Small and medium-sized enterprises

Micro, small and medium-sized enterprises (SMEs) constitute 99% of companies in the EU. They provide two thirds of private sector jobs and contribute to more than half of the total added value created by businesses in the EU. Nine out of ten SMEs are actually micro enterprises with fewer than 10 employees. Various action programmes have been adopted to support SMEs, such as the Small Business Act, which encompasses all of these programmes and aims to create a comprehensive policy framework. The Horizon 2020 and COSME programmes have also been adopted with the aim of increasing the competitiveness of SMEs through research and innovation, and providing better access to finance for SMEs.

Legal basis

Small and medium-sized enterprises (SMEs) operate mainly at national level, as relatively few SMEs are engaged in cross-border business within the EU. However, independently of their scope of operations, SMEs are affected by EU legislation in various fields, such as taxation (Articles 110 to 113 of the Treaty on the Functioning of the European Union (TFEU)), competition (Articles 101 to 109 TFEU) and company law (right of establishment — Articles 49 to 54 TFEU). The Commission’s definition of SMEs can be found in Recommendation 2003/361/EC.

Objectives

Micro, small and medium-sized enterprises make up 99% of all businesses in the EU. There are about 21 million SMEs, employing about 33 million people and constituting an essential source of entrepreneurial spirit and innovation, which are crucial for the competitiveness of EU companies. EU policy for SMEs aims to ensure that Union policies and actions are small-business-friendly and contribute to making Europe a more attractive place for setting up a company and doing business.

Achievements

a.Small Business Act (SBA)

The most comprehensive and encompassing initiative on SMEs to date was brought forward by the Commission in June 2008, in the form of a communication on the Small Business Act (SBA) (COM(2008) 0394). The SBA aims at creating a new policy framework integrating the existing instruments and building on the ‘European Charter for Small Enterprises’ and the ‘Modern SME Policy for Growth and Employment’. It takes a ‘political partnership approach with Member States’ rather than proposing a fully fledged Community approach. The SBA aims to improve the overall approach to entrepreneurship in the EU by ‘thinking small first’.

1.Smart regulation

Cutting red tape and bureaucracy is a high priority for the Commission in the SBA. Making public administrations more responsive to the needs of SMEs can make a major contribution to their growth. The ongoing implementation process for the Services Directive (Directive 2006/123/EC) should contribute to this goal, reducing regulatory barriers to cross-border service activities.

The amendment to the Late Payments Directive (requiring public authorities to make payment within 30 days, which serves as a security guarantee for SMEs) and the Directive on e-invoicing (giving e-invoices equal status to paper ones) are particularly helpful to small businesses. Furthermore, the modernisation of EU public procurement policy means that SMEs now experience lighter administrative burdens when accessing public procurement and have better opportunities for joint bidding. The same approach has been found to simplify financial reporting obligations and to reduce administrative burdens for SMEs through the modernisation of both public procurement in the EU and the existing Accounting Directives (Directive 78/660/EEC and Directive 83/349/EEC, (COM(2011) 0684).

2.Access to finance

Financial markets have often failed to provide SMEs with the financing they need. Some progress has been made over the last few years in improving the availability of financing and credit for SMEs through the provision of loans, guarantees and venture capital. The European financial institutions — the European Investment Bank (EIB) and the European Investment Fund (EIF) — have increased their operations in respect of SMEs.

However, the SBA still identifies access to finance as being the second-largest problem faced by individual SMEs. More than EUR 1 billion was made available in the 2007-2013 period under the Competitiveness and Innovation Framework Programme (CIP), enabling financial institutions to provide a total of EUR 30 billion to an estimated 400 000 SMEs. Provision was also made for improved availability of microloans.

Furthermore, in November 2011 the Commission proposed an ‘action plan to improve access to finance for SMEs’ (COM(2011) 0870). Among other things, the action plan includes policy initiatives to ease access to venture capital markets for SMEs. It also aims to present solutions in 2013 with a view to eliminating tax obstacles to cross-border venture capital investment.

3.SMEs in the single market

The SBA, the Commission communication entitled ‘Towards a Single Market Act — For a highly competitive social market economy’ (COM(2010) 0608), and the Single Market Act II (COM(2012) 0573) stress the need for the continuous improvement of framework conditions for businesses in the single market. Various initiatives and measures exist or have been planned in order to facilitate the establishment and operation of SMEs in the internal market. SMEs have been granted derogations in many areas, such as competition rules, taxation and company law.

