6. MEASURES TO BENEFIT SMALL AND MEDIUM-SIZED
ENTERPRISES
(a)
(24248)
5748/03
COM(03) 26
ADD 1
SEC(03) 57
ADD 2
SEC(03) 58
ADD 3
SEC(03) 60
(b)
(24227)
5650/03
COM(03) 21
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Commission Communication: Thinking small in an enlarging Europe.
Commission Staff Working Paper — Report on the implementation of the European Charter for Small Enterprises in the candidate countries for accession to the European Union.
Commission Staff Working Paper — Creating an entrepreneurial Europe: the activities of the European Union for small and medium-sized enterprises (SMEs).
Commission Staff Working Paper — the SME Envoy: an active interface between the Commission and the SME community.
Commission Report on the implementation of the European Charter for Small Enterprises.
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| Legal base: | —
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| Documents originated: | 21 January 2003
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| Deposited in Parliament: | (a) 5 February 2003
(b) 28 January 2003
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| Department: | Trade and Industry
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| Basis of consideration: | (a) EM of 24 February 2003
(b) EM of 17 February 2003
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| Previous Committee Report: | None
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| To be discussed in Council: | March Competitiveness Council
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared, but document (a), without the addenda, is relevant to the debate recommended on a better environment for business in the EU
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Document (a)
6.1 The Communication serves as an executive summary
for four documents:
- the three addenda. These assess progress being made in support
of small and medium-sized enterprises (SMEs) in the EU; and
- the Commission report (document (b)).
6.2 These five documents form "the SME package"
adopted by the Commission on 21 January. They provide background
detail for the Green Paper on Entrepreneurship in Europe
which was also adopted on 21 January.[7]
6.3 The March 2000 Lisbon European Council set the objective
of making Europe the most competitive and dynamic knowledge-based
economy in the world by 2010. The Communication notes that small
businesses play an important part. They are a key source of jobs,
provide a breeding ground for business ideas and develop entrepreneurship.
For this reason, the European Charter for Small Enterprises, endorsed
at the Santa Maria da Feira European Council in June 2000, embodied
a commitment to the principle of Think Small First as one
way to make progress towards the Lisbon objectives. The message
is emphasised again in the Commission's report to the 2003 Spring
European Council,[8] which
highlights the need to boost investment, jobs and growth through
knowledge, innovation and business dynamism.
6.4 The Communication says that, if the Lisbon objective
is to be met, a better business environment must be created within
the single market. This calls for "the lightest possible
administrative and regulatory burdens on business, and access
to finance". The EU needs to develop a more positive attitude
towards entrepreneurial initiatives and risk-taking so that people
are prompted to transform ideas into businesses and to learn from
failure. The Commission notes that, since most measures to improve
the environment for small businesses are the responsibility of
the Member States, its aim is to assist them to improve their
performance through the open method of coordination.[9]
Listening better to small businesses
6.5 Consultation of SMEs remains limited across the EU.
The vast majority of businesses are small but they are not always
good at making their concerns known. However, some Member States
are leading by example, with an array of different channels. For
example, the Small Business Council in the UK presents annual
policy recommendations to the Government and the Danish administration
consults over 1000 representative companies each year on administrative
burdens. A new method to measure these burdens has been developed
in Sweden, and Finnish business representatives participate in
working groups to draft legislation. On the other hand, several
Member States still provide no opportunities for small businesses
to voice their views and concerns. This issue will also be a challenge
for some of the candidate countries. The report at ADD1 demonstrates
that several do not involve business representatives in the policy
and law-making processes. Business organisations themselves, particularly
those representing SMEs, should recognise that it is in their
interest to play a more active role.
6.6 The Commission says:
"Listening to small businesses and integrating their concerns
into different Community policies is a major task for the Commission
SME Envoy, appointed within the Enterprise Directorate General
just over one year ago. The SME Envoy acts as a facilitator between
SME representatives and the Commission services seeking to ensure
that SMEs' needs are taken into account in Community policies
and initiatives. He can play an important role in increasing the
awareness of SME issues inside the Commission, in fostering dialogue
with business organisations and in promoting the 'think small
first' principle".
Exchange of good practice
6.7 A growing number of Member States have demonstrated
the influence of other countries' ideas in shaping their national
policies. The Commission considers that real progress has been
made. In Denmark and Austria, for example, companies can now register
on-line and, fairly soon, will be able to in Sweden, France and
Spain. Other Member States, however, continue to struggle with
lengthy and complex start-up procedures. Sweden has created a
loan guarantee scheme for SMEs inspired by practices developed
in the Netherlands and Finland. Efforts to exchange good practice
should be stepped up across the EU.
Teaching entrepreneurship: the role of education and training
6.8 In the EU, a survey in 2001 found that 48% of people
would prefer to be self-employed, compared to the US rate of 59%.
The highest rates were recorded in Greece (68%), Portugal (63%),
Spain (60%) and Italy (59%). One year ago, only two Member States
had started to promote entrepreneurial attitudes, such as initiative
and motivation, in primary schools. By January 2003, almost one
third of Member States had started to do so. In at least half
of the Member States, but not including the UK, secondary school
students were learning how to create and develop a company. There
is a particular need to increase teachers' entrepreneurial knowledge.
Creating an entrepreneurial culture in the candidate countries
6.9 This is the main challenge in the candidate countries,
along with implementing the acquis communautaire. Some
candidate countries have reduced the administrative costs and
time required to set up a new enterprise to the same level as
the best European performers. Entrepreneurs in Malta, Latvia,
Lithuania and Slovakia can submit tax declarations and other official
documents electronically.
