Chapter 14. Czech Republic

Figure 14.1. Structure and performance of the SME sector in the Czech Republic
Figure 14.1. Structure and performance of the SME sector in the Czech Republic

Sources: A, B, For creations (employer enterprise births), OECD Structural and Demographic Statistics Database 2018; for bankruptcies, Financing SMEs and Entrepreneurs 2018: An OECD Scoreboard; Chart C, D: OECD Structural and Demographic Business Statistics Database 2018, http://dx.doi.org/10.1787/sdbs-data-en; Chart E: OECD Structural and Demographic Business Statistics Database 2018, Employer Business Demography dataset.

 StatLink http://dx.doi.org/10.1787/888933925065

SME business conditions and access to strategic resources

Institutional and regulatory framework

A series of measures have been introduced since 2008 to reduce the administrative burden on SMEs. However, procedures remain complex, and the cost of enforcing contracts is one of the highest in the EU. An extensive amendment to Act No. 182/2006 Coll. on Insolvency came into effect in 2017. It fundamentally changes many aspects of insolvency proceedings, including a so-called “insolvency cap” that shifts the emphasis when assessing the inability to pay debts to the real liquidity of the entrepreneur, thus helping debtors defend themselves more effectively in the event of unjustified insolvency petitions against them.

Market conditions

Several support services to SMEs are available for internationalisation. In 2016, the Czech Trade agency launched three programmes, ‘NOVUMM, NOVUMM KET & DESIGN’, all of which support SMEs in taking part in exhibitions and fairs abroad in priority sectors, including key enabling technologies and design. In 2017, an amendment to the Czech Labour Code became effective that aims at limiting administrative demands imposed on employers, relating in particular to so-called Home Office (teleworking), holiday leave, and the transfer of employees to another job.

Infrastructure

The National Research, Development and Innovation Policy of the Czech Republic 2016-20 aims to ensure consistency across strategies and programmes, with more emphasis on applied research. In addition, a new evaluation framework (Metodika 2017+) for R&D support is expected to be fully implemented by 2020. Since 2016, the ICT and Shared Services programme offers grants to businesses specialised in ICT, software development, big data and cloud solutions to enhance their competitiveness on global markets. In 2016, the ‘Low carbon technologies’ (Nízkouhlíkové technologie) programme was introduced, which supports Czech SMEs in introducing innovative technologies in the fields of e-mobility, energy management and utilisation of secondary raw materials.

Access to finance

The financing environment for Czech SMEs has continued to improve since the crisis. Loan rejections fell from 17.6% in 2013 to 3.2% in 2016, and SME interest rates have more than halved since 2008. However, equity funding and venture capital (VC) investments remain underdeveloped. In 2017, the first programmes supporting VC were introduced in co-operation with the European Investment Fund (EIF), along with the EXPANSION programme, which provides SMEs with guarantees and preferential loans. In 2018, the Czech-Moravian Guarantee and Development Bank launched VADIUM, which gives small entrepreneurs up to CZK 50 million guarantee for bids in public tenders.

Access to skills

Skills shortages in the workforce remain a policy priority for the Czech government, with vacancies at employment offices increasing more than seven-fold over 2010-2018 and a persistent skills mismatch on the labour market, including high shares of under-skilled workers. At the end of 2016, a new call for applications to the ‘training centres’ support programme (Školicí střediska) was launched in order to create new centres and modernise existing ones for the benefit of SMEs. The Czech Republic is also returning to a dual education system that supports polytechnic education, introduces modern technology into teaching in primary and secondary education and should produce graduates of technical secondary schools.

Access to innovation assets

The percentage of Czech SMEs selling online and turnover from e-commerce are above OECD average. At the same time, SMEs lack the ability to innovate in-house or introduce non-tech innovations. The government has a range of tools to support innovation, including regional innovation vouchers, proof-of-concept funding and streamlined support for applied research projects. The launch of a National Innovation Fund was suspended in 2018, but the government still plans to support innovative start-ups through seed and development finance, as well as to strengthen links between firms and research institutions, albeit with a heavier reliance on private VC funds. The TREND programme was approved end 2018 with a total CZK 15 billion budget for 8 years (of which CZK 10 billion of state support) in order to increase the competitiveness of R&D performing companies and start-ups.

The full country profile is available at https://doi.org/10.1787/34907e9c-en

References

API (2016), Školicí střediska – Výzva II, Agentura Pro Podnikani a Inovace, https://www.agentura-api.org/programy-podpory/skolici-strediska/skolici-strediska-vyzva-ii/.

Euroactiv (2018), Národní inovační fond nebude, české startupy ale zoufat nemusí, https://euractiv.cz/section/all/news/narodni-inovacni-fond-nebude-ceske-startupy-ale-zoufat-nemusi/.

European Commission (2017), 2017 SBA Fact Sheet Czech Republic, https://ec.europa.eu/docsroom/documents/29489 (accessed on 10 August 2018).

OECD (2018), OECD Economic Surveys: Czech Republic 2018, http://dx.doi.org/10.1787/888933790182.

OECD (2017), Going for Growth 2017 - Czech Republic Country Note, http://www.oecd.org/eco/growth/going-for-growth-2017/ (accessed on 10 August 2018).

TaylorWessing (2016), Extensive Amendment to Labour Code in the Czech Republic, https://czech-republic.taylorwessing.com/en/extensive-amendment-to-labour-code-in-the-czech-republic.

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