Survey from the ECB Reports a Recovery of the Economic Activity and Financing Conditions of SMEs

The European Central Bank (ECB) published the results of the latest Survey on Access to Finance for Enterprises (SAFE) last June.

Conducted twice a year, the survey provides information on the latest developments in the financial situation of enterprises, and documents trends in the need for and availability of external financing. 

The 26th survey round, conducted between March 7th and April 15th 2022, covered the period from October 2021 to March 2022. The sample comprised 10,950 firms, of which 9,999 (91.3%) are SMEs. 

Here is an overview of the main results as published in the official report by the ECB.

Economic Activity

Results indicate a recovery of the economic activity, with increases in turnover reported more frequently among large enterprises than among SMEs.

However, firms’ profitability was reduced by surging production costs, with 89% of firms reporting an increase in raw materials and energy costs and 66% in labor costs, both standing at a historical peak in the survey. 

The impact of supply disruptions and higher energy costs, which are likely to be related in part to war in Ukraine, is expected to continue to affect prices. Moreover, the perceived importance of expected inflation as a factor in selling prices has increased compared with 2020, with 58% of firms now reporting expected inflation as a “very important” factor (up from 30% in 2020).

Financing Conditions

The survey results reveal that, while euro area firms felt that changes in the general economic outlook had had a strong negative impact on their access to finance (-29%, down from 8%), with a similar negative impact among SMEs and large firms, the availability of external funds still continued to improve, albeit at a slower pace. 

Overall, smaller improvements in firms’ access to external funds broadly compensated for the moderate increases in their financing needs, so that the external financing gap – the difference between the change in demand for and the change in the supply of external financing – reached 1% (up from -4% in the previous round).

A significant number of euro area firms reported a tightening of financing conditions, with 34% signaling increases in bank interest rates, up from 5% in the previous round. A comparable percentage has not been observed in the SAFE since 2012 and is consistent with the recent net widening on margins applied to bank loans also reported by banks in the April 2022 bank lending survey. 

Future Conditions

Looking ahead, firms anticipated a deterioration in access to bank loans and credit lines for the first time since the outbreak of the coronavirus (COVID-19) pandemic, probably reflecting the prevailing uncertainty and a changing attitude on the part of banks. However, all in all, expectations remain positive.

The next survey round will be conducted by the ECB in cooperation with the European Commission, covering all EU countries plus some neighboring countries. The results will be published in December 2022.

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