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SPEECH/05/527












Günter Verheugen

Vice-President of the European Commission responsible for Industry and Enterprise




The future policy for SMEs






















Conference on future SME policy for stakeholders
Brussels, 19 September 2005

Ladies and gentlemen,

I have convened today's conference in order to discuss the outlines of my future SME policy with you as stakeholders in SMEs.

Last week you received an initial consultation paper which presents the key elements of the new SME policy. My objective today is to discuss the priorities and actions of this policy with you.

Following today’s discussions, the paper will be revised and finalised within the Commission. The aim is to have the new SME policy presented to and accepted by the Commission at the end of October or beginning of November. The UK Presidency has scheduled a discussion on this topic for the "Competitiveness" Council at the end of the November.

Even after this point, I think it is very important to continue to talk with you, the representatives of the Council and the European Parliament.

Allow me to briefly run through some current developments.

The main problem today is undoubtedly the high level of unemployment in large parts of the EU. Increasing globalisation means much more intensive competition to attract business and therefore for jobs.

SMEs play an important role in this, as they can guarantee jobs on the one hand, but also face a considerable risk of losing other jobs through increasing competition.

The Commission, in partnership with the Member States, is therefore focussing its policies on growth and employment.

What can we, as the European Commission, do for SMEs?

I will try and answer this by posing three questions.

  • 1. Why a new SME policy?
  • 2. What are the components of the new SME policy?
  • 3. How can the dialogue be improved?

Firstly: why a new SME policy?

Small and medium-sized enterprises are a European asset which we should exploit. The European economy revolves around the craft sector, micro- businesses, family businesses, cooperatives and SMEs.

This is proven by statistics familiar to all of you: SMEs make up 99% of all 23 million businesses in Europe, and employ over two-thirds of all private-sector employees in Europe. This amounts to over 75 million people.

I have therefore set myself the task of developing a framework in tandem with the Member States which will give SMEs scope for greater growth and employment.

My motto is “think small first“, by which I mean think first of all about what SMEs need. In order to shape and implement this policy, Ms Maive Rute, who addressed you earlier, is the SME envoy within my Directorate-General.

There are two aspects to her job: to represent the interests of SMEs within the Commission, and to conduct an ongoing dialogue with stakeholders in order to become better acquainted with their requirements.

The 'European Partnership for Growth and Employment’ assigns a key role to SMEs, and to fully develop this role we have set out future policy areas for the new SME policy in the consultation paper. The aim is to strengthen the SME dimension in all EU policies.

It therefore gives me pleasure that Mr Špidla, the Member of the European Commission in charge of Employment and Social Affairs, has also agreed to take part in today’s panel, and that many other colleagues from the Cabinets and other services are also present today.

The second question asked: What are the components of the new SME policy?

The new policy adopts a ”bottom-up approach". It is based on existing instruments, such as the European Charter for SMEs and the Action Plan for Entrepreneurship. Both documents present best practice studies in important areas for SMEs and need to be consolidated.

The Multiannual Programme for Enterprise and the future Competitiveness and Innovation Programme form the financial framework for enterprise policy, mainly for SMEs. In addition, there are of course much larger funds in the EU, such as the structural funds, the research programme and training programmes, from which SMEs can benefit.

But let me clear about this: much of what can be done for SMEs is carried out at local, regional and national level. The EU creates the framework to bolster the competitiveness of all businesses, and especially SMEs.

I would like to name five areas in which I feel we need to be particularly active.

One: Innovation and research

SMEs and entrepreneurship go hand in hand with innovation. It is often small businesses which are most innovative, but many have difficulties in gaining access to innovation and research results and intellectual property rights.

Through the Communication on SMEs and the Action Plan on Research and Innovation, I am therefore urging that SMEs be given better access to the framework-programmes for research and to the 7th programme in particular. Simplified procedures should be introduced for SMEs along with specific calls for tenders, and various SMEs – or groupings thereof – should be given greater opportunities to take part in joint research projects.

The new Innova initiative is intended to involve SMEs and their stakeholders more closely in projects such as clusters and innovation panels.

At the same time, the Commission is working on simplified rules for aid in the field of innovation which should give the Member States more leeway to promote innovation programmes for SMEs.

Two: Financial instruments

Funding is an important element for start-ups, but also during the business transfer and growth phases.

Our existing financial instruments are already very effective. Over 200 000 SMEs have benefited from the various financial schemes, the majority being businesses with fewer than 50 employees. The problem is often the fact that the end user is not even aware that this is European money as it is paid out via the user’s own bank.

The financial instruments should be even better adapted to requirements as part of the new Competitiveness and Innovation Programme (CIP). We are planning new financial products such as the securitisation of bank loans and mezzanine finance. In this instance we are talking directly with banks and business representatives and are, for example, setting up a new round table involving representatives from banks and SMEs at the beginning of next year.

Next year I intend to present a special communication on SME funding to the Commission.

Three: Promoting entrepreneurship and improving training

A further important component of my work is to promote entrepreneurship and improve the image of the entrepreneur.

In the EU, there are still too few people who want to become entrepreneurs. According to a Eurobarometer survey, the majority of citizens prefer employee status to founding or running a business.

We are therefore urging the Member States to promote “business skills” such as risk-taking, initiative and independence early on at school and at university. Together with my colleague, Mr Figel, I am planning an initiative on the 8 core competencies after schooling – one being the promotion of entrepreneurship – and we will also explain what exactly is meant by “business” skills.

