REPORT on the fifth annual report of the European Observatory for SMEs (1997) (C40115/98)

25 June 1998

Committee on Economic and Monetary Affairs and Industrial Policy
Rapporteur: Mr Michel Ange Mathieu Scarbonchi

By letter of 23 January 1998 the Commission forwarded the fifth annual report of the European Observatory for SMEs (1997)(C4-0115/98) to Parliament.

At the sitting of 20 February 1998 the President of Parliament announced that he had referred the report to the Committee on Economic and Monetary Affairs and Industrial Policy as the committee responsible.

At its meeting of 23 January 1997 the committee had appointed Mr Scarbonchi rapporteur.

The Committee on Economic and Monetary Affairs and Industrial Policy considered the fifth annual report and the draft report at its meetings of 26 May 1998 and 25 June 1998.

At the last meeting it adopted the motion for a resolution unanimously.

The following took part in the vote: Secchi, vice-chairman; Scarbonchi, rapporteur; Areitio Toledo, Argyros (for Arroni), Castagnede, Caudron, Christodoulou, Cox, Cunningham (for Donnelly), Ettl (for García Arias), Fayot, Filippi (for Fourçans), Funk (for Friedrich), García-Margallo, Gasoliba I Böhm, Glase (for Garosci), Harrison, Hautala, Hendrick, Herman, Ilaskivi, Konrad, Langen, Larive, Lienemann (for Katiforis), Lindqvist (for Riis-Jrgensen), Lulling, Metten, Miller, Murphy, Paasilinna, Pérez Royo, Randzio-Plath, Rapkay, Read, Rübig, Theonas (for Ribeiro), Thyssen, Torres Marques, Watson, Wibe and Wolf (for Soltwedel-Schäfer).

The report was tabled on 25 June 1998.

The deadline for tabling amendments will be indicated in the draft agenda for the relevant part-session.


Resolution on the fifth annual report of the European Observatory for SMEs (1997) (C4-0115/98)

The European Parliament,

- having regard to the fifth annual report of the European Observatory for SMEs (1997)


- having regard to its resolution of 18 September 1997 on the fourth annual report of the European Observatory for SMEs (1996)[1],

- recalling its previous resolutions on policies for the benefit of SMEs and, in particular, its resolutions of 24 April 1997 on

- the craft industry and small enterprises, keys to growth and employment in Europe[2],

- the integrated programme for SMEs and the craft sector[3],

- the coordination of activities in favour of SMEs and the craft sector[4],

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0255/98),

A. whereas in 1996 99.8 % of the 19.0 million non-primary private enterprises were SMEs, while 92.9 % were very small enterprises,

B. whereas the total employment in SMEs rose from 68.7 million in 1995 to 75.7 million in 1996, the rise in employment in large scale enterprises was from 34.6 million in 1995 to 39.4 million in 1996,

C. whereas according to the data provided by the annual report SMEs are less vulnerable to business cycle fluctuations than large scale enterprises (LSEs),

D. whereas the analysis shows that in certain countries, the number of craft enterprises in 1995 has increased as compared to 1991; whereas however, the average size of craft enterprises decreased in most European countries,

E. whereas the transfer of ownership issue is becoming very important, as about a third of the small business owner-managers are at least 50 years or older,

F. whereas the European tourist industry can be characterised as an SME dominated sector, where around 99.95% of tourist enterprises employ less than 250 employees,

G. whereas the European tourist industry is facing new challenges, linked to a world-wide increase in competition, ever higher quality requirements, globalization and deregulation and growing environmental expectations, with business success ever more clearly dependent on price-toperformance ratio,

H. whereas the European SME tourist industry suffers from internal barriers, notably commercialisation, promotion, the introduction of new technology, access to capital, inter-firm co-operation, management, implying an urgent need to push towards modernisation,

I. whereas, in order to improve access for SMEs to venture capital, it is necessary to take into account these firms' specific problems and structures,

J. whereas SMEs are affected by a number of barriers in the environmental field through lower awareness of environmental issues, lack of personnel and scarce resources,

K. whereas its resolution of 1 April 1998[5] on measures of financial assistance for innovative and job creating SMEs considered a number of new schemes, notably the SME Guarantee Facility,

1. Welcomes the Fifth Annual Report 1997 of the European Observatory for SMEs as informative and comprehensive documentation of the trends, practices and developments in the European Union, Iceland, Liechtenstein, Norway and Switzerland;

2. Welcomes the inclusion in the fifth annual report of in-depth thematic studies on "SMEs in Tourism" and "SMEs and the Environment", which have been neglected so far;

