Professionals and managers of very small businesses increasingly discouraged by the acceleration of the crisis

As numerous as they are heterogeneous, VSEs are the majority in all branches of activity and are spread across all urban and rural areas. In direct contact with consumers and their professional clients, they are on the front line of economic movements, both upwards and downwards.

Their observations and feelings often anticipate the profound movements that will spread throughout the entire value chain.

This is why the SDI considers it essential to question them regularly in order to anticipate the findings that the “macro” will have to integrate sooner or later.

Key lessons: acceleration of the crisis

86% of professionals and managers of very small businesses are discouraged...

The year 2024 continues in a difficult context for artisans, traders and managers of very small businesses. Over the course of the SDI quarterly surveys, the negative state of mind has remained at a high level since January 2024.

Complicated personal situations

52% of respondents say they will see a drop in their income in Q3 2024. 51% of independent professionals and managers of very small businesses say they will have earned less than the minimum wage in Q3 2024.

Deteriorating professional situations

More than one in two VSEs encounter cash flow problems

While 55% of SME managers express cash flow difficulties, the situation is even more critical for those who have a PGE currently being repaid. It should nevertheless be noted that, overall, the rate of independent professionals and SME managers experiencing cash flow problems has been steadily declining since the beginning of 2024.

Thus, at the same time last year (in Q3 2023), 65% of respondents reported experiencing such difficulties. However, two elements tarnish a possible positive assessment of this improvement in cash flow:

63.000 VSEs have closed their doors and more than 250.000 have voluntarily ceased their activity. This improvement in the appreciation of cash flow can therefore be analyzed as the consequence of a “clearing” of the market.

Alongside this improvement in cash flow, there has been a deterioration in the remuneration of managers. In fact, the reduction in the level of remuneration is the first lever used by managers of very small businesses to improve their cash flow.

Increased difficulties in the event of ongoing repayment of a PGE

In fact, 68% of them express cash flow difficulties, including significant difficulties in 36% of cases.

In fact, many VSEs are still repaying their PGE for a monthly payment of €2000 on average. 86% of respondents still have to repay their PGE, mostly until 2026 (55%) but also 2027 (18% of cases) or even 2028 (9%). Although the PGE does not in itself represent the trigger for the difficulties of the VSEs concerned, it currently represents, in light of the economic context, an aggravating factor in the ability to maintain activity. As the SDI had pointed out, the mechanism for referring the matter to the Credit Mediator has not been an improving factor.

The causes of degraded cash flow

An extension of payment deadlines for B2B VSEs

According to COFACE (Survey of 18/09/2024) 95% of VSEs grant payment terms to their professional customers. However, in 2024, 73% of VSEs noted an increase in late payment terms compared to 55% for ETIs and large companies.

To this first element that can justify tight cash flow, it is appropriate to add the sharp increase in failures of SMEs and mid-cap companies, which are the ordering parties of VSEs. Between late payments and bad debts, cash flow, the traditional Achilles heel of VSEs, makes the situation of many VSEs very unstable.

A general drop in consumption

63% of respondents indicate that they will see a decline in their activity in Q3 2024 compared to Q3 2023. In fact, the constant decline in inflation in 2024 to reach 1,2% over one year in September according to INSEE has so far had no positive impact on consumption as noted by independent professionals and managers of very small businesses. 84% of them have not noted any increase in consumption since August 2024.

A sharp drop in banking support

Cash credit agreements down 12 points

A traditional warning signal of a deterioration in confidence in the economic situation, banking support for VSEs is showing a significant decline, particularly with regard to cash flow loans. While more VSEs have requested a cash flow loan (13% compared to 11%), only 57% (compared to 78%) of them have obtained it in full and 8% (compared to 17%) partially. 27% (compared to 14%) have encountered an outright refusal. In total, only 74% of VSEs obtain the requested credit in full or in part compared to 86% in Q2 2024.

Investment credit agreements down 7 points

This trend is also present with regard to investment credits, served at 87% compared to 94% in Q2 2024.

