SMEs and high inflation : summary report

Since 2021, the European Union has experienced historically high levels of inflation, with year-on-year increases in consumer prices reaching as high as 11.5 % in October 2022. The present study assesses how this environment of high inflation has affected small and medium-sized enterprises (SMEs). The report shows that inflation has increased most in energy-related and agri-food ecosystems. Rising energy prices and shortages of raw materials, and well as the by-products of the pandemic (e.g. supply chain disruptions and labour shortages) were among its key drivers. In terms of impacts, higher inflation is most directly associated with longer collection periods for payments, mixed effects on green investments, and increased difficulties in accessing skilled labour. Its effect on the profitability of SMEs depends on the ability of these businesses to pass rising costs on to consumers, with some firms scoring record profits while others have struggled to remain afloat. The indirect effects of inflation (decreased aggregate demand due to increased interest rates, lower growth and greater economic uncertainty) have had a more widespread impact, in having an especially significant effect on investment decisions. The study concludes with an overview of relevant policies adopted by Member States to support SMEs in this context, and presents actionable measures to address the causes of inflation and mitigate its negative effects, in particular distinguishing those measures that are appropriate only in crisis circumstances, and those measures that should be avoided.