Opinion of the Economic and Social Committee on 'Craft industries and small- and medium-sized enterprises` (97/C 158/09)

On 19 December 1995 the Economic and Social Committee, acting under Rule 23(2) of its Rules of Procedure, decided to draw up an opinion on 'Craft industries and small- and medium-sized enterprises`.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 February 1997. The rapporteur was Mr Pezzini.

At its 344th plenary session (meeting of 20 March 1997), the Economic and Social Committee adopted the following opinion by 112 votes to one, with three abstentions.

1. Introduction

1.1. The 1957 Treaty of Rome did not provide for a Community enterprise policy. It was first developed in the 1980s, when the White Paper on the single market () was implemented and new Community policies were drawn up in order to create a favourable business environment for SMEs entering the single market in 1992.

1.2. The significance of small- and medium-sized enterprises and craft industries in Europe was definitively recognized at the Edinburgh Council in December 1992, the Copenhagen Council in June 1993 and the Corfu Council in June 1994. A range of initiatives was approved at these Councils, including the multi-annual action programme in favour of SMEs 1993-1996, and the resolution, following on the memorandum from the Belgian presidency of the Council, calling for an increase in corporate competitiveness - particularly for SMEs and craft industries - and a boost to employment. This was subsequently transformed into the action plan for SMEs.

1.3. The following figures () show the importance of SMEs and the craft industry in European production: 99 % of European firms employ fewer than 250 people; moreover, most of them are small, craft-based firms, since some 93 % of EU firms have fewer than 10 employees.

1.4. Within the European economy, SMEs account for more than two-thirds of Community employment, and Community micro-businesses (0-9 employees) provide almost as much employment as large companies (29 %). In the last three years, 75 % of European jobs have been created by the SME and crafts sector. Moreover, if we consider that SMEs account for over 70 % of total EU business volume, it can be concluded that SMEs and crafts are the economic and social backbone of the European Union.

1.5. Some years ago, the EU, acknowledging the importance of the craft sector for economic growth and job creation, and wishing to provide a tangible response to its needs, launched a policy of support for small-to-medium and craft firms.

2. From the Avignon Conference to the Berlin Conference

2.1. Since the first Avignon Conference in October 1990, the Commission has been working in close cooperation with the trade organizations to meet the requirements of craft industries. The Conference prompted several actions: the Guide to craft industry and SME organizations; pilot actions for training couples who work together; cross-border training and training for standardization and quality certification. There is no doubt that the outcome of these years is positive. On the one hand, although the European Commission has begun to address the concerns of the craft industry and small enterprises, the changes brought about since the first European Craft Industry Conference in Avignon underline the need to pursue the process of dialogue and exchanges between enterprises, between their national and European representatives and with the EU Member States. Moreover, the structural challenges facing micro-businesses over the next few years will cause several problems.

2.2. These could be divided into external and internal problems. On the external side, craft industries will have to face increased competition due to:

- the creation of the single market;

- large firms taking over market outlets traditionally dominated by small and very small enterprises;

- creation of large-scale commercial projects (supermarkets and hypermarkets), where each job has taken three or four away from the craft and trade sector;

- the rise in semi-professional do-it-yourself activities;

- the increase in moonlighting.

2.3. Moreover, craft workers and the owners of small businesses are feeling the effects of competition distortions caused by the lack of adequate economic information, and the delays in getting hold of it. This includes information on standards and quality certification, legislation on environmental protection, safety at work etc. On the internal side, craft workers and those who operate small businesses have to deal with:

- shortage of capital;

- a heavy tax and administrative burden;

- little familiarity with strategic management and corporate organization;

- problems with staff training.

2.4. The second Berlin Conference in September 1994 identified the main sources of concern for companies facing up to social and economic changes in the European Union. The Conference made an important contribution towards raising the profile of the craft industry at European level () and represented a new approach in terms of the quality of preparation for the discussions (preparatory conferences). At the Berlin Conference, 144 proposals were addressed to the European Commission and other Community and national institutions. These can be summarized as follows:

- more participation for the representatives of small firms and craft industries in drafting Community regulations;

- internationalization of small firms and craft industries;

- cooperation with the countries of central and eastern Europe;

- raising the profile of the crafts industry;

- awareness of the sector's economic role;

- incorporation of small firms and craft industries into the single market;

- vocational training;

- streamlining of red tape;

- cross-border areas;

- funding and access to credit;

- greater transparency of Commission services.