Recruitment in decline

Hiring intentions at their lowest

The number of professionals indicating that they are looking for staff is at its lowest since the beginning of 2024, falling to 13% in Q3 2024 compared to 22% in Q1 and 19% in Q2. The weakness of this figure as well as its constant deterioration can be attributed to:

• Low consumption levels;
• The persistence of political and economic uncertainty.

On this last point, the survey was carried out before the Prime Minister's general policy speech and the announcement of €60 billion in savings to affect the entire population and businesses, well beyond the first indications of targeting the wealthiest.

The level of charges on salaries still the number 1 obstacle to hiring

While a certain number of professionals prefer not to have employees, the level of payroll taxes remains the primary obstacle to hiring, followed by the question of the economic situation. This data demonstrates the potential for jobs within VSEs subject to a reduction in payroll taxes. This is clearly not the path taken by the new government, which intends to increase the minimum wage in advance (+2% on 1/11/2024) while VSEs employ a third of their employees at this level of remuneration and up to 40% in labor-intensive sectors.

The government's plan to review the structure of aid for low wages to transfer the benefit to wages above the minimum wage also risks having a significant impact on the payroll of VSEs. In a context of very low growth (+1,1% in 2024 and 2025), adjustments will undoubtedly be necessary, either on prices or on the number of employees.

In fact, 65% of respondents say they are unable to handle a 2% increase in their payroll. Very serious recruitment difficulties In addition to these declining hiring intentions, it is important to highlight the very serious recruitment difficulties. The professionals surveyed are almost unanimous in describing a job market essentially composed of unmotivated and/or incompetent people.

Taxes for all?

The very principle of increasing taxes on the most profitable companies only appeals to 38% of the professionals questioned, even if it were targeted only at large companies.

According to 62% of respondents, SMEs will be affected

A premonitory assessment. This result, which predates the Prime Minister's general policy speech, proves to be premonitory. In fact, if very small businesses and SMEs are not affected by a tax increase in the fiscal sense of the term, they will be affected by an increase in charges:

• Anticipated increase in minimum wage of 2%;
• Extension of value sharing;
• Reform of aid for low wages.

An assessment based on the empirical experience of the CICE

Small businesses that are subcontractors and customers of large companies are used to the practices of these principals who systematically pass on the effects of increases in costs to them, or even capture their added value. Thus, when the CICE was set up, there were many examples of subcontractors from whom their principals demanded price reductions.

Should social protection in France be reviewed?

A system in pain

The social protection system in France, whose financing is essentially based on contributions from work, is unable to maintain its balance and even less able to respond to the growing needs of hospitals, the demands of health workers and city doctors, and the care of the elderly. This is why the SDI has tried its hand at the provocative question of proposing a move to an entirely private health system.

A provocative question

A provocative question because independent professionals and managers of very small businesses are basically particularly attached to universal and united social protection, just like all citizens. This is demonstrated by their comments, but also by the practice of creating businesses. Thus, the SAS (Simplified Joint Stock Company) is today the leading form of company creation, well ahead of the SARL. The reason is simple: the manager of an SAS is “assimilated to an employee” and is therefore covered by the general social security system, both for sickness and for pension rights. The situation is also very common among minority and equal managers of SARLs who benefit from a so-called technical employment contract, i.e. not attached to the management of the company.

Abuse and fraud

On the other hand, they denounce its abuses, the lack of controls and fraud. Assessments largely based on their personal experience with dishonest employees. Many believe that, in any case, the system for reimbursing health care costs is already largely privatized due to the intervention of supplementary health insurance, mutual insurance companies, insurance companies and provident organizations, whose high cost they denounce in passing.

Health insurance in question

On this last point, the figures show that the level of participation of all complementary health insurance in the consumption of medical care and goods is 12,6% (in 2022). On the other hand, the management costs of complementary health insurance, an integral part of contributions, are proportionally 8 times higher than those of Social Security with €7,7 billion. Perhaps an avenue to explore for the Prime Minister in his search for savings and increased purchasing power.

Illustrative image of the article via Depositphotos.com.