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The Challenges Facing European SMEs

European SME survey 2019

Going digital is a challenge for European small and medium-sized enterprises – but key to remain competitive.

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The National Promotional Institutions of France (Bpifrance), Germany (KfW), Poland (BGK), Spain (ICO) and the United Kingdom (British Business Bank) presented a study in Brussels on the challenges of digitalisation for European small and medium-sized enterprises (SMEs). The study is based on a first-time joint survey of more than 2,500 SMEs in the participating countries, the European SME Survey.

SMEs, which are the backbone of the economy and create a large share of employment in Europe, generally are in sound shape and experience robust revenue growth. This is not least due to their competitiveness on both national and international markets. For instance, more than half of all SMEs active abroad achieved revenue growth rates of 5% and higher last year, according to the European SME Survey.

To remain a driving force of the European economy, SMEs must increasingly invest in digitalisation. On average, about 54% of SMEs in France, Germany, Poland, Spain and the UK consider the adoption of new technologies as necessary to ensure their future competitiveness. For about 76% of SMEs, digitalisation is a management priority.

The digital activities European SMEs engage in are diverse, ranging from e-commerce to cloud computing and social media. Used by about 60% of all SMEs, electronic invoicing is most common. More advanced technologies are less widespread, but will likely gain in importance: While only 32% of European SMEs analyse big data to optimise their work processes and only 20% make use of artificial intelligence, another 30% of SMEs intend to introduce respective applications in the next two years.

For European SMEs to advance further in the digital transformation process, a variety of obstacles must be overcome, including IT security concerns and a lack of digital infrastructure. A quarter of SMEs perceive a lack of appropriate financing possibilities as a key barrier to digitalisation in their company. Another important problem from the point of view of European SMEs are insufficient digital skills – both among their own workforce and on the external labour market.

Although many SMEs expect that digitalisation will make some tasks and jobs obsolete in their company, the majority expects the total number of employees to remain stable in the future – or even to grow. “The digital transformation is a huge challenge, especially for SMEs, which are often more constrained in terms of finance or labour than larger firms. Addressing these shortages will be a key task for policymakers, but also for National Promotional Institutions,” Nicolas Dufourcq, Directeur Général of Bpifrance, Dr Günther Bräunig, Chief Executive Officer of KfW, Beata Daszyńska-Muzyczka, President of the Management Board of BGK, José Carlos García de Quevedo, Chairman of Instituto de Crédito Oficial and Keith Morgan, Chief Executive Officer of British Business Bank, said in a joint statement.

Increasingly, SMEs in Germany are responding actively to the challenges of digitalisation. For 76% of them, digitalisation is a priority – a percentage similar to the average of the countries examined. In comparison to their international counterparts, however, the approach of German SMEs is more differentiated, and they tend to concentrate on fewer digitalisation projects. For German SMEs, the pressure of competition is less of a driving force for digitalisation than in other countries: only under half of them (48%) are convinced that they must use digital technologies to stay competitive (compared to 54% across Europe).

Like companies in other countries, SMEs in Germany are confronted by a range of obstacles to their digitalisation efforts. In addition to slow internet speeds (27%), they name the lack of employees with the necessary IT skills (24%), as well as the shortage of IT experts on the external labour market (23%). From the point of view of SMEs, there is a lack of programming knowledge and competencies in analysing complex data and managing digital projects. To expand their digital know-how, German SMEs are particularly active when compared internationally: 58 % of them carry out in-house training for their employees, a percentage which is significantly higher than in the other countries examined.