6 Review of Small Business Act
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7017/11
COM(11) 78
| Commission Communication: Review of the Small Business Act for Europe
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| Legal base | —
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| Document originated | 23 February 2011
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| Deposited in Parliament | 4 March 2011
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 21 March 2011
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | See para 6.21
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
6.1 In September 2008, our predecessors drew to the attention
of the House a Commission Communication[33]
(Think Small First: A "Small Business Act" for Europe),
which endeavoured to create a new policy framework for small and
medium-sized enterprises (SMEs) by establishing the "think
small first" principle in SME policy-making at EU and Member
State level, and by setting ten broad policy objectives. The Commission
has now sought in the current document to take stock of the implementation
of the Act during its first two years; to set out new actions
to respond to the challenges resulting from the economic crisis;
and to propose ways of improving the uptake and implementation
of the Act.
The current document
IMPLEMENTATION OF THE ACT
6.2 The Commission says that the principles in its previous
Communication were fully endorsed by the European Council in December
2008, with both the Commission and Member States committing themselves
to the necessary measures, structured around three main areas
— ensuring access to finance, taking full advantage of the
Single Market, and smart regulation.
Progress by the Commission
6.3 The Commission says that, with the exception of a draft
Regulation providing for a Statute for a European Private Company,
all the legislative initiatives in the Act have been adopted,
including those on e-invoicing and combating late payments. In
addition, the EU has taken an increasing role on access to finance
(through measures within the Competitiveness and Innovation Framework
Programme, the setting up of a permanent SME Finance Forum, and
a relaxation of State Aid rules to allow additional aid for SMEs);
whilst entrepreneurship has taken its place in the new innovation
and research policy (with new financial instruments for start-ups,
affordable intellectual property rights, and strategic use of
procurement budgets), the Cohesion Policy and European Agricultural
Fund for Rural Development (EAFRD) having been identified as key
to achieving practical action on the ground.
Developments in the Member States
6.4 The Commission comments that, whilst all Member States
have acknowledged the importance of rapidly implementing the Small
Business Act, the results achieved vary considerably. In particular,
it notes that:
- not all Member States have effectively reduced administrative
burdens, or integrated the SME test into national decision making;
- whilst most Member States have enhanced SMEs' access to finance
(especially bank lending), a stronger approach is warranted;
- only a few Member States have started to promote the European
Code of Best Practices to facilitate SME access to public procurement;
- there has been no progress in simplifying bankruptcy procedures;
- Member States are, however, making good progress in making
it easier to start up a company.
Need for further action
6.5 The Commission says that, although it remains important
to implement the Act fully, the new challenges which have emerged
as a result of the changed economic circumstances make it essential
to look further. It has therefore identified a number of areas
for new action — including making smart regulation a reality
for SMEs; paying specific attention to their financing needs;
taking a broad-based approach to enhancing SMEs' market access;
helping SMEs to contribute to a resource-efficient economy; and
promoting entrepreneurship, job creation and inclusive growth
— with the proviso that, to be effective, these steps must
be based on strong SME governance.
GIVING FRESH IMPETUS TO THE ACT
Smart regulation
6.6 The Commission says that the core principle of the Small
Business Act implies a simplification of the regulatory and administrative
environment in which SMEs operate, and that there is scope for
making its application more systematic based on the EU Smart Regulation[34]
agenda. It adds that it will ensure that SME expertise is fully
available when assessing the impact of new proposals, whilst taking
into account differences in the size of enterprises, where relevant;
promote across the EU the application of the "once only"
principle, whereby public authorities and administrative bodies
should not request the same information, data, documents or certificates
which have already been made available to them; simplify the EU
accounting network by revising the basic requirements for annual
and consolidated accounts of limited liability companies; explore
in line with the Smart Regulation Communication the possibility
of reducing "gold plating" by Member States; carry out
"fitness checks" in order to assess whether the regulatory
framework for a policy area is fit for purpose (and, if not, what
should be improved); and carry out Single Market "performance
checks" in order to identify and, as appropriate, remedy
difficulties arising from the interaction of simultaneously applicable
pieces of EU legislation to the service sector.
6.7 In addition, it invites Member States to systematically
assess the impact of legislation using an "SME test",
while taking into account differences in the size of enterprises,
where relevant; present each year a forward planning of business
related legislation which will enter into force in the next budgetary
period; and apply the "Think Small First" principle,
not only to legislation, but also to administrative procedures
affecting SMEs.
