Sophie Villaume - Élodie Pereira INSEE, Business Surveys Unit

Are there differences in data trends and volatility between SMEs and large enterprises?

EU workshop on business and consumer surveys (BCS) Brussels, November 15-16

Are there differences in data trends and volatility between SMEs and large enterprises? 2

Introduction

Small and medium-sized firms (SMEs) :- 99% of French businesses - 37% of the total French turnover

SMEs may face particular difficulties

Are there differences in data trends and volatility between SMEs and large enterprises?

Approach :

1) Description of the French economic landscape2) Comparison of the results stemmed from Insee business surveys for

SMEs and for other firms in Manufacturing Industry and Services3) Creation of French business climates for SMEs and for larger firms

Are there differences in data trends and volatility between SMEs and large enterprises? 3

Definitions

1. SME :A firm with less than 250 employees and less than € 50 million annual turnover.

2. Intermediate-sized firm

3. Large firmA firm employing over 5,000 people or a firm with an annual turnover greater than 1.5 billion euros.

Are there differences in data trends and volatility between SMEs and large enterprises? 4

I) Description of the French economic landscape (1)

Rates of SMEs and larger firms in France (in turnover) in 2009

27%

56%68%

37%45%

37%

43%

30%

32%

48%

14% 27%

30%

14% 15%

41% 36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ManufacturingIndustry

Services BuildingIndustry

Wholesaling Retail trade All sectors

SMEs Intermediate-sized enterprises Large entreprises

Source : Insee, Annual Sectoral Survey 2009

Are there differences in data trends and volatility between SMEs and large enterprises? 5

I) Description of the French economic landscape (2)

7

39

13

3

10

28

16

27

10

1418

15

0

5

10

15

20

25

30

35

40

45

Industry Services Building (includingBuilding Craft)

Wholesaling Retail trade Other activitysector

In percent

Number Turnover

Source : Insee, Annual Sectoral Survey 2009

Breakdown of French SMEs by activity sector

Are there differences in data trends and volatility between SMEs and large enterprises? 6

II) Reconstruction of balances of opinion for SMEs (1)

1) Presentation of the surveys

Five sectoral business surveys

Mostly qualitative questions on the economic situation in the

last few months and on the expectations

Topics: turnover, outlook, demand, employment, prices, etc.

Many of the questions have 3 answers:

« increasing » /« stable » /« decreasing  »

Balance of opinion = % « increasing » - % « decreasing »

The questions have different periodicities

Are there differences in data trends and volatility between SMEs and large enterprises? 7

II) Reconstruction of balances of opinion for SMEs (2)

2) Methodology

SMEs’ balances of opinion were built with firms’ individual

answers

Weight variable: turnover or workforce size.

Seasonally adjusted

Focus on the two main sectors :

- Manufacturing Industry

- Services

Are there differences in data trends and volatility between SMEs and large enterprises? 8

II) Reconstruction of balances of opinion for SMEs (3)

3) Results in Manufacturing Industry

Recent changes in output, balance of opinion, in %

-70

-50

-30

-10

10

30

50

70

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

SMEs Intermediate-sized firms Large firms

Are there differences in data trends and volatility between SMEs and large enterprises? 9

II) Reconstruction of balances of opinion for SMEs (4)

Personal production expectations, balance of opinion, in %

-50

-40

-30

-20

-10

0

10

20

30

40

50

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

SMEs Intermediate-sized firms Large firms

Are there differences in data trends and volatility between SMEs and large enterprises? 10

II) Reconstruction of balances of opinion for SMEs (5)

General production expectations, balance of opinion, in %

-100

-80

-60

-40

-20

0

20

40

60

801990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

SMEs Intermediate-sized firms Large firms

NB: this balance of opinion is not weighted

Are there differences in data trends and volatility between SMEs and large enterprises? 11

II) Reconstruction of balances of opinion for SMEs (6)

Business climate synthetic indicator in Manufacturing Industry:

Built with the six main balances of opinion of the Industry Survey - general production expectations - recent changes in output- personal production expectations- demand and total order books- demand and export order books- finished goods inventory level

Aim: summarize the information contained in the Survey.

Principle: tracking the common change in the balances, which are already very correlated.

Normalized to have a mean equal to 100 and a standard deviation equal to 10.