4.Competition policy

The EU’s state aid policy has, for a long time, treated SMEs favourably, recognising the special difficulties they face on account of their size. In 2008, a new exemption regulation (the General Block Exemption Regulation (GBER)) on state aid was adopted. Under the new rules, SMEs can receive investment aid of up to EUR 7.5 million for a given project without having to notify the Commission. The initiative also aims to facilitate environmental protection projects and promote female entrepreneurship. Furthermore, a number of state aid guidelines, including those on risk capital, will be revised in order to achieve the Europe 2020 objectives and respond to SME needs.

b.EU programmes and networks for SMEs

Examples of SME policies and networks aimed at SMEs include, firstly, general support services for SMEs in the EU, such as the ‘Enterprise Europe Network’, ‘SOLVIT’, ‘Your Europe — Business’, ‘SMEs and the Environment’, and ‘Dealing with Chemicals: National REACH Helpdesks’. Secondly, support for innovation and research includes the ‘IPR Help Desk’, ‘SME Techweb’, ‘China IPR Helpdesk for SMEs’, ‘European Business and Innovation Centres (BIC) Network (EBN)’, ‘Innovation networks’, ‘Gate2Growth’, ‘CORDIS Incubators Service’, ‘CORDIS European Innovation Portal’ and ‘Electronic Marketplaces’.

c.SMEs and research

Research and innovation are crucial to the sustainable success and growth of SMEs in the EU. The Horizon 2020 programme for the 2014-2020 period aims at creating a better and more comprehensive support environment for the research and innovation activities of SMEs. Major simplification should be achieved through a single set of rules. As part of this approach, SMEs are encouraged to participate through a new ‘specific SME instrument’, aiming to fill gaps in funding for early-stage, high-risk research and innovation by SMEs.

It should be noted that an interim evaluation of Horizon 2020 is a mandatory requirement under the regulation establishing Horizon 2020. The interim evaluation will contribute to improving the implementation of Horizon 2020 and will provide a solid evidence base for designing future activities and initiatives. In fact, the results will be used to prepare for the ex-ante impact assessment of the future Framework Programme for Research (starting in 2017).

d.Programme for the Competitiveness of Enterprises and SMEs (COSME)

The Programme for the Competitiveness of Enterprises and SMEs (COSME) was proposed by the Commission in November 2011 (COM(2011) 0834). In November 2013 Parliament approved the multiannual financial framework, allocating a budget of EUR 2.3 billion (in 2013 prices) to COSME.

COSME carries out its activities to a large extent under the current CIP programme, thereby pursuing the following general objectives:

  • to improve access to finance for SMEs in the form of equity and debt: an equity facility for growth-phase investment, and a loan guarantee facility which will provide SMEs with direct or other risk-sharing arrangements with financial intermediaries to cover loans; EUR 1.4 billion of the COSME budget is allocated to financial instruments;
  • to improve access to markets both inside the Union and globally: growth-oriented business support services will be provided via the Enterprise Europe Network in order to facilitate business expansion both within the single market and outside the EU;
  • to promote entrepreneurship: activities will include developing entrepreneurial skills and attitudes, especially among new entrepreneurs, young people and women.

According to the Commission, the programme is expected, on an annual basis, to help 39 000 companies to create or save 29 500 jobs and launch 900 new business products, services or processes.

Role of the European Parliament

As early as 1983, Parliament declared a ‘Year of Small and Medium-sized Enterprises and the Craft Industry’ and launched a series of initiatives to encourage their development. Since then, Parliament has consistently demonstrated its commitment to encouraging the development of European SMEs. For example:

  • In June 2010, Parliament adopted a resolution on Community innovation policy in a changing world[1]. In this resolution, it emphasises the need to create conditions whereby risk capital will be more readily available for SMEs. It calls for the development of SME financing tools, such as microcredit, venture capital for people seeking to invest in innovative enterprises, and ‘business angels’ to sponsor business projects by young researchers. It also calls for Member States and the Commission to create tax, financial, business and administrative incentives for investment.
  • In March 2011, Parliament adopted a resolution on an industrial policy for the globalised era[2]. Among other things, it calls on the Commission to proceed with the implementation of the SBA so as to reduce administrative burdens and ensure better access to financing opportunities for SMEs. It also calls for an updating of the definition of SMEs, with a view to allowing greater flexibility in specific industrial sectors. Furthermore, it urges the Commission to increase the participation of SMEs in the framework programmes for research and development.
  • In May 2011, Parliament adopted a resolution on the Small Business Act review[3]. In this resolution Parliament, among other things, calls on the Member States to adopt the last remaining proposal on the European Private Company Statute. It also stresses its concern that the SME test has not been applied properly and consistently in all new legislative proposals, particularly at national level. In addition, it warns Member States about ‘gold-plating’ in exceeding the requirements of EU legislation when transposing directives into national law.
  • In October 2012, Parliament adopted a resolution on ‘small and medium-sized enterprises (SMEs): competitiveness and business opportunities’[4]. In this resolution, it highlights a number of domains, including the reduction of administrative burdens, support for competitiveness and job creation, the launching of start-ups, and access to information and financing.
  • In January 2014, Parliament adopted a resolution on reindustrialising Europe to promote competitiveness and sustainability[5], stressing the importance of SMEs in the EU economy and calling for specific support and assistance for SMEs.
  • In September 2016, Parliament adopted a resolution on access to finance for SMEs and increasing the diversity of SME funding in a Capital Markets Union[6].

[1]OJ C 236 E, 12.8.2011, p. 41.

[2]OJ C 199 E, 7.7.2012, p. 131.

[3]OJ C 377 E, 7.12.2012, p. 102.

[4]Texts adopted, P7_TA(2012)0387.

[5]Texts adopted, P7_TA(2014)0032.

[6]Texts adopted, P8_TA(2016)0358.

Frédéric Gouardères

06/2017