Resilience and vulnerabilities of small-to medium-sized enterprises

Business resilience put to the test

Growth of the French economy continues to lose steam

In the second quarter of 2026, French GDP grew by 0.5% year on year, half the rate achieved by Germany, Italy, and the euro area taken as a whole. Growth even rose above 2% on the Iberian Peninsula. The slowdown in economic activity is largely the consequence of subdued demand, both at home and abroad.

The relatively solid performance of manufacturing industry proved insufficient to offset a gloomy business climate in construction and retail. The latest available forecasts point to growth of just 0.4% for 2026 overall, compared with the 1.0% expected by the consensus at the start of the year.

A greater need for financing

Non-financial corporations are suffering from this sluggish business environment. Their profit margin has fallen by nearly one percentage point (pp) compared with last year. Their savings rate has dropped back to its 2020 low. Their investment rate, however, remains relatively high owing to the capital spending needed to support the environmental and digital transitions.

The resilience of investment is chiefly driven by spending on services, particularly in information and communication, which includes spending on artificial intelligence. From 2022 through the first half of 2026, this spending grew much faster than investment overall: +26% versus +10%.

Within the manufacturing sector, manufacturers cite the modernization and streamlining of production as their main investment priority, at the expense of ethe replacement of existing equipment and the expansion of production capacity.

All in all, the decline in corporate profitability combined with resilient investment is creating a need for financing that, in the first half of 2026, has already risen above the level it reached in 2025.

Rising debt

This financing requirement is having a negative impact on companies’ cash positions. Net credit flows are rising in response to this situation: +€35 billion from January to July 2026, compared with +€21 billion over the same period in 2025. Per lending category, this sharp increase is chiefly driven by short-term cash loans. At the same time, we observe a decline in net financial investments, standing at −€25 billion from January to July 2026, compared with −€17 billion in the first seven months of 2025.

+€35bn Net credit flows between January and July 2026

Following the rise in market interest rates over the summer, both in money markets and in sovereign bond markets, interest rates on bank loans for investment purposes could increase to 4.0% by the end of the year, up 50 basis points from their June level.

This would add to the burden on businesses, as their existing debt is only partially shielded from the increase, given that around 22% of loans carry variable rates. Some investment projects may well be postponed or canceled as a result of higher borrowing costs and a more negative business outlook.

Business demographics are (still) holding up

New business creation shows no sign of slowing

The creation of new businesses remains particularly buoyant: +11% year on year in August, reaching 1.25 million over the past 12 months. Most new businesses are micro-enterprises (+14%, to 0.84 million), followed by companies (+7%, to 0.31 million) and sole proprietorships (+4%, to 0.11 million). By sector, momentum is chiefly driven by business services, where start-ups are up 19% and which account for one in four new creations. The other business sectors are also buoyant, with the exception of transportation (−1%) and, above all, financial activities (−10%).

Business failures continue to rise

Business failures continue to rise at an almost unchanged pace of +2% year on year, to nearly 70,000 between September 2025 and August 2026. The number of jobs at risk remains on a high plateau, at 286,000 over the 12 months to August 2026.

The picture is similar across company categories, except for businesses with no employees: +5% year on year, compared with near-stability for very small enterprises (VSEs), SMEs, and intermediate-sized enterprises (between −1% and +1%). As for jobs at risk, the decline is concentrated among intermediate-sized enterprises (−13%).

Given the strong growth in the business population in France, the business failure rate (the number of failures relative to the total number of businesses) provides a useful complementary measure. This statistic has remained broadly stable at a high level for nearly three years, both for businesses overall and for each company category. However, business failures are expected to rise in the coming months, reaching 71,000 for 2026 overall.

At the start of the year, BPCE L’Observatoire forecast 69,000 failures. This year’s events, first and foremost the surge in energy inflation caused by the conflict in the Middle East, have worsened the terms of trade and financial conditions while weighing down on business activities, and therefore on demand for companies’ goods and services.

71,000 Number of business failures expected for 2026

Real estate, retail, and road freight hit particularly hard

Real estate is particularly affected by the downturn in economic activity and by rising interest rates. Sales of existing properties slowed in the first half of the year, while the crisis in new housing drags on, with reservations hitting a new low in the second quarter of the year. At 16,800, business failures in real estate are down 4% year on year but still remain at a historically very high level. New business creations in the sector are still above pre-Covid levels.