2.5. After considering the proposals, the Commission concluded that some 50 % of them were already covered either by Community policies or by actions undertaken shortly before the Conference. The Committee requests the Commission to carry out an appraisal of those proposals which have already been put into practice and to specify what action it intends to take on the others to be undertaken.

2.6. In conclusion, the second European Conference on Craft Industries and Small Enterprises, held in Berlin, was an important stage in the quest to enhance the craft industry's role in the economic, social and political life of the European Union. Progress was also made on awareness of the problems facing the sector and how to solve them. The Third European Conference on the Craft Industry will be held in Milan.

3. Community policy on SMEs and the craft industry

3.1. The term 'craft industry` covers different activities in the various Member States, and there is no consistency between the legal definitions - where they exist. In its October 1992 Opinion on SMEs and Craft Industries (), the Committee pinpointed some of the typical features of craft industries and small firms in the Member States:

- generally small in size, except for some regions and countries;

- backbone of the local economy and/or use of advanced technology;

- customized production or working-to-order;

- legal and financial independence of the firm;

- close links between family and firm, with relatives playing an important part;

- skills of the head of the firm, who works in close contact with employees.

3.2. Moreover, the importance of micro-businesses and the craft industry in particular is not due merely to the part they play in economic activity, or to the number of firms and jobs involved, and their contribution in terms of added value. The dynamic role they play in the Community economy should also be considered. Owing to their internal organization, and their presence in expanding markets, micro-businesses and craft industries are of vital importance for productivity, innovation and flexibility, all of which are essential for the structural development of the economy as a whole, and for ailing regions in particular.

3.3. The craft industry, however, has to solve quite different kinds of problem than those facing medium-sized and larger companies. Some of these problems stem from the increasing need for companies to go beyond their traditional, local markets, and to operate on the European market.

3.4. Compared to medium-sized and large companies, it is more difficult for them to cope with legal and administrative red tape, particularly red tape relating to protection of the environment and conformity with the standards applicable in the European Single Market.

3.5. Craft industries have greater problems with funding and access to credit and to Community information and international cooperation. Their managers find it more difficult to develop strategic objectives at European level. In order to alleviate these problems and give these firms greater access to the Single Market, the Commission devised the Community policy in favour of SMEs and craft industries. At any rate, a study should be commissioned to ascertain the extent to which the craft industry and business women have access to funding and credit.

3.5.1. In the field of research and technological development too, support measures for SMEs have been adopted under the 4th Framework Programme 1994-1998, following on the positive experience of the Craft programme (cf. feasibility awards, for example). These measures are designed both for SMEs from traditional sectors, and for those in high tech sectors. The aim is to encourage them to take part in all the new Community R& D programmes.

3.6. If the policies are to have a greater impact on production, then the Community authorities will have to distinguish between policies on micro- and small enterprises, and those on medium-sized enterprises, given the obvious production, commercial, organization and management differences of these two categories of firms.

3.7. In this area, the Commission's selective approach does not offer firms direct support, but it does provide help for their intermediaries and representative bodies, such as professional bodies and associations.

3.8. Various types of initiative have been undertaken, from Euro Info Centres (information networks) and BC-NET (Business network cooperation), to the BCC, Europartenariat and Interprise (Cooperation between enterprises), and actions relating to subcontracting and pilot schemes (Euromanagement, Commerce 2000, and Start-up Capital). Furthermore, the European Union has created 24 'Start-up Capital Funds` which have pledged themselves to investing in companies which are starting up or have recently done so, and which need managerial and financial support to carry out projects which can lead to development and innovation.

