The latest Cepyme indicator on the business situation of Spanish small and medium-sized enterprises warns that the excessive increase in costs and the reduction in margins is pushing business profitability back to 2014 levels. Net return on assets (ROA) stands at 2.8%, lower than any figure recorded between 2016 and 2020. For reference, in the fourth quarter of 2019, the last full quarter before the pandemic, SME profitability reached 3.7%.
According to Cpyme, total costs rose by 24.4% between April and June on a year-on-year basis, compared with growth of 23.3% between January and March. While sales continued to grow in the second quarter but at a slower rate of 14.5 per cent, compared to the 19.8 per cent rise in the first quarter. This shows that the narrowing of business margins detected in the previous report is worsening.
Of the 15 economic magnitudes that make up the indicator, all point to a looming recession. Rising total costs are stifling the resilience of SMEs. Specifically, the cost of inputs – the price of goods acquired to produce other goods and services – shot up by 51.7% in the second quarter compared with the same period the previous year, the highest increase in more than two decades.
Energy costs – which include electricity, gas, oil derivatives and water supply – have doubled, rising by 113.7%. The cost of intermediate goods – material resources, goods and services used during the production process – has also risen by 21.5%, a percentage never seen before in this century, to which must be added the cost of capital goods, 5.7% higher.
On the other hand are labour costs, which rose by 6.2% year-on-year to June, affected by the 6.6% increase in the average ordinary wage of SMEs – driven by the increase in the minimum wage (SMI).
This situation is leading companies to have to meet costs with their own savings resources or loans, which has led to a sharp increase in indebtedness. That ratio – measured as total liabilities in relation to equity – is at its highest level since 2018, 12.7 percentage points higher than a year earlier. It has now risen for four consecutive quarters and exceeds 100% of equity.