A4-0120/94

Resolution on the communication from the Commission 'The European Observatory for SMEs - Comments by the Commission on the Second Annual Report (1994)'

The European Parliament,

- having regard to the Commission's communication 'The European Observatory for SMEs - Comments by the Commission on the Second Annual Report (1994)' (COM(94)0352 - C4-0248/94),

- having regard to its resolution of 24 October 1994 on the communication from the Commission to the Council and the European Parliament concerning the improvement of the fiscal environment of small and medium-sized enterprises, accompanied by a recommendation concerning the taxation of small and medium- sized enterprises ((Minutes of 24.10.1994, Part II, Item (a).)),

- having regard to its resolution of 24 October 1994 on the Commission communication on the implementation of an integrated programme in favour of SMEs and the craft sector ((Minutes of 24.10.1994, Part II, Item (b).)),

- having regard to the Commission's White Paper on Growth, Competitiveness and Employment and in particular to the importance it attaches to the SME sector ((OJ C 20, 24.1.1994.)),

- having regard to its resolution of 1 December 1994 on an action plan on employment policy to be adopted at the Essen European Council meeting and in particular to the importance it attaches to the role of SMEs in creating jobs ((Minutes of 1.12.1994, Part II, Item 3.)),

- having regard to its Rules of Procedure,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0120/94),

A. whereas there is increasing recognition of the key role of SMEs in creating employment in the European Union but apparently little coordination of efforts to create employment in the sector at the different levels,

B. whereas the objectives of Economic and Monetary Union as foreseen in the EU Treaty, and in particular the second phase thereof, is based on increasingly close coordination of national economic policies in which the SMEs demonstrably have a role to play,

C. whereas the recognition of the role of the SME sector must go beyond political declarations of intent and must address the concrete problems with which the sector is confronted,

D. whereas the lack of success of policies so far aimed at improving the conditions of the SME sector at national as well as Community level is to be seen in the context of the great diversity of enterprises within the sector, and the insufficient distinction between policies aimed at these enterprises,

E. whereas the Community presently is in a position to benefit from a comparative approach which could draw on experiences gathered so far and make the optimal use of synergies in order to have the best possible strategy for dealing with the problems SMEs face,

F. whereas the European Union, in the White Paper on Growth, Competitiveness and Employment, set itself the target of creating 15 million new jobs by the end of the century; whereas the task of the SME Observatory must be to provide the Union with information on how to help the SME sector to help the Union achieve this target,

G. whereas the Commission stated its desire to encourage Member States to implement policies providing for the abolition of late payments, which can incapacitate SMEs,

1. Welcomes the appearance for the second time of this annual report by the Observatory, prepared as it is by an external agency and which could as such be a model for increasing the level of understanding of other areas of Community activity, but regrets that the second annual report could not have served as the basis for the establishment of the integrated programme in favour of SMEs and the craft sector;

2. Considers the present report an analytical tool and a framework for reflection which usefully throws light on to the problems facing the SME sector as a whole, and notes in particular

(a) with regard to the structural analysis:

- the marked difference between micro- and small enterprises on the one hand, and medium-sized enterprises on the other;

- the relative decrease in the importance of the role of large enterprises in the European Union, just as has been seen in the USA and Japan, and the trend towards specialization in smaller units, even to the extent of spinning-off units from larger enterprises;

- the US University Outreach system for SME advice and guidance;

- the significantly greater number of SMEs in Europe compared to the USA and in particular to Japan;

- the positive correlation between average enterprise size and per capita GNP;

- the dominant role of micro-enterprises in employment creation from 1988- 1993, and to a lesser extent the importance of smaller enterprises, while noting that medium-sized enterprises performed worse than large scale enterprises in employment creation;

(b) with regard to the internal market:

- the still limited role of SMEs within the internal market, their markets being more local and regional than national and Community, given that most SMEs are micro-enterprises with fewer that 10 employees (14.7 million enterprises compared to 1 million enterprises between 10 and 99 employees) and may remain relatively untouched by the internal market;

- that enterprises that are engaged in internal market activities complain about the continuing existence of barriers to the functioning of the internal market, notably in the field of customs procedures, fiscal matters, technical norms and standards and with cross border payments and late payments;

- that the export potential of SMEs currently considerably exceeds export reality;

- that the high cost of hedging foreign currency-denominated receivables against the risk of exchange rate fluctuations, and the high thresholds for export credit insurance, act as disincentives for SMEs to become exporters;

- that the net first order effects on SMEs of adjustment to the internal market may prove to be negative, and that any such effects will be felt disproportionately in those Member States with the highest concentrations of SMEs and CDS; accepts that in the longer run internal market completion benefits will be greatest for SMEs;

(c) with regard to employment creation and human capital:

- that apparently only 5-6% of SMEs actually wish to grow;

- that the number of SME failures rose across the Union during the early 1990's; recognizes that this was due to the downturn in the business cycle but regards it as a sign of the urgency of the task the Union faces if it is to reach its target of 15 million new jobs by the year 2000;

- that whilst a more highly skilled and trained labour force can significantly affect labour productivity - and therefore competitiveness - in various sectors dominated by SMEs, smaller enterprises are less likely to have specific training budgets;

- that regional governments have a more direct hands-on approach to delivering support and information to SMEs than national governments;

- that provisional and incomplete information show SMEs to be relatively stable in terms of both creating and protecting jobs throughout the business cycle, unlike large undertakings;

