“Saving” Greece by Destroying its Economy!

Endeavor Greece Report: New company formation 50% down vs. 2008

1 February 2017

Endeavor Greece, the global non-profit organization supporting entrepreneurship, issues new report on company formation based on data from General Commercial Registry (GEMI). For 2016, Endeavor reports a 50% drop in the number of new companies in comparison to 2008. In particular, 28,615 new companies were registered in 2016, decreased by 33% vs. 2012. This dramatic drop drives the negative balance between company formation and closures, as the number of companies that seized operations appears to have dropped by ~5,500 reaching 35,159. For the first time, company closures in 2016 surpassed company formations by 6,500.

Despite the sharp drop in Greek’s disposable income, local entrepreneurial ventures remain largely focused on non-productive and introvert sectors, such as restaurants/bars/catering and retail. The only exception is tourism & travel demonstrating significant increase in number of new companies (+31% between 2012-2016), but also a clearly positive balance between new and closed companies.

84% of new companies in Greece still focus on introvert sectors (e.g., restaurants, bars, coffee shops, accounting/consulting services). This percentage is lower than the one in 2012 (88%), however this marginal increase is not sufficient to accelerate transformation of Greek economy and rapid job creation.
Indicatively, some “popular” categories of new companies for 2016 are the following:
o Restaurants, bars, catering, food retail: 5,613 new companies, decreased by 41% in comparison to 2012
o Other retail: 3,200 new companies, decreased by 49% in comparison to 2012
o Tourism & Travel: 1,347 new companies, increased by 31% in comparison to 2012
o Construction: 986 new companies, decreased by 25% in comparison to 2012
o Manufacturing: 850 new companies, decreased by 29% in comparison to 2012
o Accounting & Consulting Services: 966 new companies, decreased by 16% in comparison to 2012

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Apart from tourism, the vast majority of sectors has suffered drops larger than 30% on average. The energy sector suffered the greatest drop which reached 93%.
It is worth mentioning that even sectors with international orientation, such as food processing and ICT have also suffered drop in company formation by 38% and 27% respectively.
The report also looks at the balance between company formation and closures per sector for 2016. Indicatively, the balance is clearly negative in the following sectors:
o Retail (955 more closed companies than registrations)
o Construction (640 more closed companies than registrations)
o Manufacturing (424 more closed companies than registrations)

On the other hand, the balance is positive mainly in tourism (622 more new companies than closures), medical services, agriculture, financial services, but also restaurants/bars/catering.
New companies in extrovert sectors have decreased in absolute figures but marginally increased as percentage of total registrations, accounting for 16% in 2016 vs. 12% in 2012. 75% of this increase is attributed to tourism.
After 8 years of recession, Greek economy continues to seek a new stable equilibrium position. However, with the only exception of tourism, it has not managed to overcome introversion and focus on domestic consumption. Greece risks being trapped in stagnation, driven by sharp decline in healthy business formation, which is the only solution for mid-term drop in unemployment rates and reversal of brain drain.