SMEs need real support, not handouts

The Greatest Shock Since World War II

Over 2.1 million coronavirus deaths by mid-January 2021[1], a rapid and severe recession, and economies disrupted in Europe and around the world. The crisis caused by COVID-19 is the greatest challenge for societies and economies in Europe and globally since World War II. It is little comfort that the Polish economy fared relatively well in 2020 compared to countries like Italy, Spain, or Greece. We should also not be lulled into complacency by the fact that COVID-19 vaccinations have just begun, with high hopes attached to them. After all, we expect a third wave of the epidemic, and another lockdown could be fatal for many businesses still afloat. Moreover, after the crisis, we will still need to provide consumers and the economy with products and services. Those who survive and use this difficult time to address their problems, including those from before the pandemic, will be the first off the starting blocks and will use the rising wave of economic growth to gain a competitive advantage in the new reality. Within six months of the pandemic, companies in the transport, tourism, culture, and recreation sectors accumulated over 1.2 billion PLN in debt. Subsequent restrictions and lockdowns have particularly affected SMEs (micro, small, and medium-sized enterprises), which lack the financial resources to survive such a significant demand collapse. Most do not have contingency plans or the necessary know-how to better absorb market shocks and quickly rebuild profitability. Living day-to-day, they cannot break away from the immediate challenges and firefighting caused by the unstable situation.

SMEs Are the Foundation of Stable State Development

The 2020 report on the state of small and medium-sized enterprises prepared by PARP indicates that SMEs account for 99.8% of businesses in Poland. Over half of SMEs operate in services, one in four in trade, one in eight in construction, and one in ten in industry. In the services sector, SMEs are engaged in professional, scientific, and technical activities, transport and warehousing, and healthcare and social assistance. The SME sector accounts for nearly 50% of Poland’s GDP and employs 6.8 million people[2]. The assistance commonly offered to entrepreneurs by governments, including Poland’s, is primarily aimed at helping businesses survive the crisis. It is designed to prevent company failures and maintain jobs. The Polish anti-crisis shield was similarly designed for SMEs, focusing on industries most affected by pandemic safety measures, such as gastronomy, entertainment, and retail. The purpose of the allocated aid funds is to support companies in financing fixed costs and improving their cash flow through loans, non-repayable standstill benefits, and exemptions from contributions. A review of central anti-crisis programs offered to entrepreneurs in Germany, the UK, Ireland, the USA, and Canada indicates similar trends in supporting businesses, including SMEs, although these programs are more developed and comprehensive. Due to different social security systems and legal-tax solutions, it does not make sense to compare these programs directly. However, it is worth noting selected solutions in the context of the needs of not only direct beneficiaries but also the economy as a whole.

Development Second

An analysis of the German stimulus package indicates an attempt to pro-developmentally target some aid funds toward investments in areas deemed crucial for the market and economic development of the country, such as AI, quantum computing, 5G and 6G networks, digital transformation, and electromobility[3]. Importantly, these are directed not only to those in need but also to those providing support. They aim to increase the competitiveness of program beneficiaries, maintain the investment attractiveness of selected sectors, and protect highly specialized jobs. Therefore, when seeking the most effective forms of support for SMEs, we should not limit ourselves to merely providing life-sustaining drips. Firstly, crises reveal unresolved problems in poorly managed companies. Keeping them alive will only prolong their agony. In such a situation, it is better to lead to a controlled failure and support their owners and employees in quickly finding their way back to the market. The efficiency of taxpayer money spending should also be a significant topic of discussion. Ireland, for example, uses a mechanism that links the disbursement of funds with advisory support provided by carefully selected consultants[4]. There is no doubt that in the first stage of anti-crisis measures, in a highly uncertain and volatile environment, valuable human and organizational resources must be protected from loss. The next stage involves pro-development actions, as confirmed by changes in enterprise support policies in OECD countries[5]. SMEs generally have lower productivity, innovation, investment propensity, and crisis resilience. They have limited access to development capital and know-how. However, they have enormous and growing significance for the economy. They are engines driving employment, are more agile, and account for a significant portion of national output. It is widely believed that emerging from the current crisis will take at least two years. This time should be used to strengthen SMEs for competitive combat in the newly emerging post-COVID reality. We will undoubtedly see a rebound in industries whose closure has strongly impacted consumer sentiment, such as entertainment, gastronomy, and tourism. Consumers are eager for the freedom of the pre-COVID era and will try to compensate for the traumatic experiences of the epidemic. However, it is not just the rebound of industries heavily affected by COVID-19 that will constitute the economic revival, but also the rapid adaptation to new tracks defined by post-epidemic trends. Large enterprises will manage, but the sector needs significant support, which the state must provide.

The World Has Changed

It is impossible to fully convey the scale of changes brought about by the pandemic briefly. Many of them are already clearly visible, while some have more subtle characteristics, and their effects will only become apparent over time. In the first months of the pandemic, processes related to digitization and the fourth industrial revolution, including the Internet of things, services, people, and data, accelerated significantly. Along with these processes, the importance of cybersecurity has increased, as shown by a recent global survey of entrepreneurs conducted by McKinsey[6]. The pandemic experience has changed attitudes towards remote work and virtual business meetings, redefining the importance of such commonplaces as offices, business travel, and conference room training. The importance of omnichannel strategy in retail, risk management in the supply chain, and digital customer experience has increased even more. Navigating the new situation in the global market certainly requires SMEs to have access to know-how and development capital. However, effective advisory services are even more important. It is not just about investing in new technologies and innovations. It is about fundamentally restructuring business models, guiding employees and leaders through the change process, and training them so that innovative solutions truly yield the intended results. Results in the form of increased productivity and employment, greater resilience to crises and global competition, higher international activity, and innovation in processes, products, organization, and marketing.