In addition to business set-ups, the issue of business transfers is becoming increasingly important. In Europe, many enterprises disappear every year due to a lack of business successors. Approximately one third of European businesses will be transferring ownership in the coming 10 years. This means that an estimated 600 000 to 800 000 small and medium-sized enterprises will be changing hands each year, potentially affecting 3 to 4 million jobs.

Society therefore needs to value male and female entrepreneurs more highly.

Four: Reducing red tape for businesses in Europe is a key element of my work.

It is well known that cumbersome administrative procedures and unnecessarily complicated legislation are a greater burden on SMEs than on large businesses. The smaller the business, the greater the burden in terms of time and money.

The Commission is therefore withdrawing unnecessary proposals for legislation which SMEs have problems in implementing on account of particular bureaucratic hurdles. On 27 September, President Barroso and I will propose that over one-third of all proposals discussed in the Council and the European Parliament since 1 January 2004 be withdrawn because they are unnecessary or no longer relevant. This shows not just that the Commission is able to stop unnecessary legislative proposals after close scrutiny, but also that a review of these proposals confirms the need for around two-thirds of them.

The impact study on future laws must also contain a so-called “competitiveness test”, which highlights specific constraints for SMEs. No new proposal submitted by the Commission should impose a burden on SMEs. To ensure that this is the case, it will be necessary to find special rules for SMEs and create exemptions or set up a special contact point for them. One current example of where I – with the European Parliament – am committed to easing the burden on SMEs specifically is the REACH proposal.

Another important aspect is the obligation to consult all parties concerned by all the proposals set out in the Commission’s work programme. It is also one of the tasks of the SME envoy to ensure that the views of SME representatives are heard here too.

Five: European internal market

The European internal market is a success story in the economic development of Europe from which SMEs have also benefited. There are, however, areas where obstacles still exist or where better use can be made of the internal market.

This is particularly the case with European standardisation and public procurement, but also applies to taxation.

Standardisation

Some 1 000 new European standards are adopted annually by the various standardisation committees. Studies here have shown that SMEs in particular have problems in understanding and applying EU Directives and standards. We propose greater participation by SME representatives in these committees and a more intensive dialogue between all parties involved.

Public procurement

The public procurement market amounts to some €1.5 billion per annum. The bulk of this is still national, and only some 5% of all contracts published in the EU Official Journal are awarded to foreign tenderers. Here too SMEs are clearly under-represented. The Commission urges the Member States to improve access for SMEs and to ensure that there is greater awareness among SMEs about public procurement.

Taxation

Indirect taxes and different national regulations form a further obstacle to the development of SMEs. Since simplification and the Commission’s proposal to introduce a “One Stop Shop System for VAT” would undoubtedly make life easier for SMEs, the Commission is pressing for rapid adoption.

The pilot project on “Home State Taxation”, which has the full backing of Commissioner Kovacz and myself, seeks to facilitate the taxation of SMEs which wish to set up branches in a neighbouring country. Here again, we are calling on the Member States for their support.

There is often also uncertainty over the application of internal market rules and a lack of information about opportunities in other markets, particularly among SMEs.

The Euro Info Center network, with over 330 centres inside and outside the EU often hosted by Chamber of Commerce or federations, is intended to help out with queries on EU regulations and programmes. I also intend to step up new initiatives on improved cooperation – so-called “Match-making events”.

The third question was “How can the dialogue be improved?”

I am aware that a new SME policy can only be implemented after intensive talks among all parties concerned, which includes the Member States, SME representatives, the Commission and the European Parliament.

This dialogue has to be improved. The SME envoy, Ms Maive Rute, and her team have a role to play here since we have specifically created a new Unit within our Directorate-General to act as your contact point. Today’s event and future conferences and contacts also form part of this dialogue.

On a practical level, we are stepping up feedback via our Euro Info Centers through so-called SME Test Panels. This should increase the chances of receiving direct feedback from the SMEs concerned on problems with specific Directives.

We also want to create a stronger network of national ’SME envoys’, which means improving contact with the SME envoys in the Member States at regular meetings - a wish expressed by the Member States. Some countries also have a special SME envoy or SME Minister at government level.

The Commission already has an ‘Interservice network' among Directorates-General which is run by Maive Rute and is to be stepped up. Its main purpose is that of early information and discussions on planned Commission proposals of relevance to SMEs.

The European Parliament – and I would like to extend a special welcome to Mr Rübig on today’s panel - Panel, has already carried out sound preliminary work in establishing an Intergroup and an SME Union. I personally have close contact with the chairs and members of these groups, and will also briefly present our new SME policy at the next meeting with the industry committee.

The UK Presidency, represented here today by Mr Martin Wyn Griffith, has placed specific emphasis on better lawmaking and thus also the problems of SMEs. Under the UK Presidency, I will also be launching a new award for business-friendly policies at regional level, the “European Enterprise Awards”, in mid-November.

Last but not least, I should mention our most important partners in this dialogue, the SMEs themselves and their stakeholders.

I am delighted to be able to welcome today two heads of businesses from different EU Member States.

Mr Orfinger from Poland and Ms Rousseau from France will report on the practical experiences of a small business immediately following this address.

I would also like to extend a warm welcome to the Secretaries-General of the European federations, Mr Müller of UEAPME, Mr Abruzzini of Eurochambers and Mr de Buck of UNICE.

I am of course also very impressed at the large number of other important stakeholders who have turned up today. This show the importance of the topic and of the dialogue among us.

We will also be organising further conferences with stakeholders this year and next. One specific proposal which I would make is to convene another European Conference on Craft Industries in the autumn of next year. The European Charter Conference will be held next June in Vienna.

I am here this afternoon to listen to your requests and address your needs.

Thank you for you attention.


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