In the latest round of the twice-yearly Survey on the Access to Finance of Enterprises (SAFE) in the euro area, covering the period from April to September 2023, firms reported “an increase in turnover, although the net percentage was lower than in the previous survey round.”
As noted in a blog post by the European Central Bank (ECB), more firms saw a deterioration in their profits “than in the previous survey round (net -14%).”
The decline in profits once again “reflects a sharp rise in labor costs and other costs related to materials and energy, although cost pressures seem to have eased. Increasing interest expenses are a further drag on profitability. Firms’ investment and employment growth has broadly held up, albeit with fewer firms reporting increases.”
The financial vulnerability indicator, which provides “a comprehensive picture of firms’ financial situation, suggests that 9% of euro area enterprises encountered major difficulties in running their business and servicing their debts over the past six months.”
Firms reported on average that they “expect their selling prices to increase by 3.7% over the next 12 months (down from 6.1% in the previous survey round) and their non-labour input costs to increase by 6.1%. They expect their employees’ wages to rise by 4.3% (down from 5.4%), with an increase in average employment of 1.7% over the year ahead.”
The net share of firms reporting “an increase in their need for bank loans was modest (5%, compared to 4% in the last survey round). At the same time, the availability of bank loans declined, with 10% of firms indicating a deterioration. The financing gap thus continued to widen at a moderate pace.”
Firms continued to report “a widespread increase in bank interest rates and other price and non-price costs of bank financing (net 86%), reflecting the transmission of past monetary policy tightening to firms’ financing costs.”
Despite tighter financing conditions, “the financing obstacles indicator for all firms remained at a similar level compared with the previous round (6%, down from 7%). Among firms applying for a bank loan (27% of firms), 10% reported obstacles to obtaining a loan, which was also similar to the previous round.”
Looking ahead, firms expect “a decline in the availability of all external financing sources, and especially bank loans. This suggests that part of the transmission of monetary policy to firms’ financing conditions is still in the pipeline.”
The report published recently “presents the main results of the 29th round of the SAFE in the euro area, conducted between 4 September and 18 October 2023 and covering the period from April to September 2023. The sample comprised 11,523 enterprises, of which 10,499 (92%) are small and medium-sized enterprises (SMEs) (i.e. firms with fewer than 250 employees).”
