Sofia Investment Agency Publishes a New Report on the Role of Small and Medium Enterprises in Sofia’s Economy

The team of Sofia Investment Agency published its new report titled “The Role of Small and Medium Enterprises in Sofia’s Economy “, developed by the Institute for Market Economics for Sofia Investment Agency. The paper contains data and analysis of the state and trends of small and medium-sized enterprises in Sofia, based on their development over the past five years, as well as an overview of their economic role in Bulgaria as a whole.

The study examines the distribution of the companies in Sofia, their entrepreneurial activity and the viability of the new companies. Special attention is paid to role small and medium-sized businesses play in Sofia’s development, as well as to employment, salaries and labor productivity in the different types of companies based on their size and industry.

Overall, the results of the study are quite encouraging. As it is in other European economies, SME-s make up the vast majority of the companies based in Sofia and produce the biggest portion of the output. The SME sector is also experiencing the highest levels of entrepreneurial activity. Medium-sized businesses are leading both in terms of labor productivity and levels of remuneration. Micro and small businesses have the fastest growth in a number of indicators and their importance for Sofia’s economy is likely to increase in the future.

Here are some of the main highlights of the report:

• Between 2012-2017, the total number of companies in Sofia rose by 12.3%, compared to an 8.4% growth in the country as a whole;
• The number of small businesses had the fastest growth rate – 12.7%, followed by the growth in the number of large companies – 12.1%.

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• Microenterprises with fewer than 9 employees constitute the majority of the firms in Sofia (according to data on enterprise demography, most likely the majority of these companies are sole traders)  In 2017, 108 000 out of the 117 000 enterprises registered in Sofia were microenterprises.
• The number of companies with over 10 employees was much smaller – 7 400 of the companies were small, 1 400 were average-sized and only 290 were big, with over 250 employees.
• In almost all sectors of the economy micro-enterprises accounted for 85-90% of the enterprises, small enterprises accounted for 5-10%, medium-sized firms for 1-2%, and big ones for less than 1%.
• A total of 38.9% of all big companies are registered in Sofia, including 74% of the large  trade companies and a large share of the ICT companies – 60% of the micro, 71% of the small, 77% of the medium-sized and 93% of the big companies in the sector are situated in Sofia.
• More than 80% of the large and medium-sized companies for outsourcing of professional activities are located in Sofia.  
• In terms of outsourcing of administrative and auxiliary services, 70% of the large companies, and about 50% of the enterprises of other sizes operate in Sofia.
• The companies ‘born’ in Sofia in 2016 were concentrated in several sectors: trade with    4 800 new companies, followed by professional activities with 3 200 new companies. The ICT sector also experienced active entrepreneurial activity, with 1 200 companies ‘born’ in 2016 alone.
• Most of the new jobs in Sofia were created by microenterprises. In 2016 there were 16 500 people employed in newly created companies with under 9 employees and 3 400 people working in new small companies; Most of the new employment was created in the trade and retail sector (6 300 new jobs), professional activities (2 800 new jobs), hospitality and restaurant services (1 800 new jobs).
• In 2017, Sofia’s output volume reached BGN 60.9 billion or just over 36% of Bulgaria’s total output. Output is distributed relatively evenly between the different size groups, with a slight prevalence of companies with more than 250 employees (30% of the total output).
• The importance of small and medium enterprises for the economy of Sofia is extremely high. Micro-enterprises and SME-s account for 70% of the total output of the city.
• Out of the total 755 000 employed in Sofia in 2017, small and medium-sized businesses accounted for 63% or some 2/3 of the employment. The remaining 37% worked in large companies.  

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• Large companies registered the fastest growth in employment – 37.6%, followed by small companies – 8.8%.
• Between 2012-2016, the wage growth in Sofia was 33% on average and was remarkably constant among the four types of companies grouped by size. Medium-sized companies registered the fastest growth in salaries (33.1%) and large firms – the slowest (31.1%).
• Medium-sized companies offered the highest average gross monthly salary in Sofia – BGN 1 471, which was very close to the average salary in the big companies – BGN 1 458; salaries in small companies and microenterprises are much lower – BGN 1 211 and BGN 873 respectively.

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• The medium-sized companies in Sofia have the most productive workers, with an average of BGN 40 500 gross added value (GAV) per year per employee in 2017. Large companies come next, with BGN 33 400 GAV per employee. Most likely this is among the main reasons why the salaries in medium-sized companies are higher than in the large ones.

More detailed data, charts, analyzes and trends can be found in the full version of the report.

‘The Role of Small and Medium Enterprises in Sofia’s Economy’ report was developed by the Institute for Market Economics for Sofia Investment Agency.

If you have any questions related to the report or other data regarding the investment climate in Sofia, do not hesitate to contact our team at contact@investsofia.com.