EU report singles out Cyprus support for SMEs

A recent EU report on Small- to Medium-sized Enterprises commends Cyprus support for SMEs during the pandemic, but sees some measures as lacking.

The recently released Annual Report on European SMEs 2020/2021 noted positively Cyprus’ support for wages (with subsidies), for the self-employed, social security, debts and loans, and provision of grants.

The report pointed to the importance of SMEs in the Cyprus economy: Small SMEs posted the highest enterprise growth in 5 Member States (Cyprus, Denmark, Latvia, Malta, and Slovenia). Small SMEs also showed the highest growth in value added in four Member States, and in employment in six Member States including Cyprus.

About 33 per cent of EU SMEs surveyed used government support to reduce costs and 27 per cent of SMEs surveyed used government job retention schemes, according to the report.

The report also takes note of Cyprus’ deferral of VAT payments. While the Cyprus scheme did not have the scope of measures taken by other countries, Germany in particular, it did allow companies facing difficulties due to the Covid-19 outbreak to delay their payment of VAT for April, May, and June to November without any interest or facing any penalties.

The report also noted that Cyprus’ support measures did not include any deferral or reduction for corporate tax. Cyprus is one of three EU Member States that did not take action on corporate tax. For the tourism sector, where many SMEs are effectively shut down, this does pose challenges to their survival.

Added value by EU-27 SMEs is forecast to grow by 5.8 per cent in 2021, while a rise of 0.6 per cent is expected in EU-27 SME employment, the report shows. The levels of EU-27 SME value added and employment in 2021 are expected to reach only 97.7 per cent and 98.8 per cent respectively of their pre-pandemic levels of 2019, the report continues.

As in 2019 and 2020, EU-27 SMEs in the digital sector are projected to outperform SMEs in the non-digital sector in 2021. EU-27 SMEs in the digital sector are forecast to increase their value added and employment by 6.7 per cent and 1.7 per cent, respectively. In contrast, EU-27 SME value added and employment in the non-digital sector is projected to grow by only 5.7 per cent and 0.5 per cent.

Similar differences with regard to participation in e-commerce were evident, with 41 per cent of medium-sized SMEs reporting that they sold online in 2020, whereas only 30 per cent of small SMEs and 22 per cent of micro SMEs did so.