Small Business Act: a European strategy for SMEs

think small first. On 12 May 2011, the European Parliament broadly supported the measures for small businessesess Act, a strategic framework implemented in 2008 by Brussels to improve the environment for European small and medium-sized enterprises (SMEs). What has the EU done for the smallest of its entrepreneurs in almost three years?

The Small Business Act (SBA) was based on an observation that SMEs are essential for the dynamism of the European economy. These companies employing less than 250 people and whose turnover does not exceed €50 million are 23 million in the EU, represent 99% of European companies and employ almost 70% of the private sector workforce . Without them it is difficult to achieve the innovation and employment goals of the Europe 2020 strategy: they are essential. The EU’s ambitions imply this observation and the implementation of a strategy, as Antonio Tajani, Vice-President of the European Commission and Commissioner for Industry and Entrepreneurship, points out: “ SMEs […] are the engine of our economy and must remain strong, competitive and innovative. Member States must act quickly to ensure full implementation of the Small Business Act. »

think small first, the European Commission launched in 2005, before adopting a comprehensive legislative document with Member States in December 2008, bringing together measures beneficial to SMEs. This document follows the spirit of the US Small Business Act of 1953, which has proven itself in terms of SME dynamism. In particular, the Small Business Act in its European version aims to reduce the burden of administrative procedures in the creation and management of SMEs.

What does the Small Business Act contain

Many criticized this document for not being binding. It recommends the application of a set of principles, but without legal pressure on Member States.

  • Developing a favorable environment for entrepreneurs (promoting the entrepreneurial spirit, organizing exchanges of experience, improving training);

  • “Second chance” policy for entrepreneurs who want to restart after bankruptcy (establishment by the States) aid schemes, limitation of the duration of liquidation proceedings where the bankruptcy is not fraudulent);

  • Integrate the “First Small Business First” principle into all legislation;

  • Adapting public services to the needs of SMEs – requiring the removal of administrative barriers;

  • Modification of the instruments available to the public authorities with regard to the award of public contracts and the granting of state aid;

  • Use of diversified forms of financing (eg venture capital, microcredit or mezzanine credit). Investments should incentivize SMEs to engage in cross-border trade;

  • The internal market must adapt to the characteristics of SMEs and improve their visibility (the introduction of a European patent would be a good example);

  • the potential for innovation, research and development SMEs need to be strengthened. Transnational coordination or community programs such as the Leonardo Da Vinci student mobility program are good examples;

  • “Turning environmental challenges into opportunities”: developing management and production methods with high environmental standards seems to be the key to smart growth;

  • Opening up SMEs to external markets. The aim is to support European SMEs in their penetration of markets in third countries, especially emerging markets. European business centers have been established to steer this policy.

The principles are there… But that’s not all: the Small European Business Act contains a series of important legislative proposals: revision of the State aid scheme compatible with the common market, the Statute for a European Company (SPE), the reduction of certain VAT rates, simplification and harmonization of invoicing rules and reduction of late payment.

What the Small Business Act Changed

At least two objectives have been achieved, with supporting figures.

Reduce paperwork and red tape first (reduce red tape).

This was indeed a crucial improvement that SMEs were asking for. The cost in time and money is not negligible. The effect of the SBA is noticeable: the time and costs involved in setting up a business have decreased remarkably. For the formation of a limited liability company (SARL), we went from European averages of 12 days and €485 in 2007 to 7 days and €399 in 2010 (source: European Commission).

Second example: late payments. SMEs run a much greater risk of insolvency than larger companies in the event of financial difficulties. Their wish to see the 2000 Late Payment Directive amended in their favour was granted in 2009: governments must now pay their bills within a maximum of 30 days. This improves the cash flow of SMEs with public procurement.

Other elements should be attributed to the Small Business Act strategy, such as improving participation in public procurement by simplifying online procedures or establishing a center for SMEs in China to help these European companies break through on the Chinese market. market.

Based on this positive assessment based on several concrete advances, the Commission has relaunched the Small Business Act in a revised version dated 25 February 2011, including new objectives such as helping SMEs to contribute to an efficient economy in the use of resources. The European Parliament has just approved most of it. In a context of difficult recovery and increased international economic competition, the implementation of a European strategy is not too much.

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Image source: ec.europa.eu

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