A recent quarterly update from the Spanish SME association, Cepyme, indicates that the economic landscape for microenterprises in Spain has deteriorated following five years of consecutive crises, initially sparked by the COVID-19 pandemic and exacerbated by rising inflation.

Over 11,300 microbusinesses, defined as having fewer than 10 employees, have ceased operations since 2019.

The report highlights stark differences in resilience across various business sizes.

While microenterprises have experienced a decline of 1%, small enterprises (10 to 49 employees) saw a growth of 9.8%, medium-sized companies (50 to 249 employees) increased by 8.7%, and large enterprises (250 or more employees) grew by 19.5% during the same period.

The overall data illustrates a troubling trend where smaller firms are particularly vulnerable, contrasting sharply with the performance of larger companies.

Cepyme President Gerardo Cuerva criticized government policies, alleging that the increases in labor costs, fuelled by minimum wage hikes and social security contributions, have placed unsustainable pressures on smaller businesses.

He highlighted the burdens of escalating energy prices and more expensive financing, warning of a 'very dangerous spiral' that threatens shrinking profit margins and investment capacity.

In terms of labor costs, small businesses and microenterprises have faced a cumulative rise of 25.1% since 2021, compared to a 19% increase for medium-sized companies.

Despite an increase in sales for these smaller businesses, overall profitability remains significantly lower than in 2019—by 15.4% for small firms and 10.4% for medium-sized firms.

Looking ahead, a pressing concern for small business owners is the upcoming reduction of the working day, which is being processed by the Spanish Congress.

Cuerva expressed that this measure would disproportionately affect small and microenterprises, which lack the resilience of larger corporations to absorb such changes.

Cepyme's report advocates for adjustments to measures that would further increase labor costs or contributions, asserting that policies like cumulative minimum wage hikes or a reduction in working hours without a corresponding salary change would exacerbate the economic strain on SMEs.

Cuerva noted the internal divisions within the business community but confirmed that they would maintain a united front to influence parliamentary discussions against unilateral government reforms that bypass social dialogue and collective negotiation tables.

The repercussions of these economic conditions raise significant challenges for the future viability of microenterprises in Spain, underlining the need for a more accommodating policy environment for smaller businesses.