- that, as differences in the productivity of labour and in the adaptability of workers to technological advances are largely due to differences in workers' skills and qualifications, appropriate information and training for SMEs are very important;

(d) with regard to capital and finance:

- that there is no shortage of short-term, bank borrowed finance for SMEs, and that financial costs for SMEs are on average 2% higher than for large scale enterprises; that SMEs do however face a desperate shortage of risk capital and equity finance;

- that cash-flow problems are the causes of many SME failures throughout the Union, and that governments, or government agencies, in very many cases administer the coup de grâce to struggling SMEs by their way of dealing with them;

- the lengthening of payment periods in almost all Member States and the indication that SMEs trading with other parts of the internal market are facing disproportionate and excessive late payment periods;

- that a dynamic European capital market is needed to create financial instruments tailored to SMEs' requirements;

(e) with regard to innovation and diffusion of technology:

- that SMEs lag behind larger firms in gathering information on new norms and standards and in terms of participation in large EC technological programmes;

- that SMEs lack the financial resources to innovate and acquire new technology but that they also need incentives and support in terms of information, consultancy, education, training and cooperation;

(f) with regard to regional differences and border regions:

- that there has been considerable movement of goods and people between border regions, whereas institutional contacts have been more limited, although they are gradually increasing;

- that, as the most serious obstacles to cross-border cooperation are of a cultural, linguistic and structural nature, it varies with the regions concerned;

(g) with regard to the policy on SMEs, that the integrated programme in favour of SMEs and the craft sector pays particular attention to projects geared to the improvement of the managerial capacities of SMEs and the formulation of modernization strategies;

3. Welcomes the special emphasis placed on the problems of the crafts sector in the present report; suggests that the considerable differences in the statistics pertaining to the number of crafts enterprises in the different Member States partly reflects the wide differences in the definition of the crafts sector; expresses its concern at the prospect of the industrialization of crafts activities leading to the failure of many crafts enterprises with the attendant possible job losses;

4. Notes the importance of the retail distribution sector to the SME sector as a whole, with more than 3.5 million of the total of almost 16 million SMEs (58% of these 3.5 million are micro-enterprises), and requests that more attention be given to this particular sector in future reports not least in view of the role it plays in getting the products of the other sectors 'to market¨;

5. Regrets that the Commission's - and by extension, the Observatory's - approach to the problems of the SME sector distinguishes insufficiently between measures pertaining to SMEs' performance in the internal market - where the Union can be said to have a natural role to play - and more general measures promoting SMEs at the local, regional, national and Community levels; invites the Commission to take account of this distinction when framing future proposals whilst continuing to respect the subsidiarity principle;

6. Endorses the Commission's desire to see the Observatory continuing to publish a detailed annual report on the most significant developments in the Member States, this being important for the evolution of both Community policy and the effectiveness of joint actions;

7. Regards as totally inadequate the present definition of SMEs; fears the extent to which the absence of consistent distinction with regard to the size of SMEs (micro-, small and medium-sized enterprises) adversely affects the efficacy of measures directed at the sector as a whole, and requires that in future measures be directed at specific sub-groups;

8. Calls on the Commission, with a view to completing the internal market, to take steps to

- eliminate the remaining barriers to the functioning of the internal market in particular regarding access to finance for SMEs across Member States, continue the harmonization of legislation and ease administrative burdens;

- alleviate the effects of late payments, including cross-border late payments, and calls on the institutions of the European Union, and Member State governments, to be in the vanguard of the best and most prompt payers to SMEs;

- ensure that the banking system throughout the internal market does not operate against the development potential of SMEs;

- ease the access of SMEs to information on new norms and standards, as well as to joint research and development projects;

- fulfil its recent pledge to introduce a directive to facilitate cross- border payments;

9. Urges the Commission to introduce a late payments directive;

10. Calls on the Commission, concerning more general measures aimed at the SME sector, to propose measures to:

- open existing (national) export credit guarantee agencies to the SME sector;

- increase the skills level in SMEs, for example where management training is concerned, and by making it easier and cheaper for SMEs to take on apprentices;

- demonstrate the importance of the exchange of information and experience among organizers of SMEs;

- increase equity investment in SMEs in line with the White Paper on Growth, Competitiveness and Employment, and with best practice available within Member States;

- promote means of increasing financial liquidity in SMEs, e.g. factoring and leasing, particularly in Member States where penetration of such schemes is low;

- target all policies for SMEs taking into account the very specific and different characteristics, performance, and needs of micro-enterprises, small enterprises, and medium-sized enterprises;

- promote the exchange of information between member states on 'best practice¨ measures for the SME sector, either by improving existing mechanisms for such exchanges of information or by creating new ones;

- ensure that all measures to promote financing opportunities benefit SMEs rather than intermediary financial institutions;

- stimulate entrepreneurship, in particular for women, under a European programme developed for this purpose;

- promote the expansion of mutual credit guarantee schemes to those parts of the EU where they are not already common and provide support, advice and flexible lending for SMEs;

11. Calls on the Council to monitor the circumstances under which SMEs are closed, in particular circumstances arising from central government legislation, being mindful of the potentially negative first order impact of the internal market;

12. Supports the setting up of an SME Academy to collect, collate and disseminate data on SMEs as an effort to replicate best practice throughout the EU and to stimulate debate and action favouring SMEs;

13. Calls on the Council also to use the current economic recovery to assist and promote both the start up and growth of SMEs, and to safeguard current employment;

14. Instructs its President to forward this resolution to the Commission and Council.