3.9. The craft industry is also supported, albeit insufficiently, considering its importance for the Community's economy, within the framework of the Community regional development policy, under the Community Support Frameworks (CSF), the Community initiatives and the EIB (European Investment Bank), particularly via global loans.

3.10. The Structural Funds have budget allocations of more than ECU 141 000 million for the period 1994-1999. Most of this considerable sum (the Structural Funds account for some 35 % of the Community's annual budget) will be used to fund national CSFs, particularly infrastructure projects. However, only a small proportion of these resources are harnessed to boost SMEs and the craft industry. Moreover, 9 % of the total allocation, i.e. ECU 13 450 million, has been set aside for Community initiatives.

3.11. Of these programmes, the significance of the SME Community initiative should be stressed. It has a budget allocation of ECU 1 000 million for joint funding of a range of support activities for SMEs and craft industries.

3.12. A further problem undoubtedly arises from the need to ensure that craft industries make good use of the numerous opportunities available to them, so that they can benefit fully from existing actions and programmes, as requested by the Commission (Communication (95) 502) and the European Parliament (Thyssen Report). Only a reduction in red tape and in waiting time for disbursement of funding, improved backup and a broader, deeper partnership with the Community, national and regional authorities and the representatives of trade organizations, will generate a mass effect - greater convergence between local, national and EU action, and improved transparency, which is essential if the enterprises concerned are to participate more profitably.

3.13. The Integrated Programme for SMEs and Craft Industries () is a step in this direction. It puts forward a new framework for the improved identification and integration of the different contributions the EU can make towards the creation and development of enterprises. In this programme, the Commission has made a particular effort towards setting up a legal and administrative framework conducive to craft industries. Although there are no new budget headings, the programme does incorporate all other policy areas which can contribute towards the development of SMEs and craft industries, such as the Structural Funds, research and technological development and vocational training. New proposed action will be funded by instruments already in place. In order to tailor these programmes still more effectively to the specific circumstances of craft industries and SMEs, the Committee requests the Commission, in a communication, to study the involvement of craft industries in Community programmes.

3.14. In recent years, the European organizations representing the craft industry and SMEs have played an important part in implementing these policies, and are increasingly involved in Community activities. The craft industry's representative organizations are members of several committees of the EU Institutions. Here, the European Commission's aim is clear: to support all forms of cooperation between Member State organizations and encourage them to pool their skills.

3.15. The impact of Community action on the craft industry

It transpires from the above evaluation of recent EU action to help SMEs and the craft industry, and of its impact on craft industry productivity, that although this action has generated undoubted benefits there are a number of problems:

- measures to help the craft industry are always of a somewhat general nature; this makes it more difficult to identify the beneficiaries and reduces the impact on the sector; moreover, the measures are often implemented without consulting craft sector organizations;

- action is not very specific, in spite of the distinct nature of the craft industry and micro-businesses in general;

- there is a myriad of uncoordinated measures; this confuses craft-industry managers, thus reducing the impact on the activity of the sector. In this respect, coordination of initiatives planned at European level would be desirable. To this end, the establishment of a craft industry-SME joint group at the EP and at the ESC and the setting up of a European Commission interdepartmental working party which, under the responsibility of DG XXIII, would coordinate Commission operations to assist craft industries and SMEs would help to enhance the impact of actions undertaken at local, national and Community level.

3.15.1. All this raises two fundamental problems: firstly, it is impossible to continue to use a general definition for small- and medium-sized enterprises which includes micro-businesses, whether they be craft industries or commercial enterprises; secondly, initiatives need to be fine-tuned, so that they target the special needs of the craft industry.

3.15.2. With regard to the first problem, the Commission recommendation concerning the definition of small and medium-sized enterprises is of some assistance. It emphasizes that 'a distinction must be drawn, within SMEs, between medium-sized enterprises, small enterprises and micro-enterprises; whereas the latter should not be confused with craft enterprises, which will continue to be defined at national level due to their specific characteristics.` The recommendation classes all firms with less than 10 employees as micro-businesses (turnover is disregarded); those with between 10 and 49 employees and a turnover of not more than ECU 7 million as small businesses; and those with between 50 and 249 employees and a turnover of no more than ECU 40 million as medium-sized businesses. All firms with a workforce of over 250 are classed as large firms.

