90 100 110 goods and build long term relationship with customers which also might reduce the price elasticities the firms are facing. Opening up additional sources of revenue could be another motive. 37 Services as shares of total manufacturing output increased in all but three EU countries between 1995 and 2005. Largest shares are found in the Finnish and Dutch manufacturing industries where services constitute around 8 % of total output, cf. Figure II. 8. 37 Ibid. 51
Page 1: EU industrial structure 2011 Trends
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