The retail sector, for its part, is being hit by weak household purchasing power. After nearly four years, purchasing power in the first half of 2026 is only 1.4% higher than in 2022. At the same time, consumer lending is slowing, as the household savings rate remains above its average, probably also because of high interest rates.
French consumers have also shifted their spending toward household equipment and services, and away from food, clothing, and car purchases. Over the past 12 months, business failures in retail remain high, at nearly 15,500 (+2% year on year). These recent changes are nevertheless accompanied by buoyant start-up activity, a sign that the sector is transforming and attracting new players.

Road freight transport is being hurt first and foremost by higher fuel prices (+46% year on year, partly absorbed through fuel surcharge indexation). Combined with rising costs elsewhere (maintenance and repairs, driver pay, etc.) and weaker demand as economic activity slows, the situation is creating cash-flow difficulties in the highly competitive road freight sector (51% of firms reported a decline in their cash position in the second quarter of 2026, up 7 points year on year). Although bankruptcies are down 9% year on year, business failures in road freight, at 1,700, remain at a historically high level.

The great wave of business transfers has yet to materialize

370,000 businesses looking for new owners in the next five years

A demographic shock is also set to hit businesses, starting with those that will be sold or handed over when their owner-managers retire. In November 2025, Bpifrance estimated that 370,000 businesses could potentially change hands by 2030, with 3 million jobs at stake, or an average of 74,000 businesses a year. In practice, only 37,000 businesses a year changed hands in 2023 and 2024, just half of the 74,000 potentially up for transfer.

This issue is strategically important in several respects:

• the built-up wealth of expertise and know-how, and their transmission, could disappear when the owner-manager leaves;
• the question of sovereignty becomes an issue in strategic sectors (defense, health, energy) if the business is bought by foreign buyers;
• the regional dimension is also a major issue in business transfers, as they help maintain jobs and economic vitality, especially outside major urban centers;
• the competitiveness of the French economy is also tied to business transfers, which help preserve French market share against foreign competition.

Business transfers have stalled for the past two years

There is no increase in business transfers: BPCE L’Observatoire still estimates the number of businesses sold at nearly 37,000 a year in 2025 and 2026, still falling far short of the estimated potential of 74,000 transfers a year.

At the same time, the age of the owner-managers of SMEs and intermediate-sized enterprises continues to increase. The share of older company executives at French SMEs and intermediate-sized enterprises rose from 17.4% in 2010 to 27.6% in 2025. The latest data therefore show no clear sign of generational renewal, with older executives handing over to younger ones. Moreover, the share of executives aged 66 and over has doubled over the past 15 years, from 6.2% in 2010 to 12.4% in 2025. SME owner-managers are thus staying at the helm of their companies for longer.

There are many obstacles to business transfers:

• psychological and relational obstacles, linked to the owner-manager’s failure to plan ahead for the transfer of his or her company, an unresolved sense of loss at parting with the business (particularly among founders), and the company’s limited ability to operate independently once its long-standing leader (the key person) has left,
• technical and financial obstacles, resulting from a series of shocks (Covid, inflation, political uncertainty, etc.), the downturn in economic activity, and rising interest rates.

Nevertheless, business transfers offer many advantages and opportunities. All other things being equal, businesses that are taken over naturally perform better economically and financially than businesses created from scratch.

Wide disparities by size, sector, and geographical region

Despite a lackluster overall trend, the business transfer market is moving at several speeds:

• by size: businesses with no employees are seeing a sharp drop in transfers (−16% compared with 2019), probably linked to the wave of business start-ups. Transfers of VSEs with employees (1 to 9 employees) have been almost stable over the past 13 years (21,290 transfers in 2025). By contrast, the trend is much more favorable for SMEs and intermediate-sized enterprises (an estimated 5,830 transfers in 2025, up 31% compared with 2019), which naturally carry greater economic weight than VSEs and single-person businesses;
• by sector: transfers of SMEs and intermediate-sized enterprises in retail, hospitality (hotels, cafés, and restaurants), and industry are on an upward trend, unlike those in construction, where the transfer market is shrinking. The number of transfers of SMEs in business and household services was stable in 2025 compared with 2019;
• by region: transfers can be much more dynamic in some regions, such as Lower Normandy and Provence-Alpes-Côte d’Azur, where the transfer rate for SMEs and intermediate-sized enterprises is significantly higher than the national average (2.7% versus 2.3% in 2025). Other regions tend to lag behind, such as Champagne-Ardenne (1.7%). These differences are largely due to the economic structure of these different regions.