6.10 Access to finance is still difficult, although many
candidate countries use tax instruments efficiently to increase
the financial capacity of SMEs. Lithuania, for example, has introduced
a lower basic tax rate for micro enterprises.
Putting SMEs at the forefront of all Community policies
6.11 Almost every Community policy has an SME dimension.
For example, some _16 billion, about 11%, of the Structural Funds
budget has been allocated to SME-targetted projects over the period
2000-2006. Approximately one third of this sum is dedicated to
advisory services and shared business services, such as incubators,
networking and clusters. This Community aid has triggered large
matching support from national funds. Also, nearly _2.2 billion
has been allocated to support the research and innovation efforts
of SMEs under the Sixth Framework Programme for RTD[10]
(2002-2006).
The way ahead
6.12 Under this heading, the Commission concludes that
faster progress is needed if the EU is to meet the Lisbon objective.
A key area is that of the promotion of entrepreneurship, which
is why the Commission has launched a public debate with its Green
Paper — Entrepreneurship in Europe.[11]
If the EU can create an environment for small businesses which
is constantly improving, and can exploit its entrepreneurial potential,
its future competitiveness will be much more assured.
Document (b)
6.13 The European Charter for Small Enterprises, adopted
at the Feira European Council in June 2000,[12]
commits the Commission to provide an annual progress report to
the Spring European Councils. This third report covers similar
ground to the Commission Communication summarised above. The format
is that of earlier reports, recording performance against the
ten lines for action identified in the Charter:
(1) Education and training for entrepreneurship;
(2) Cheaper and faster start-up;
(3) Better legislation and regulation;
(4) Availability of skills;
(5) Improving online access;
(6) More out of the Single Market;
(7) Taxation and financial matters;
(8) Strengthen the technological capacity of small enterprises;
(9) Successful e-business models and top-class small
business support; and
(10) Develop stronger, more effective representation
of small enterprises' interests at Union and national level.
6.14 In two separate sections the report deals with:
— communicating the importance of listening to small
businesses and keeping them high on the agenda;
The Commission considers that progress on communication is encouraging
and that the influence of the Charter has expanded, following
endorsement by the candidate countries in April 2002. It is likely
to become the cornerstone of small business policy in the enlarged
EU. The implementation report for 2001[13]
emphasised the need for better representation of the interests
of small businesses. Impressive measures have been taken in a
few Member States, such as Denmark, Sweden, Finland and the UK,
which could inspire others. However, very little progress overall
has been reported in this area over the last year, with several
Member States still providing no opportunity for small businesses
to express their interests. This means that the voice of the bulk
of European businesses is lost. The Commission says that it is
committed to involving all stakeholders in legislation and policy-making
from an early stage.
The Commission Green Paper on entrepreneurship, which raises questions
on how to produce more entrepreneurs, should contribute to the
objectives of the European Charter for Small Enterprises.
The Commission says there has been an encouraging trend in Member
States learning from each other. Good progress has also been made
in the key areas of education and better regulation.
— where we are and what should be done next
The Commission considers that progress since last year's report
is encouraging but that the pace of reform needs to be accelerated.
It invites the Member States to concentrate on consolidation and
improving existing measures, rather than launching a large number
of initiatives every year. With the disclaimer that it is difficult
to assess progress in all areas on an annual basis, it outlines
the main trends in the ten areas of activity. This information
is similar to that in document (a), summarised above.
The Government's view
6.15 The Parliamentary Under-Secretary of State for Small
Business, Department of Trade and Industry (Nigel Griffiths),
says:
"The Government welcomes these reports as they reveal the
steps being taken by the Commission, EU Member States and candidate
countries to improve the business environment for SMEs.
"The UK believes that the Charter must be recognised as a
crucial instrument in the development of enterprise policy. It
is reassuring therefore to see the Commission's acknowledgement
of the principle of 'Think Small First', and that it describes
the Charter as being central to achieving the Lisbon objective
of making Europe the world's most competitive and dynamic knowledge-based
economy".
6.16 The Government also welcomes the report on implementation
of the Charter as it shows the progress being made across the
EU against the commitments in the Charter.
Conclusion
6.17 The main messages in these reports are familiar
and echo those of last year's report. They are the need for "the
lightest possible" administrative and regulatory burdens
to be placed on businesses, and giving small and medium-sized
enterprises (SMEs) easier access to finance. Particularly highlighted,
as in last year's report, is the need to create a more effective
dialogue between SMEs and policy-makers, especially in those Member
States where channels are, apparently, non-existent. The Commission's
call for "the lightest possible administrative burden"
is certainly one which we endorse.
6.18 The UK gets a number of favourable mentions,
usually in the company of the Nordic Member States and the Netherlands.
The Commission highlights the divide between the Member States
which have taken steps to seek the views of SMEs, and to include
their representatives in policy formulation, and those which have
not put formal channels in place. Curiously, however, the Member
States with the highest proportion of small businesses, and where
the citizens have expressed the greatest desire to be self-employed,
are the Mediterranean states and Portugal.
6.19 We now clear these documents. However, elsewhere
in this Report we recommend for debate the Green Paper on entrepreneurship,
and document (a), without the addenda, is relevant to that debate.
7 (24230)
5765/03; see paragraph 2 of this Report. Back
8 (24223)
5454/03; see HC 63-xiv (2002-03), paragraph 13 (5 March 2003). Back
9 A
form of governance used to ensure coherent Community action and
exchange of ideas in areas where competence largely lies with
Member States. Back
10 Research,
technological development and demonstration. Back
11 (24230)
5765/03; see paragraph 2 of this Report. Back
12 Not
2001, as stated in the Explanatory Memorandum. Back
13 (23280)
6125/02; see HC 152-xxiii (2001-02), paragraph 19 (10 April 2002). Back
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