3. Welcomes the inclusion of the new chapter, 'The European SME Scoreboard', which provides useful background data on the structure and development of SMEs;

4. Calls once again for the simplification and improvement of the legal framework conditions for SMEs, and in particular for the long-term monitoring of new EU legislation having an impact on SMEs; welcomes, in this connection, the progress made by the SLIM project, now in its third phase, and recommends its rapid extension;

5. Calls for speedier procedures and payment arrangements in connection with SME aid programmes; therefore supports the introduction of 'one-stop shops' which bring all services for SMEs under one roof, thus simplifying the subsidies application procedure;

6. Welcomes the chapter on SMEs in less favoured areas and calls for better targeting of SMEs in rural areas in programmes such as LEADER and Objective 5b in order that they can provide a better range of employment opportunities;

7. Calls on the Commission to ensure that, in future aid programmes, SMEs in rural areas continue to receive special support in the form of links between trade, tourism and agriculture;

8. Recommends the publicization of the euro through tourism, because this is the sector in which consumers will experience the direct benefits of the common currency; considers, however, that the tourist sector does not need to receive any specific aid for the introduction of the euro because it is precisely one of the sectors which will benefit from the new currency; nevertheless, the tourist sector should be included in existing programmes to ease the changeover to the euro;

9. Recommends that the particularly difficult situation of the tourist industry in the regions bordering on the future euro zone should be relieved by stepping up EU programmes, particularly Interreg, though not at the expense of undertakings in traditional tourist regions;

10. Proposes, in the context of the reorganization of aid policy in objective 2 regions, that subsidies be provided for developed but declining tourist areas and that tourism be specifically mentioned in the new objective regions;

11. Recommends that, as a matter of urgency, programmes be defined for aid to staff training and the adaptation of the industry's human resources to the new reality of the single currency, encompassing the various areas affected: dealing with clients, management and accounts, tax matters, marketing and sales personnel, etc;

12. Recommends that particular importance be attached to providing information for those working in the industry; precise replies to customers' questions about the euro will only be possible where staff have themselves been informed in good time;

13. Asks that the next report from the Observatory looks at how SMEs, and in particular very small SMEs, will be affected by changes to the social security system;

14. Asks for the next report to consider the extent to which the concept of bench marking is applied by small and medium-sized enterprises and also hopes that, if it appears that insufficient use is made of benchmarking, the Observatory will develop strategies to improve the situation;

15. Hopes that the next report from the Observatory will carry out a comparative survey among the Member States on SMEs' access to capital through banks, stock exchanges, participating enterprises and other sources of finance;

16. Asks the Observatory in its next report to consider the extent to which coordination takes place between the various European programmes which target SMEs;

17. Draws attention to the European Investment Fund's Growth and Environment programme which provides guarantees via commercial banks in the Member States for environmental investments by SMEs, and points to the opportunities offered by this programme for SMEs to make their production more environmentally sensitive;

18. Notes that SMEs tend to have a lower awareness of environmental issues and calls for improvement in their access to the relevant documentation;

19. Notes that there is the potential for a positive employment impact from environmental regulations;

20. Notes the passage in the report relating to the care required when designing environmental regulations so as not to hamper the relative competitiveness of SMEs;

21. Hopes that the European Observatory for SMEs will be able to pursue its activities in the most useful manner and at regular intervals, all the more so since its annual report concerning SMEs is now widely acknowledged as a reference document in scientific and economic circles;

22. Instructs its President to forward this resolution to the Commission, the Council and the National Parliaments of the Member States.

  • [1] () OJ C 304, 6 October 1997, pp 101-134
  • [2] () OJ C 150, 19.5.97, pp 16-44
  • [3] () OJ C 150, 19.5.97, pp 16-47
  • [4] () OJ C 150, 19.5.97, pp 16-50
  • [5] ()Minutes of 1 April 1998, p. 15


The Fifth Annual Report of the European Observatory for SMEs gives an extensive and valuable overview of SMEs and the craft trades in all EU member states plus Iceland, Liechtenstein, Norway (all countries of the European Economic Area) and Switzerland. A major objective of the Observatory, which has been produced by the European Network for SME Research, is to provide an information basis for policy making activities in relation to SMEs (including the craft sector).

As in the 1996 report, the main part of the 1997 observatory concerns the measuring of the effect of the completion of the Internal Market on SMEs. Given the importance of SMEs as backbone of the European Union's economy your rapporteur welcomes the report and appreciates very much the work put into it. The 1997 report includes two in-depth thematic studies on "SMEs in Tourism" and "SMEs and the Environment".

