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European Commission

Máire GEOGHEGAN-QUINN

European Commissioner responsible for Research, Innovation and Science

"The Horizon 2020 programme: what's in it for SMEs"

2nd European SME Convention /Brussels

1 October 2012

Ladies and Gentlemen,

Thank you very much for welcoming me to the 2nd European SME Convention, organised by UEAPME.

SMEs in many Member States are severely hit by the crisis. Creating new SMEs or helping them to grow has become ever more important because we need thriving and innovative enterprises to get the European economy back on track, to provide growth and jobs.

So, I am delighted to have this opportunity to talk about how European Research and Innovation Policy is currently supporting SMEs, about recent developments and our plans for the future under Horizon 2020.

The main source of growth in Europe is our capacity to create new knowledge and to transform ideas into commercially-attractive products and services. The European Union is serious about revitalising its economy, and this means finding better ways to involve and support SMEs in the research and innovation process.

We must commercialise our scientific and technological advances faster and more fully so that we can face and, indeed, profit from global competition. This is where entrepreneurs and SMEs are crucial. SMEs have the agility to bring technological breakthroughs and service innovations more quickly to market.

SMEs are drivers of innovation – and this is regardless of whether they are traditional crafts enterprises or young high-tech companies, whether they are mainly active in local markets or have customers world-wide.

That is why, under Innovation Union, we are working hard to establish the conditions that will let SMEs flourish. The European Commission has already made four legislative proposals on the framework conditions that will help innovators and businesses, and SMEs in particular, to get their ideas to the market. Let me say a few words about each of these.

The excessive cost of patenting across the EU is a burden that falls disproportionately on SMEs. The European Commission's proposal for unitary patent protection will reduce the costs by up to 80%.

The standardisation package aims to modernise the system so that standard-setting is 50% quicker by 2020.

Last December, the Commission proposed a new venture capital regime so that funds can easily raise capital across Europe, and support growing businesses with a European and global perspective.

Again in December, the Commission made a proposal to modernise EU public procurement legislation, including concrete measures to facilitate innovation.

All of these actions, and many other initiatives under Innovation Union, are meant to create an innovation-friendly eco-system with better links between research and business and more investment in research and innovation.

But besides these major policy initiatives, we are also taking action at the European level to ensure that SMEs receive the right financial support at the right time.

The 2011 report on the State of the Innovation Union shows that public spending on research and innovation is crucial for the short-term resilience of our economies and essential for future growth. Those countries that have maintained or increased their investment in education, research and innovation are weathering the economic storm better, and are well placed to bounce back quickly.

The European Commission champions the importance of research and innovation for growth and jobs. This is why we launched innovation Union, and why we have proposed to increase European support for research and innovation to 80 billion Euro under the new Horizon 2020 programme.

Yes, this is ambitious, but is also a timely and necessary investment in the sources of growth and jobs.

I am very pleased that UEAPME and other SME representatives have declared strong support for Horizon 2020, in particular the raft of measures dedicated to SMEs.

Horizon 2020 will fill gaps in funding for high-risk research and innovation by SMEs. It will create business opportunities out of the need to tackle major societal challenges. It will strengthen productivity and innovation capacity and it will help innovative SMEs to grow.

Let me explain, first, the overall thrust of the programme: Horizon 2020's simplified structure is composed of three distinct, yet mutually reinforcing priorities:

  • Innovation starts with excellent research, and Horizon 2020's first pillar is aimed at boosting excellence in Europe's science base. A proposed investment of over 24 billion Euro will enable the most talented scientists to carry out cutting edge research of the highest quality.

  • The second pillar aims to boost industrial leadership, with actions to make Europe a more attractive place for business to invest in R&D and innovation. The budget will be nearly 18 billion Euro.

  • The third pillar, with nearly 32 billion Euro of funding, is aimed at Tackling Societal Challenges such as health, food security, clean energy, green transport, climate change and security.

Horizon 2020 introduces real simplification, which is of real interest to SMEs. We are proposing to cut red tape cut across the board, and the simpler programme architecture will make it easier for applicants to see where the opportunities lie. I am keen to increase the participation of SMEs in the programme and, more importantly, to enhance the impact of the funding they receive.

Horizon 2020 takes an integrated approach to SMEs, which is in line with the Small Business Act. This includes applying the current definition of an SME as laid down in the Recommendation of 2003.

We want more SMEs to participate across the whole programme. Through this approach, it is expected that around 15% of the total budget dedicated to Leadership in Enabling and Industrial Technologies (the first part of the second pillar) and Societal Challenges will go to SMEs.

Horizon 2020 builds on the experience of the 7th Framework Programme for Research. Under FP7, we have already achieved a lot. We are on course to exceed our target of allocating 15% of the budget to SMEs and we estimate that by the close of FP7 next year, some 17,000 SMEs will have been supported.

FP7 projects have increased the research and innovation capability of SMEs, giving them access to the best research knowledge in the Union, access to international networks, and access to new partners, new markets and new customers.

However despite this, SMEs do need to get better at exploiting research results. Only a few SMEs are using the results of Framework Programme projects for strategic business innovation. There are many reasons for this, but the most important one is that R&D support schemes have not been conceived with astrong enough business logic and from the perspective of SMEs.

For Horizon 2020 we have applied the 'think small first' principle. We have carefully listened to SMEs' needs and we have looked at successful best practices worldwide, notably the Small Business Innovation Programme, or SBIR, in the United States.

What the Commission proposes in Horizon 2020 is a new approach to SME research and innovation funding in Europe: an SBIR-type instrument.

