Value From SMEs on the Rise

10/14/2014 3:42 PM
Category: Economy

Estonian small and medium size businesses are doing an extremely good job at increasing value added, say economic affairs officials.

The same trend has been spotted in Europe - last year these sort of businesses were growing in numbers and creating more value added than before the 2008 crisis, eurokratt.ee writes.

"It´s great that the increase of value added in Estonia, compared to the boom era, has been among the best in Europe," said Kaupo Reede, head of the economic development department at the Ministry of Economic Affairs.

The European Commission recently published its latest conclusions based on productivity of small and medium size businesses. The results show that even though there was a certain pickup in the economy last year, there are still fewer people working for SMEs than before the 2008 crisis.

Reede pointed out that the increase in value added creates opportunities to pay higher wages and invest into development.

Reede says that increasing value added is Estonia´s biggest challenge for the years ahead.

He points out that there are two reasons why the increased value added has not created many more jobs.

"Firstly, before the crisis Estonian small and medium size businesses focused on raising efficiency - which meant the same amount of work was supposed to be done with fewer people. So they invested into improving technology and manufacturing," Reede said.

"Secondly, Estonian domestic production has climbed up the value ladder: more domestic product has emerged instead of subcontracting."

Over three-fourths of Estonian private sector employees work for small and medium sized businesses and 74 percent of the value added created by the Estonian economy is created by them.

A large number of Estonian small and medium sized businesses are in the service sector. However, retail, wholesale, construction and manufacturing sectors are important, too. The last of these generates a quarter of the value added and employment rate among small and medium size businesses.

The European Commission expects 2.8 percent growth in value added this year in the EU and 3.4 percent next year, and 700,000 new jobs should be created, which however is not enough to completely make up for the loss of 2008. 


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