MNI BRIEF: Financing, Energy, Labour Hitting EZ Firms - ECB

Business activity among euro area firms continues to improve, but increased materials, energy and labour costs are dampening profitability, the European Central Bank reported on Tuesday, with access to external funding expected to deteriorate despite banks’ current willingness to lend.

Larger firms were more likely to have experienced an increase in turnover, with 93% of companies responding to the Survey on the Access to Finance of Enterprises (SAFE) reporting an increase in the costs of raw materials and energy, and 71% confirming increased labour costs. Both SMEs and large firms saw protfits decline, but -19% and -9%, respectively.

On average, just under 9% of all firms reported a funding gap, while the proportion of euro area firms cited higher bank interest rates had more than doubled from the previous survey round to 71%.