By bringing together the research and innovation-related SME measures that are currently spread across several programmes, Horizon 2020's SME instrument will provide one comprehensive and simple scheme adapted to the needs of SMEs. This is something really new, as is the idea that the instrument will cover the whole innovation cycle in three distinct, but seamlessly connected stages, including links to private finance.

The SME instrument will be competitive, business-oriented and focused on creating impact. It will support SMEs in developing high-potential innovations and bringing them closer to market. And it will provide incentives to leverage private co-investor or follow-up investments.

An additional and crucial element is the support network that will provide mentoring and coaching for beneficiary SMEs, to boost the impact of the funding they receive.

The possibility of "single company support" is an important development - a group of SMEs or indeed a single SME can take the lead in projects and organise them to better fit their own purposes.

By focusing on the strategic needs of SMEs and market opportunities, we want the dedicated instrument to appeal to a broader range of innovative SMEs and support a broader range of innovation activities. In that way, more SMEs will be encouraged to participate in Horizon 2020.

A good chunk of the Horizon 2020 budgetary target for SMEs will be delivered through this dedicated SME instrument.

But that's not all. Horizon 2020 envisages many more ways to support SMEs. Additional SME-specific measures include an action targeting research-intensive SMEs that will support the next stage in the Eurostars Joint Programme, implemented in partnership with Member States. We are currently in close discussion with them and hope to make a new proposal in 2013.

There will also be measures to build SMEs' innovation capacity - such as networking and brokering - and to support market-driven innovation. Reinforcing the innovation support of the Enterprise Europe Network will make it even easier for SMEs' to access Horizon 2020.

To promote and to accompany the specific SME measures in Horizon 2020, the Commission will set up a dedicated body of stakeholders and experts in SME research and innovation. This will involve SMEs more closely in EU research and innovation support, and it will foster transnational knowledge exchange and networking. I hope that I can count on your participation and input.

I would like to say a few words on the opportunities provided by 'access to risk finance', which is essential to enhance the competitiveness and growth potential of innovative firms.

The current financial and economic crisis is marked by a fall in lending and reduced availability of venture capital. Young, knowledge-driven companies are having a particularly hard time in securing finance on reasonable terms.

There is a significant gap in the market between the demand and the supply of risk finance, from both the debt and the equity side. But there are steps that we can take at the EU level.

In Horizon 2020, we intend to strongly reinforce loan guarantee and venture capital facilities for innovative SMEs. We shall operate these in close conjunction with complementary facilities in COSME, the Programme for Competitiveness of Enterprises and SMEs.

The two programmes, COSME and Horizon 2020, will jointly support EU financial instruments providing debt and equity financing for innovative firms, and especially for SMEs with growth potential.

On the equity side, both programmes will jointly make seed-funding, early-stage and growth-stage investments in support of a seamless, EU-wide venture capital scheme. Horizon 2020 will focus largely on early-stage venture capital funds, and COSME on growth-stage ones.

The venture capital scheme will also cover investments in funds-of-funds that operate across borders and that invest in venture capital funds that will, for the most part, have a thematic focus in line with the goals of Europe 2020.

On the debt side, both programmes will provide loans and guarantees. Together, they will support the research and innovation that are necessary to tackling social challenges, enhancing competitiveness and fostering sustainable growth.

Horizon 2020's debt facility will also address the commercialisation phase of the dedicated SME Instrument that I described earlier, with a specific sum, yet to be defined, ring-fenced for this purpose.

As you can see, major initiatives are planned. But in advance of Horizon 2020's arrival, the Commission has already taken other steps to tackle the issue of risk finance for innovative SMEs.

In preparing Horizon 2020's debt financing instrument for SMEs, the Commission and the European Investment Bank Group launched the Risk-Sharing Instrument (RSI) for SMEs and smaller mid-caps in early 2012. The aim is to incentivise financial intermediaries - commercial banks - to extend loans and financial leases to innovative SMEs and small mid-caps from 25,000 Euro up to 7.5 million Euro.

The initial target was to leverage up to 1.2 billion Euro of loans by the end of 2013. But demand has been so high that we have decided to extend the scheme. An additional contribution from the Commission of 150 million Euro will bring our target up to 2 billion Euro of loans for SMEs and Small Midcaps. We will also introduce a new product: counter-guarantees, mainly for promotional banks and guarantee societies.

I am proud to announce today that the first agreement between the European Investment Fund and a commercial bank for a portfolio of 120 million Euro will be made in Vienna this Wednesday, 3 October. This is excellent news, and I am also delighted to say that we are expecting around ten agreements to be signed before the end of this year.

As you can see, we are already working very closely with the European Investment Bank. I will also ensure that Horizon 2020 will work in close synergy with other EU programmes – not just with COSME as I already mentioned, but also with Cohesion Policy, which you will hear more about later this morning.

Synergies with cohesion policy - especially with those aspects related to research and innovation - can help build 'stairways to excellence'. The development of smart specialisation strategies will boost cohesion funding as a driver for innovation and excellence. This is an approach that gives priority to investments in research and innovation programmes that play to a region's strengths, including the strengths of its SMEs.

Ladies and gentlemen,

I want SMEs to fully seize the opportunities that Europe presents - so, my thanks to UEAPME for organising this conference.

I am counting on your support for what we have proposed in Horizon 2020, not just for what it will do for SMEs, but for what it can do for researchers, innovators and companies throughout Europe.

To reach SMEs on the ground we need the voice and the support of SME intermediaries at all levels, UEAPME included! So, let us work together to ensure that Horizon 2020 delivers on our ambitions for Europe's Small and Medium-sized companies.

You have the chance to contribute so much to a long-lasting economic recovery in Europe. I, and my colleagues in the European Commission, will be with you every step of the way.

Thank you.


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