Are there differences in data trends and volatility between SMEs and large enterprises? 12

II) Reconstruction of balances of opinion for SMEs (7)

Business climate synthetic indicators in Manufacturing Industry

60

70

80

90

100

110

120

130

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

SMEs Intermediate-sized firms Large firms

Are there differences in data trends and volatility between SMEs and large enterprises? 13

II) Reconstruction of balances of opinion for SMEs (8)

Correlation between balances of opinion and Manufacturing Industry's growth

Recent changes in

output

Personal production

expectations

Demand and total order

books

Demand and export order

books

Finished goods

inventory level

General production

expectations

Business synthetic indicator

SMEs 0.21 0.38 0.21 0.09 -0.32 0.57 0.28

Intermediate-sized firms 0.39 0.55 0.30 0.29 -0.44 0.64 0.45

Large firms 0.41 0.37 0.24 0.27 -0.27 0.64 0.33

Conclusion about Manufacturing Industry:SMEs’ managers do not really distinguish from others in their activity perception. The business synthetic indicators of SMEs and of other firms have almost the same evolutions/pattern.

Are there differences in data trends and volatility between SMEs and large enterprises? 14

II) Reconstruction of balances of opinion for SMEs (9)

3) Results in ServicesWe were not able to build balances of opinion for large firms only, as the number of large firms was insufficient.

Recent changes in turnover, balance of opinion, in %

-40

-30

-20

-10

0

10

20

30

40

50

60

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Large and intermediate-sized firms SMEs

Are there differences in data trends and volatility between SMEs and large enterprises? 15

II) Reconstruction of balances of opinion for SMEs (10)

Expected turnover, balance of opinion, in %

-40

-30

-20

-10

0

10

20

30

40

50

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Large and intermediate-sized firms SMEs

Are there differences in data trends and volatility between SMEs and large enterprises? 16

II) Reconstruction of balances of opinion for SMEs (11)

General Outlook, balance of opinion, in %

-50

-40

-30

-20

-10

0

10

20

30

2006 2007 2008 2009 2010 2011 2012

Large and intermediate-sized firms SMEs

Are there differences in data trends and volatility between SMEs and large enterprises? 17

II) Reconstruction of balances of opinion for SMEs (12)

Business climate synthetic indicator in Services: Built with the six main balances of opinion of the Services Survey

-  General outlook on activity-  Recent changes in turnover-  Expected turnover-  Expected demand-  Recent changes in operating balance result-  Expected changes in operating balance result

60

70

80

90

100

110

120

130

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Large and intermediate-sized firms SMEs

Are there differences in data trends and volatility between SMEs and large enterprises? 18

II) Reconstruction of balances of opinion for SMEs (13)

Correlation between balances of opinion and Services’ growth

Conclusion about Services:SMEs in Services do not stand markedly from other firms in their perceptions of activity. Large and intermediate-sized enterprises bring nevertheless slight additional information to explain output growth.

Recent

changes in turnover

Expected turnover

Expected demand

Recent changes in operating balance result

Expected changes in operating balance result

General outlook on

activity

Business synthetic indicator

SMEs 0.51 0.58 0.63 0.58 0.60 0.70 0.63

Large and Intermediate-sized firms

0.55 0.59 0.62 0.58 0.64 0.68 0.67

Are there differences in data trends and volatility between SMEs and large enterprises? 19

III) French business climate (1)

Two French Business climates were built : - one for SMEs - one for Intermediate-sized and large firms

Built with 26 balances of opinion stemmed from the five sectoral Business Surveys:

- Manufacturing Industry- Services- Building Industry- Wholesaling- Retail Trade

They are very correlated (the coefficient of correlation is 0.95)

Are there differences in data trends and volatility between SMEs and large enterprises? 20

III) French business climate (2)

French business synthetic indicators

Coefficient of correlation with output growth : • Large and Intermediate-sized firms: 0.61• SMEs: 0.58

60

70

80

90

100

110

120

130

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

Large and intermediate-sized firms SMEs

Are there differences in data trends and volatility between SMEs and large enterprises? 21

Conclusion

SMEs do not stand markedly from other firms: although they exhibit sometimes differences in their short-run dynamics, SMEs and other firms share broadly the same business cycle. Possible explanation: subcontracting.

SMEs are however somehow different from other firms. In particular, SMEs’ managers tend to be more pessimistic than others.

Their answers appear smoother than the answers of large firms.

These results suggest, as an avenue for further research, to explore new weighting methods, which would affect a lower weight to large enterprises than those actually used.

Thank you for your attention !

Insee18 bd Adolphe-Pinard75675 Paris Cedex 14

www.insee.fr

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