More 'thinking small' policies needed to help SMEs
While the European charter for small enterprises has helped to create a more focused environment for SMEs (small and medium sized enterprises) to work in, more needs to be done to help 'the backbone of the European economy' a conference heard on 23 May in Brussels. Without extra attention to the needs of SMEs, it is very possible that Europe could miss its Lisbon target of becoming the most competitive knowledge-based economy in the world by 2010. As SMEs make up a much larger percentage of the European economy than they do in either the USA or Japan, making SMEs competitive means that Europe becomes competitive, the conference heard. Some felt that policy changes had not had enough effect. 'We need to close the gap between rhetoric and reality,' said British MEP Nick Clegg. 'There has been a weighing down of targets which does not lead to any changes by governments or commercial operators.' Mr Clegg was also sceptical about being able to address SMEs problems by throwing money at them. 'Access to capital, transparent bankruptcy rules, education and skills - these are the sort of things that are essential to SMEs. I don't believe that you can invent competitive SMEs by dedicating a large budget to the issue.' The most important change that could be introduced would be the establishment of a business impact assessment agency, Mr Clegg claimed. While at present, all three European institutions are 'irresponsible' in the way that they pass legislation without having a clear idea of its possible impact on business, a new agency would be able to ensure that legislation has the appropriate effect. He gave the example of an existing agency that exists in the Netherlands, which can hold up legislation for six weeks while assessments can be made. At the end of this period, the government can still press ahead with the proposed legislation, even if the agency is not convinced of its effectiveness, but it is up to the government to make a case for why it is continuing. A major focus has been dedicated by the European institutions to make it easier for Europeans to set up a business. In the USA, it takes just six hours to establish a business, and while differences remain between Member States on the equivalent time to do so in Europe, it takes much longer in all of them, despite recent improvements. But this could be focusing on the wrong issue, according to Rob van de Horst, a specialist in SME issues from EIM business and policy research. 'It may be cheaper to set up a business, but running an enterprise has never been so complicated,' he said. He also emphasised that, while the public sector has a role to play, it is the private sector which is more important for SMEs. According to figures produced by Mr van de Horst, only 20 per cent of micro enterprises have used public sector support services in the past five years. A clearer focus on what SMEs are good at is needed, he said. So with, 93 per cent of SMEs having less than 10 employees, discussing exports and intensive investment in high technologies, is often not appropriate. 'The important thing for these firms is to consolidate, to be innovative to look for niche markets and product quality,' he said. In terms of how the public sector can help, the most important thing to offer is a simpler regulatory environment which is not changed too often. Philip Bushell Matthews, another British MEP, claimed that administering and complying with regulations was one of the main causes of bankruptcy for SMEs in the UK. The European Commission's representatives at the event pointed to the progress that has been made under European initiatives. David White of DG Enterprise highlighted that the charter for small enterprises has led to the possibility of establishing a company in less than two weeks in 10 Member States. Some of these, such as Italy, have repealed outdated laws, Germany, Greece and Denmark have established online public procurement procedures and, crucially, the charter led to the creation of an SME envoy, Timmo Summa. Jorge Costa David, also of DG Enterprise, pointed to the success of business incubators in helping small companies and said that 80 per cent of them receive some form of public funding. Concluding the conference, EU Commissioner for Enterprise and Information Society, Erkki Liikanen said that he was aware that more was needed to attain the goals set at the Lisbon summit. He said that Member States needed to move towards best practice and claimed that some of them were already learning from each other. 'But we still need to know small enterprises better and improve our knowledge of the issues that affect them,' he added. 'Let's keep small enterprises at the top of the agenda,' he said.