Brussels, 13/03/2009 (Agence Europe) - European business is concerned about the economic developments over the next few months, explained the European employers' federation BusinessEurope and small business representatives in Europe (UEAPME) on Thursday 12 March 2009, when they both published research painting a gloomy picture for 2009.
In its Spring 2009 Economic Outlook, BusinessEurope forecasts a fall in real EU GDP of 2.2% this year (-2.1% in the eurozone) with EU27 investment spending expected to plunge 7.4% and exports by 5.9%. Above all, the crisis is causing company bankruptcies, with employment in the EU expected to decrease by 4.5 million this year, with almost 2 million of these job losses in Spain and the United Kingdom alone. These forecasts are gloomier than those published by the European Commission in January predicting a 1.9% fall in GDP, but match forecasts by other bodies (including the European Central Bank, ECB) which have already been revised downwards. Like the ECB, BusinessEurope is expecting inflation in the eurozone to fall to close to zero by mid-2009 and to average 0.8% for the year as a whole (1% in the EU27). “The sharp deterioration in the cost of, and access to, finance has become a life-threatening concern for numerous European companies,” explained BusinessEurope, which expects profitability to fall still further..
Against this backdrop, the organisation is calling for a four-pillar strategy for recovery: 1) restore companies' access to finance under affordable conditions (BusinessEurope calls on the ECB to increase its work here); 2) fight protectionist reflexes which will undermine the internal market and free trade; 3) implement national recovery plans in a coordinated manner; and 4) speed up structural reforms.
According to research published on Thursday 12 March by UEPAPME, the European employers' organisation representing craft, trade and SMEs, small businesses' confidence has hit a new record low. Nearly half the 50,000 SMEs polled across Europe expect negative developments in their business in the first half of 2009, compared with only 20% two years ago. The sharpest fall took place in the last six months. “A further decrease in confidence was clearly predictable, but not by such a large extent,” explained Gerhard Huemer, director of the newly created UEAPME Study Unit, which carried out the survey.
Thus far, however, despite the economic crisis and contrary to larger enterprises, smaller businesses are still reluctant to lay off workers to cope with the downturn. “Micro enterprises are keeping more persons employed than pure turnover considerations would require,” commented Huemer, explaining: “This is partially due to the closer work relationship between owner and staff, but also to the fear of losing skilled workers that would be hard to replace and retrain when the downturn comes to an end.”
Business expectations for investment and orders for the months to come are strikingly negative, although the service sector expects the decreases in orders to stop during the first half of 2009 and foresees a relative improvement in personal services orders, adds UEAPME. (A.B. trans fl)