Commission redefines SMEs in order to boost competitiveness
The European Commission has issued new definitions of micro enterprises and small and medium sized enterprises (SMEs) aimed at boosting the competitiveness of Europe's small businesses. SMEs and micro enterprises are currently defined according to guidelines set out in 1996. The new guidelines, announced in Brussels on 8 May, take account of price and productivity increases and will significantly raise the financial ceilings which help define what category a particular company falls within. The headcount thresholds, however, will remain unchanged. Commissioner for Enterprise and the Information Society Erkki Liikanen said: 'Small and medium sized enterprises form the backbone of the European economy. They are key to entrepreneurial spirit and innovation in the EU and thus crucial to ensure EU competitiveness. A proper definition of which enterprises are SMEs makes it easier to identify their needs and to develop efficient policies to compensate for the specific problems linked to their small size.' The changes to the thresholds focus on the maximum turnover and balance sheet totals in each category. For micro enterprises, companies with a maximum of ten employees, the previously undefined amounts in each case are set at two million euro. Small enterprises with less than 50 employees will see the ceiling for turnover raised from seven to ten million euro, while total balance sheet goes from five million to ten million also. Medium sized enterprises will now be defined as companies with less than 250 workers whose turnover is under 50 million euro, and whose balance sheet is not in excess of 43 million euro, up from 40 million euro and 27 million euro respectively. With the changes, the Commission hopes to promote growth and entrepreneurship, and encourage SMEs to invest in research and innovation. It is hoped that the increased financial ceilings in each category will favour those companies that invest their capital, which will in turn lead to higher levels of research and subsequently increased innovation. The creation of a precise financial definition for micro enterprises for the first time should facilitate national and regional support schemes specifically for this category, and social economy activities and craft businesses are also included as enterprises. In order to provide a smooth transitional period at EU and national level, the new definitions will be formally introduced on 1 January 2005.