This article was published on December 1, 2022

If European SMEs are going to survive, they need tech now more than ever

A recent survey reveals that SMEs across the continent are in 'survival mode'

If European SMEs are going to survive, they need tech now more than ever
Ioanna Lykiardopoulou
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Ioanna Lykiardopoulou

Ioanna is a writer at TNW. She covers the full spectrum of the European tech ecosystem, with a particular interest in startups, sustainabili Ioanna is a writer at TNW. She covers the full spectrum of the European tech ecosystem, with a particular interest in startups, sustainability, green tech, AI, and EU policy. With a background in the humanities, she has a soft spot for social impact-enabling technologies.

According to EU data, small and medium-sized enterprises (SMEs) are the backbone of Europe’s economy. They represent 99% of all businesses in the Union, employ around 100 million people, and account for more than half of Europe’s GDP.

Yet, business survival for SMEs has been continuously challenged since the pandemic. After suffering the consequences of the COVID crisis, SMEs are now particularly affected by soaring energy prices, inflation, supply chain bottlenecks, and changed consumer behavior.

That’s especially the case in the retail, food, and restaurant sectors — among those that were hit hardest during the pandemic.

A survey conducted by Glovo, a Spanish startup that provides on-demand delivery services, found that European SMEs in these sectors are worried about their future growth prospects.

The startup surveyed 2,049 SMEs in Bulgaria, Italy, Poland, Portugal, Spain, Romania, and the UK. Alarmingly, 46% of businesses across all seven countries say that they are in “survival mode.”

SMEs Europe digitalization

“This research confirms that, unsurprisingly, just as SMEs are moving past the hangover of the pandemic, they find themselves struggling once again,” Rodrigo Alier, Executive Director, Partners & Brands at Glovo, said.

“The cost of living crisis weighs heavily on their minds and their balance sheets, with more than two-thirds of businesses surveyed in the UK and nearly half of those in Spain saying they are in ‘survival mode’,” Alier continued.

The role of technology in enabling business growth

According to studies, consumer behavior has changed considerably over the last couple of years, indicating a preference for digitalized services, be it online shopping or food deliveries.

Glovo’s survey also found that 42% of SMEs surveyed believe their customers’ digital experience is becoming more important than the in-person experience.

Romania’s example in the research highlights tech’s role in business growth. Nearly 1 in 3 businesses that digitized during the pandemic — but have since stopped due to the return of in-person dining — report that they are now severely struggling.

Comparatively, nearly half of all businesses that were already digitized before the pandemic and continue to be have experienced slow but steady growth in the past 2-3 years. They also expect significant growth in the next 12 months.

And while one-in-three UK businesses see digitalization as integral to growth, two-in-three still say they need help to become technologically innovative, but partnerships with private partners are only part of the solution.

In order to achieve the EU’s ambitious Digital Decade targets, it is crucial SMEs are equipped with adequate digital skills, access to technology, and sufficient funding — all of which require a supportive policy environment.

And while numerous policies and projects are now in place, Thierry Breton, Commissioner for the Internal Market, calls for further action.

“We need to step up the efforts to make sure that every SME, business, and industry in the EU has the best digital solutions available to them and have access to a world-class digital connectivity infrastructure.”

Only then will SMEs and startups have a fighting chance in the future.

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