SMEs account for 99.7% of business enterprises in Republic

Small and medium enterprises account for 99.7 per cent of all active business enterprises in the Republic, employ 68 per cent of the workforce and generate just over half the State's annual turnover, according to the Central Statistics Office (CSO).

The CSO's Business in Ireland 2012 study provides an interesting snapshot of the importance of small business to the Irish economy.

Nonetheless, the study indicates that while SMEs employ almost seven in every ten workers, they account for less than half (46 per cent) of State’s gross value added (GVA), a key measure of income, reflecting the economy’s reliance on foreign multinationals.

In 2012, there were 185,500 active businesses in operation here, employing over 1.2 million workers. Significantly, over 90 per cent of these SME businesses were classified as “micro-enterprises” with less than 10 employees.

The services industry, which includes transportation, accommodation and food, publishing, telecommunications as well as legal and accounting activities, was by far the largest sector, accounting for 48.6 per cent of total enterprises and 43 per cent of employment.

The distribution sector, comprising retail and wholesale activity including the sale of vehicles, accounted for 22.8 per cent of total enterprises and 26.6 per cent of people employed.

The once robust construction sector accounted for 18.3 per cent of all enterprises but only 6.3 per cent of total people employed.

Conversely, industry, which includes manufacturing, accounted for 7.3 per cent of all enterprises and 16.2 per cent of employment.

The CSO’s figures also detail the impact recession has had on the SME sector.

Employment in SMEs fell from almost 1.09 million in 2007 to just over 829,000 in 2012, representing a drop of just under 25 per cent.

The sector that was impacted the most was construction where SME employment in 2012 was only 34.4 per cent of the 2007 level with over 140,300 job losses recorded during the five-year period.

Industry was also impacted quite heavily with SME employment in the sector falling to 74.1 per cent of the 2007 level, which corresponds to over almost 38,100 job losses.

The only sector where SME employment increased over the period was in the financial and insurance sector.

The report also details the business costs facing business enterprises.

In 2012, nearly €39.2 billion was paid in personnel costs by these enterprises. Almost €5.1 billion (13 per cent) was in the form of employers’ social security payments, for example employer’s contributions to the PRSI scheme, superannuation funds, PRSA’s and other pension schemes.

The percentage was higher for large enterprises at 14.6 per cent compared to SMEs at 11.9 per cent.

The report noted enterprises in Ireland paid a relatively low rate of employers’ social security payments at 13.4 per cent of personnel costs when compared to other European countries, with only five countries, including the UK at 13.1 per cent, that paid a rate lower than Ireland.

The report calculated profitability across all sectors in the economy was on average 15 per cent of turnover, with industry coming out as the most profitable sector with an operating surplus of 25.9 per cent of turnover followed by the construction which recorded a profitability level of 22.6 per cent.

Distribution was the least profitable with an operating surplus of 6.1 per cent.