Analysis of the SME definition : a pilot approach using firm-level data

The current Small and Medium Enterprises (SME) definition is set out in a Recommendation of the Commission adopted on 6th May 2003, which came into effect on the 1st January 2005. The definition uses headcount and either turnover or balance sheet total to determine whether an enterprise is an SME, with the key cut-off points having less than 250 staff, and either less than or equal to equal to €50m turnover or less than equal to €43m on the balance sheet total. This study aims to understand the effects of inflation on this threshold using a sample of enterprises extracted from Orbis, a private companies database compiled by Bureau van Dijk. Results show that at EU-level in 2015 there were 2,198,514 SMEs (99.0% of the sample), and in 2020 there were 2,194,716 SMEs (98.8% of the sample). Accounting for inflation shows that an additional 1,817 enterprises (0.08% deflator impact) could be classified as SMEs in 2015, and this figure was 3,104 in 2020 (0.14% deflator impact). A bootstrapped sample, controlling for the expected proportion between SMEs and large enterprises, shows that the estimated impact of deflation on the number of SMEs was 0.01% in 2015, and at 0.02% in 2020, for the EU total sample. Although the study shows a link between inflation and the number of enterprises that can be estimated to be SMEs in the sample, limitations imply that these estimates cannot be directly generalised to the wider EU-27 SME population.