The first of these studies reflects on the fact that the European tourist industry is currently facing a new set of challenges, generally referred to as the 'New Age of Tourism'. These include: new demands related to individual expression and differentiation, an emphasis on value-for money, higher standards of quality required, technological advances, globalisation, deregulation of some sectors (e.g. airlines) and environmental pressures. The report also points to some barriers specifically related to tourist SMEs, for example in commercialisation, promotion, the introduction of new technology and inter-firm co-operation. These problems are mainly a consequence of the small size of most tourist SMEs and, according to the report, manifest themselves primarily in terms of labour productivity and profitability.

EMAC has recently adopted the Torres Marques report on the euro and tourism. This report made a large number of recommendations with regards to the future introduction of the Euro. It is quite surprising that the report on tourism from the SME Observatory, in its recommendations about the future competitiveness of the European tourist-related SMEs, does not mention the effect that the Euro will have on the industry in the future. As the Torres Marques report stated, the euro will be of enormous benefit to tourism, for the following reasons:

a) they will no longer have to pay exchange commissions; this will be a huge benefit, if one considers that a tourist's cash can now lose up to two-thirds of its value simply through currency exchange transactions, without a single purchase being made;

b) they will have the use of a far more stable currency, backed up by greater price transparency, and will no longer have the problem of left-over cash;

c) they will only have one currency to deal with; this will be of great advantage for the countries of the euro zone, and for their relations with third countries, in such markets as North and South America, Japan, Australia and other Asian countries;

d) the travel and tourism market will become much more competitive, with obvious consequences for the price and quality of tourism services.

These benefits will also apply to tourism operators in general and travel agents in particular: exchange rate risks will no longer exist in the euro zone, and the monetary reserves which they have traditionally been obliged to maintain will no longer need to be anything like as large. The same will apply to transport enterprises, especially commercial airlines.

To ensure that maximum advantage is obtained from these benefits, tourism enterprises, especially SMEs, should adapt to the new currency as swiftly as possible; suitable staff training must be provided, and new computer programmes created.

The thematic study on "SMEs and the Environment" argues that SMEs, like any other enterprise, are affected by environmental issues. Environmental constraints present both risks and opportunities for SMEs. For example, investments, innovations and the training of employees needed to adapt to new environmental standards have cost implications for SMEs, which could be proportionally higher than the implications for larger enterprises. This will affect the competitiveness of SMEs, especially vis-à-vis third countries outside the Union, if these do not face the same level of urgency in implementation. On the other hand, standards which lead to energy savings, water or other natural resources can, in the longer term, lead to cost savings for SMEs and there may also be opportunities derived from new markets and products.

As with the tourism industry, SME activity in the environmental field suffers from a number of barriers. SMEs tend to have a lower awareness and knowledge of environmental issues, higher relative compliance costs and scarce financial resources. SMEs seem to be 'pushed' by public authorities and regulations, although there has been more of an incentive role by competitors, employees and customers in recent years.

In terms of the 'Eco-industry', SMEs play a relatively large role in the air pollution and environmental monitoring sectors, as well as other niche markets. The Commission White Paper on Growth, Competitiveness and Employment argues that is a need to exploit fully the employment potential of the environment sector, not only in the clean-up sector but also in the new monitoring, standard-setting and maintenance areas. This, the White Paper argues, could contribute to job creation. The Observatory Report cites several studies which show that a small positive employment impact is to be expected from enterprises complying with environmental regulations.

Overall, care should be taken when designing environmental regulations and standards not to hamper the competitiveness of SMEs vis-à-vis large enterprises. To foster the development of eco-industrial activity amongst start-ups and SMEs, economic incentives and easier access to finance, as well as adequate technical information, should be provided.

One very interesting chapter is on SMEs in less favoured areas. This highlights specific difficulties for these enterprises, notably in the lack of infrastructure, distance to main markets and poor access to information. However, there can be advantages in terms of low workforce turnover rates, lower costs and attractive conditions for staff. One recommendation is for increasing 'soft' investments via the upgrading of local skills and the promotion of inter-firm co-operation and the enhancement of the technological capacities of SMEs. An endogenous growth strategy, consisting of a network of enterprises and local institutions, should be encouraged via the structural funds.

All in all the Fifth Annual Report analysis a large number of areas which are very important for the performance of SMEs, provides essential information and gives interesting and new ideas on how to approach the difficulties SMEs are facing today.