SMEs financing needs
6.8 The Commission observes that, due to the financial crisis,
many SMEs have seen their financial situation and credit worthiness
deteriorate, and that new initiatives are needed to improve their
access to finance at a time when several European banks have tightened
their credit standards. It says that it will, within a streamlined
and enhanced set of financial instruments, aim to help a higher
number of beneficiary SMEs through strengthened loan guarantee
schemes to support investment, growth, innovation and research;
make EU funding programmes more accessible to SMEs by further
simplifying procedures; adopt in 2011 an action plan for improving
SMEs' access to finance, including venture capital markets, as
well as targeted measures aimed at making investors more aware
of the opportunities offered by SMEs; consider adopting a new
legislative regime to ensure by 2012 that venture capital funds
established in any Member State can function and invest freely
in the EU; and explore options for setting up an intellectual
property rights valorisation instrument at the European level,
in particular to ease SMEs' access to the knowledge market.
6.9 In addition, it invites Member States to facilitate SMEs'
access to the Structural Funds by allowing them to submit only
once all data necessary for approval; develop "credit ombudsman"-type
solutions to facilitate further the dialogue between SMEs and
credit institutions; ensure that inconsistencies in tax treatment
do not lead to double taxation which could hamper cross-border
venture capital investment; and create one-stop-shops where SMEs
can apply for European, national and local grants.
Enhancing market access for SMEs
6.10 The Commission notes the emphasis which the Small Business
Act places on encouraging SMEs to benefit from the Single Market,
and says that it will carry out an in-depth analysis of unfair
commercial practices in the EU, and table a legislative proposal,
if needed; present tax initiatives[35]
aimed notably at reducing tax obstacles and administrative burdens
for SMEs in the Single Market; undertake a revision of the European
standardisation system in 2011; prepare a guidance document explaining
the rules on labelling of origin, and inform SMEs of the means
available to them to protect their legitimate interests; propose
a European Contract Law instrument responding to the needs of
SMEs seeking to enter new markets; and set up a uniform procedure
to facilitate cross-border debt recovery by enabling a creditor
to preserve money held by his debtor in a bank account in another
Member State.
6.11 The Commission says that it will itself (and will invite
Member States to) seek to enhance electronic operability in the
Internal Market, in particular delivering on the proposal in the
Single Market Act for a decision by 2012 to ensure mutual recognition
of e-identification and e-authentication across the EU and the
revision in 2011 of the Directive on electronic signatures. It
will also invite Member States to fully implement the European
Code of Best Practices facilitating SMEs' access to public procurement;
and promote the online publication of easily accessible and free-of-charge
abstracts of European standards, with a clear indication of changes
made wherever standards are revised.
6.12 As regards globalised markets, the Commission
says that it will present in 2011 a new strategy on the support
of SMEs in markets outside the EU, and a strategy for globally
competitive clusters and networks with a specific focus on analysing
the role played by them in improving SMEs' competitiveness; address
problems of SMEs with regard to the use of EU Trade Defence Instruments
by increasing information on, and assistance in, using these instruments;
pursue systematic efforts to eliminate non-tariff barriers in
Free Trade Agreements, facilitate SMEs' access to third country
markets, and help enforce Intellectual Property rights. In addition,
it invites Member States to provide support to SME network-building,
in accordance with EU State Aid and competition rules; and to
encourage SMEs to hire (or buy in) specialist expertise in order
to help companies grow, innovate or go international.
SME contribution towards a resource-efficient economy
6.13 The Commission says that it will set up a specific framework
to allow SMEs to take up the challenge of a resource-efficient
economy and to reap the potential, and that it will in particular
implement the new Energy Efficiency Plan, and move towards an
Eco-Innovation Action Plan which pays special attention to SMEs
in promoting networking, low carbon technologies and resource
efficient innovation; further develop the specific action on environmental
and energy aspects within the Enterprise Europe Network, whereby
specific knowledge transfer on state of the art methodologies
and best practices will be transferred from regions with advanced
experience to those lagging behind; use the Enterprise Europe
Network to support SMEs in marketing products and services resulting
from best practices, in particular low carbon technologies; and
use SME Panels and the SME feedback database of the Enterprise
Europe Network to help improve the quality of environment legislation,
including its implementation.
6.14 In addition, it invites Member States to make better
use of State Aid to support investment in the environment and
energy fields; help SMEs to acquire the necessary managerial and
technical skills to adapt their business towards the low carbon,
resource efficient economy, inter alia through the European
Social Fund; and provide regulatory incentives to SMEs registered
with the Eco-Management and Audit Scheme (EMAS), and to encourage
micro and small enterprises to take advantage of simplified EMAS-type
schemes.
