The number of SMEs and high-added value specialized companies has increased by 1,75 mln since 1993
In 1993, the year of the creation of the Czech Republic, there were 1.25 million companies and sole proprietorships, in 2021 this number increased to 2.98, and today, according to an analysis carried out by the Chamber of Commerce of the Czech Republic, there are an estimated 3 million economic entities, 3.4 times more than 30 years ago. As far as business companies are concerned, it is mainly small and medium-sized enterprises that are growing, and their development, according to Chamber of Commerce President Vladimír Dlouhý, is synonymous with a healthy business environment. Indeed, SMEs are much more responsive to market changes, allowing for constant innovation and more efficient production, which also positively influences large companies that need smaller suppliers. Small and medium-sized enterprises also contributed to the transition from a centrally planned economy in which state bodies plan the range and volume of production of goods and services, regulate product prices and the number of wages, to a market economy in which investment, production, and distribution are guided and directed by typical market forces of supply and demand. In addition, they mitigated the consequences of business transformation by hiring workers made redundant from large companies, e.g. heavy leather and shoe industries, thus providing an alternative for employees.
How bureaucracy affected this result
One possible cause of the increase in the number of business entities can be found in the reduction of bureaucracy regarding the establishment of business entities, thus increasing and improving the efficiency of the latter. In addition to this, after the recodification of civil law in 2015, the minimum share capital of limited liability companies (LLCs) was lowered from CZK 200,000 to only one crown, thus reducing capital requirements and making it easier to establish and start-up larger companies. Despite the noted increase in business companies and entrepreneurs, it is useful to consider the problem noted by the Chamber of Commerce concerning the number of economically inactive entities. Economically inactive are all those who are classified neither as employed nor as unemployed. In particular, the group highlighted by the Chamber of Commerce consists mainly of the self-employed with suspended activity and all those companies that show no signs of activity, the so-called ‘dormant companies’. The number of inactive persons varies from 40% to 50% of the total economic entities monitored by the Czech statistical office, however, the amount of entities with economic activity is still very high, in fact out of 2.98 million economic entities, more than half are self-employed persons and companies with registered economic activity, specifically 1.59 million.
The key sectors where most growth has occurred
Another aspect that has had a positive influence on the economy and the growth of companies is the steady increase in the importance of specialized, high-value-added activities, and taking the self-employed and trading companies into account again, the latter has the potential to create more gross value added given the size of their business. Value added in economics is the difference between the value of the production of goods and services and the costs incurred in the purchase of production inputs and products or services whose production is more complex and requires advanced knowledge are generally considered to have high value-added. In the Czech Republic, the sectors with the highest amount of gross value added are information and communication, health and social care, education, and finance, as well as professional, scientific and technical activities. On the other hand, on the other hand, in the sectors of agriculture and forestry, fishing, construction, quarrying and mining as well as manufacturing, the share of added value is in sharp decline. In addition, the Chamber of Commerce reported that real labor productivity in the Czech Republic has increased by about 85% in 30 years and that real wages, adjusted for inflation, are growing faster than labor productivity, by more than 2.4% per year.
Sources: https://www.kurzy.cz/
sources of images: https://pixabay.com/
graphic source: https://storyset.com/
