4.1.4. Summary of intermediate performance indicators

From the analysis of the firm performance indicators it is possible to conclude that Basque firms remain in a good position in terms of productivity and labour costs. Although it slowed somewhat in the last year, we see a pronounced recovery in productivity, especially in the manufacturing industry. In terms of labour costs per employee (LCE), the Basque Country is still reporting lower values than those for Germany, although higher than the average for Spain and the EU-28 as a whole. From the combination of the two indicators, we can see an improvement in competitiveness in the Basque Country in terms of unit labour costs (NULC) and especially in real unit labour costs (RULC), which supports the recovery of business profit margins.

Generally speaking, firms have had risk-averse financial strategies. They have continued to reduce debt and consolidate their equity, making it more sound. Additionally, Basque firms had a higher return on assets (ROA) than the cost of debt in 2017, thus finding themselves with positive financial leverage. Although the overall ROA of Basque firms is showing a recovery, Basque firms demonstrate a lesser capacity to obtain profits from activity in other territories, especially as regards to financial assets (return on financial assets). The profitability level of their operating assets (operating ROA) is similar to that of the benchmark European countries, the latter being the indicator that would best reflect the competitiveness of production activity carried out in the territory.

We do not see big changes in firm performance in aspects related to innovation in comparison with earlier years in the recovery from the crisis. The percentage of enterprises (10 or more employees) with some type of innovation is lower than in other comparable territories, in both industry and services, although the lag is particularly concentrated in smaller firms. However, we find considerable differences between the performance of firms in technological innovation and nontechnological innovation. The Basque Country is better positioned in technological innovation, with particularly high rates of technological innovation at larger firms, to which is added the development of a considerable culture of cooperation. The relative strength of the Basque Country in technological innovation lies primarily in process innovation, including among small firms. However, the Basque Country makes a poorer showing in non-technological innovation, both organisational and marketing, especially among medium-sized firms, and most of all, small ones. Lastly, with the ability to combine technological and non-technological innovation being an important source of competitive advantage, Basque firms also have room for improvement in this area, as they lag behind the EU and Germany.

However, it appears that since the recovery, Basque business is maintaining the status quo and adopting a conservative profile in its efforts and types of innovation, as well as its financial strategy. Despite the preceding, or thanks to it, Basque firms are managing to maintain good competitive capacity in terms of productivity and costs.