Promoting entrepreneurship
6.15 The Commission says that SMEs are the leading job creators
in the EU, but that, in order to avoid business failures, it is
necessary to improve framework conditions, to assess future skills
needs, and to remove barriers for entrepreneurs. It says that
it will create mentoring schemes for female entrepreneurs in at
least ten EU countries to provide advice and support with the
start up, functioning and growth of their enterprises; identify
best practices to support business transfers and launch a campaign
to promote these practices; and adopt by the end of 2011 a Social
Business Initiative focusing on enterprises pursuing social objectives.
It also invites Member States to implement the recommendation
in the Small Business Act Action Plan to reduce the start-up time
for new enterprises to three working days and the cost to €100
by 2012, reduce to one month by the end of 2013 the time needed
to obtain licences and permits to take up and perform the specific
activity of an enterprise; implement the corresponding recommendation
to promote second chances for entrepreneurs by limiting to a maximum
of three years by 2013 the discharge time and debt settlement
for an honest entrepreneur after bankruptcy; and develop user-friendly
and widely supported marketplaces and databases for transferrable
businesses, and provide training and support to increase the number
of successful business transfers, including communication campaigns
to raise awareness of the need for early preparation of business
transfers.
Strengthening the governance of the Act
6.16 The Commission says that strong governance is the key
to successful implementation of the Small Business Act, and that
it will collect information on Member States' actions and issue
annual reports on their competitiveness. More specifically, it
will set up a Small Business Act Advisory Group comprising representatives
of governments and business organisations to help evaluate and
report on the uptake of the Act, to step up efforts to disseminate
widely information on SME policy actions and promote the exchange
of good practice (and further develop the SME Performance Review);
and propose the launching of an annual SME Assembly, closely linked
to the Small Business Act good practices conference in order to
mobilise all relevant stakeholders in the implementation of the
Act and to foster dialogue between them. It will also invite Member
States (and, where relevant, regional and local authorities) to
set up, in coordination with representatives of business organisations,
national and local Small Business Act implementation plans, backed
up by a strong monitoring mechanism as well as a body in charge
of coordinating SME issues across different administrations, provided
with adequate human resources and having a high standing within
the administration itself.
6.17 The Communication concludes by indicating the progress
of individual Member States in implementing the ten principles
set out in the Small Business Act.
The Government's view
6.18 In his Explanatory Memorandum of 21 March 2011, the Minister
for Business and Enterprise at the Department for Business, Innovation
and Skills (Mr Mark Prisk) says that the broad thrust of the review
is in line with UK enterprise policy, and he notes that the UK
features strongly in the examples given of good progress (and
is well-placed in terms of proposed new measures for Member States,
which largely match existing Government activity to boost enterprise
and SME growth).
6.19 The Minister then says that the UK has consistently called
for a continued focus on the priorities agreed in 2008, and that
this is, on the whole, reflected in the current review. However,
the Government believes that the Communication paints an overly
positive picture of the Commission's implementation on reducing
regulatory burdens, and that the proposals for future action in
this area lack ambition. (For example, although the Commission
states that it has begun to use an "SME Test" in its
Impact Assessment, the evidence indicates that only three such
tests have been completed since the Act was introduced, and that
SMEs were only mentioned in 5% of Impact Assessments.) In particular,
the Government believes that the SME Test should be strengthened
by reversing the burden of proof, so that SMEs are assumed to
be exempt from new EU regulations unless policy makers provide
a quantified and compelling case for their inclusion.
6.20 The Minister also says that the Government's objective
will be to secure Council conclusions which deliver a strong message
on the need to focus on better implementation and more transparent
monitoring, at Member State and Commission level. It also intends
to give further consideration to the Commission's proposals for
enhancing governance of the Small Business Act, with a view to
ensuring that these are effective and proportionate, and to call
for greater ambition on the better regulation agenda. Finally,
he says that, as many of measures outlined in the Review have
been proposed in previous Commission Communications,[36]
it will be important to ensure consistency between the various
policy statements and that conclusions do not prejudice forthcoming
negotiations in areas such as the Single Market Act.
6.21 The Minister says that the Communication will be discussed
at an informal meeting on 12-13 April, and that Council Conclusions
are expected to be negotiated during the Hungarian Presidency.
Conclusion
6.22 Although this is a wide-ranging document, it is essentially
a review of progress so far in implementing the Small Business
Act, and does not contain any new proposals or seek to draw policy
conclusions. Consequently, whilst we are drawing it to the attention
of the House, we see no need to hold it under scrutiny, and we
are therefore clearing it.
33 (29791) 11262/08: see HC 16-xxix (2007-08), chapter
8 (10 September 2008). Back
34
(32067) 14421/10: see HC 428-ix (2010-11), chapter 11 (24 November
2010). Back
35
Such as a Common Consolidated Corporate Tax Base. Back
36
Such as the Innovation Union and Smart Regulation. Back
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