Portugal: A Country of Micro Enterprises

An Expert's View about Foreign Direct Investment in Portugal

Posted on: 19 Nov 2010

Business Sector structure in Portugal

MARKETS Portugal: A Country of Micro Enterprises Business Sector Structure in Portugal 17 November, 2010 By Inga Kilikeviciene, KPL Markets While the rating agencies are sweating over deciding whether to attribute low or very low rate to the Portuguese economy, while some smart minds savour an invented acronym that group Portugal, through a play on words, together with cute domestic animals and while the country?s governing political parties keep themselves engaged into never ending disagreements over almost everything and especially over the Budget for each coming year, the Portuguese business life maintains its own daily course. In 2008, there were 1 096 255 companies in Portugal according to Statistics Portugal (The 1 National Institute of Statistics, INE). Almost eleven hundred thousand companies for a relatively small country. The number is nice, but does it mean the business is flourishing and entrepreneurs are prospering in Portugal ? First of all, the data provided by Statistics Portugal includes all the companies listed in the books of the Commercial Registrar. In other words, the number above includes actively operating and dormant companies, the companies as fresh as a-week-old babies and those in a dissolution process or even officially insolvent. Therefore, not the most reliable indicator for a realistic business picture. Yet one thing will be constant in all studies and statistical indicators: the Portuguese economy is built on small and very small companies. SME in Portugal, 2008 330 enterprises per 10.000 inhabitants: 283 micro : 1 big Employ 72,4% 745.000 individual of all hired staff entrepreneurs Portugal SME Less than 1,7% 4 employees 2008 increase in In 59% of invoicing companies 91,9% North, Lisbon, of overall Tagus Valley: business volume 64 % of enterprises in the Algarve 1 The data for 2009 is expected to be available in May 2011. In fact, in the non-financial sector in Portugal in 2008, there were 349 756 small and medium enterprises (SME), or 99,7% of all non-financial business sector was composed by SME. 86% of the SME were micro enterprises. For the clarity sake, let me remind the SME criteria: less than 250 employees and annual turnover not exceeding Eur 50,000, or the total annual balance equal or below Eur 43,000. Curiously, these micro to medium companies generated 57,9% of the overall Portuguese business volume in the non-financial sector. And 60% of business investments also accounted to the small market players. As well as 64,2% of the total costs supported by non-financial companies. The figures above are consistent, proportionally, with the data related to 2009 revealed by Informa D&B. Their study refers to 501.174 companies to have been actually active in 2009 in Portugal, half a million less than the officially registered number. Even so, this corresponds to an increase of 2,9% of the overall number of operating companies in relation to the previous year. Increase in the number but not in business volumes: the total income revealed 0,1% reduction in comparison with 2008. In 2009, 53% of companies earned less than a million. 27,6% of these millions come from the services sector and 15,3% from retail. The highest concentration of the companies is in Lisbon (29,3%), followed by Porto (16,8%) and Braga (7%). Analyzing the company dissolution figures, the trend is the same: the majority of dissolved companies represent services (22,2%) and retail (19,2%), and they had been registered in Lisbon (28,1%), Porto (17,6%) and Braga (8,1%). In terms of new company establishment, Portugal continues among the European leaders: on average, 2.562 new companies a month were established in 2009. Unfortunately, following the classical trend, only 73% of them will survive during the first year. After the second year of their life, only 59% of the newly established companies will continue operating. Still good if compared with the 47% in Bulgaria ! Almost half of all companies hold the minimum share capital. Even so, Portugal continues being a sunny place and good things also happen here. Let?s take the alternative energy: around 43 % of the electric power consumed in Portugal is extracted from the renewable energy sources. Or the ICT sector: Portuguese IT companies work for NASA and for the European Space Agency contributing for their Space Programs. Portuguese institutions related to healthcare are among the best in the world. The artwork of the Portuguese engineers is found literally in every corner of the globe. Portugal is a world leader in the Plastic Mould Industry. And Portugal is the only country in the world where you can buy and register your beach-front villa as fast as within 24 hours ! A lot of opportunities are still offered in the engineering, construction, transport, energy and telecoms sectors, to name but a few. However, the nearest future is more encouraging for the transforming industries and the sectors working for export; construction and the internal demand products will see no increase for the time being. For smaller investors, wine-growing, hotels and catering, ICT still remain the most attractive sectors with new players entering the market every year. With one of the lowest minimum wages in Europe yet high technical skills and English widely spoken throughout Portugal, many smaller entrepreneurs choose Portugal as a country for their first export experience or a micro investment. Image: Pocean.pt KPL MARKETS: Rua Professor Prado Coelho, N.º 32 - 3º Dt.º, 1600-654 Lisbon, Portugal Telephone: ( 351) 919273430 - Fax: (351) 309716542 - Email: kpl-markets@iol.pt www.kpl-markets.webgarden.com
Posted: 19 November 2010

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