2 November 1999
By the Select Committee appointed to consider Community
proposals, whether in draft or otherwise, to obtain all necessary
information about them, and to make reports on those which, in
the opinion of the Committee, raise important questions of policy
or principle, and on other questions to which the Committee considers
that the special attention of the House should be drawn.
PROMOTING SMALL AND MEDIUM ENTERPRISES
IN THE EU
PART 1: INTRODUCTION
1. This Report considers ways in which the development
of "Small and Medium Enterprises" (SMEs) might be better
promoted in the EU.
2. There are over 18 million individual companies
in the EU, of which the large national and multinational companies,
whose activities tend to dominate the business headlines, comprise
only 0.2 per cent. Under the standard EU definition,
the remaining 99.8 percent of businesses are classified as SMEs,
principally by having fewer than 250 employees. The typical SME
is much smaller than that - on average, having only four employees.
Nevertheless, SMEs provide nearly two thirds of employment in
3. The business world is undergoing a revolution.
The development of globalisation and the spread of e-commerce
have radically changed concepts of the firm, manufacturing, services
and general trade that were familiar a generation ago. The driving
forces of rapid technological change, freer international financial
exchange and the reduction in barriers to trade are found across
the world. The transformation they have brought so far seems bound
to continue - and no less rapidly. In addition to those global
trends, businesses in the EU are subject to further dynamic changes
in the development of the European Single Market and the introduction
of the Euro.
4. The concept of employment is also changing. This
is facilitated by changes in the business environment, but is
also driven by choice - to promote a preferred lifestyle (working
for oneself and home-working) - or by necessity as a result of
unemployment (often through downsizing by large companies).
5. SMEs, particularly the vast majority of micro
and small enterprises, are not potted versions of large businesses.
Their size allows them a speed of action that big businesses struggle
to match. The opportunities for entrepreneurs have never been
greater and, in many respects, SMEs are entrepreneurs' ideal base.
At the same time, SMEs' small size means that they can face particular
challenges in tackling businesses opportunities.
6. SMEs play a vital part in general wealth creation
and in employment, in some cases giving rise to new large businesses.
They also have a key role in the provision of a wide range of
goods and services, often working closely with large enterprises.
It is therefore not surprising that the EU and Member States regard
SMEs as requiring special policy attention. The question is what
form such policy attention should best take in the transformed
business and employment environment.
7. Against that background, the Committee considered
that a study of the measures available in the EU to promote SMEs
would be both timely and useful. However, the importance of the
topic is matched by its potential size and complexity. Rather
than launch straight into what would be a major full-scale enquiry,
we saw the need first to clarify the questions that needed to
be pursued in depth. Accordingly, we undertook a short enquiry
into what, within EU policies, the European Commission, national
governments and their agents were doing to promote SMEs, and what
they should or should not be doing for such enterprises. This
report sets out our findings, and concludes with our recommendations
on the issues that merit more detailed study.
of the enquiry
8. The enquiry was carried out by Sub-Committee B
(Energy, Industry and Transport), whose members are listed in
9. The call for evidence set out in Appendix 2 was
issued in early July 1999. Given the nature of the enquiry, this
was deliberately open-ended. Those who gave evidence are listed
in Appendix 3.
10. We are grateful to all those who gave oral and
written evidence for their thoughtful contributions to our deliberations.
We also thank our Specialist Adviser, Dr Shobhana Madhavan, Director
of the Centre for Business and the Environment at the University
of Westminster, for her able assistance in guiding us through
the complications of wide-ranging issues relating to SMEs in the
1 Discussed further in paragraphs 11 and 12, although
it should be noted here that this excludes agriculture, fishery,
horticulture and forestry - as does the discussion of SMEs in
this Report. Back