SMEs and entrepreneurs have suffered from the COVID-19 crisis and fallout from Russia’s aggression against Ukraine. They were disproportionately affected by liquidity shortages and supply chain disruptions, with some groups, such as women, youth, and the self-employed, particularly vulnerable. In this adverse environment, governments have stepped up and provided unprecedented support. However, supply chain disruptions, energy and food price volatility, and inflationary pressures remain. Building the resilience of SMEs and entrepreneurs to address the challenges of tomorrow is critical. Policies may need to evolve to support viable SMEs without compromising new entries, shift from blanket to targeted approaches, and aid small businesses transition to energy efficiency and adapt to an increasingly digital world.

Access to finance is critical to enable SMEs and entrepreneurs to start-up, invest, grow, and respond to shocks. SMEs were hit hard during the COVID-19 crisis due to weaker liquidity buffers. Many came out of the crisis with higher levels of debt. Macro-economic developments in 2022 and 2023, notably sluggish growth, inflation, and higher interest rates have weighed again on both debt and non-debt financing for SMEs. Going forward, Governments must continue to enable the diversification of financing instruments, including by leveraging financial technologies. The implementation of the OECD Recommendation on SME Financing will support these efforts.

SMEs and entrepreneurs are highly dependent on skills to remain competitive but face greater challenges than larger firms in accessing and retaining skilled labour. They are disproportionately affected by skills shortages which can result in a reduced capacity to buffer through re-organisation, outsourcing, or automation. The traditional challenges SMEs and entrepreneurs face in accessing skills is magnified by the scale and rapidity of structural transformations taking place. Rapid technological changes are creating new skills gaps, while the demand for soft skills is also increasing. Skills ecosystems, encompassing local entities like incubators, accelerators, education and training institutions, can help SMEs access expertise and knowledge.

Entrepreneurship and business development continue to be hampered by inequality of opportunities. These entrepreneurship gaps are costing economies in missed opportunities for job creation, growth, and innovation. Underrepresented and disadvantaged groups in particular face institutional barriers, limited access to finance, lack of skills, and small networks. Inclusive entrepreneurship policies have been implemented to address these gaps, but more government action is needed to unleash the untapped entrepreneurial potential in the population, including tailored support for underrepresented groups.