3.15.3. As regards the second problem, the Commission's across-the-board approach to support for SMEs and craft industries is a source of confusion, both for those responsible for managing the funds locally, and for the beneficiaries. This confusion impairs programme planning and the ability to meet the actual needs of the craft industry could undermine the new multi-annual action programme for SMEs (1997-2000) before it even gets off the ground.

4. The legal definition of the craft industry

4.1. Not all countries have a legal definition of the craft industry, and when they do, they differ considerably. Based on an analysis of the relevant national legislation, the definitions of the craft industry could be divided up into three approaches: sector/size; professional; and artistic.

4.2. Rather than being seen as a problem, the differences should be considered as part of our cultural and economic heritage, and as a starting point for a common strategy to foster the European craft industry and raise its profile.

4.3. The sector/size approach is defined as such according to restrictions on size (number of workers). It differs from the professional approach, which disregards size when distinguishing between craft industries and micro- and small enterprises, and is based on affiliation to certain sectors. The artistic approach is more restrictive, in that it applies to artistic activity only ().

4.4. The sector/size approach

The criterion for the definition of a craft industry is mainly based on the size of the firm in terms of the number of employees. This may vary according to the sector (in Italy) or remain unchanged (France and the Netherlands). In practice, the countries which adopt this approach are Italy, France and the Netherlands.

4.4.1. In Italy, the first step towards regulating the craft industry came with the entry into force of law No 860 of 25 July 1956, establishing the Provisions for the legal regulation of the craft industry. The sector is currently governed by law No 443 of 8 August 1985. According to law No 443, craft industry activities may be carried out by employees working directly under a sole owner or partners, as long as the following restrictions are respected:

a) businesses not involved in mass production: a maximum of 18 employees including no more than 9 apprentices; the total number of employees may be increased to 22 provided that the increase is made up of apprentices;

b) businesses involved in mass production, but without complete automation: a maximum of 9 employees, including no more than 5 apprentices; the total number of employees may be increased to 12 provided that the increase is made up of apprentices;

c) businesses involved in artistic activity, traditional crafts and off-the-peg clothing: a maximum of 32 employees including no more than 16 apprentices; the total number of employees may be increased to 40 provided that the increase is made up of apprentices. The sectors covering artistic activity, traditional crafts and off-the-peg clothing will be defined by Presidential Decree, after consultation with the regional authorities and the Consiglio nazionale dell'artigianato (National Crafts Council);

d) transportation business: a maximum of 8 employees;

e) construction business: a maximum of 10 employees, including no more than 5 apprentices; the total number of employees may be increased to 14 provided that the increase is made up of apprentices.

4.4.2. In France the crafts sector is largely regulated by the Code de l'artisanat (Decrees No 55-656 and No 55-657 of 20 May 1955 - which were given legal status by law No 58-346 of 3 April 1958 - and later amendments) and by Decree No 83-487 of 10 June 1983 (as amended by Decree No 88-109 of 2 February 1988). Decree No 62-235 of 1 March 1962 set the size of French craft industries at 5 employees, subsequently increased to 10 by Decree No 76-879 of 21 September 1976. A Decree has just been approved to increase this from 10 to 15 employees (Droit de suite - Decree of December 1995 and Law of 5 July 1996). Moreover, Law 96/603 of 5 July 1996, on the development and promotion of commerce and the craft industry, was passed recently. This retains the provisions of the 'Droit de suite` unamended.

4.4.3. The Netherlands (non-legal definition) uses a method which is halfway between the two previous approaches: in practice, all firms with no more than 10 employees and which operate in certain sectors are considered craft industries.

4.5. The professional approach

4.5.1. This approach is particularly dynamic and follows the dictates of national legislation (in Germany, the 'Handwerksordnung 127` of 28 December 1965; in Austria, the 'Gewerbeordnung 1994`; and in Luxembourg, a law passed in 1990). These laws define which sectors can be considered 'craft industries`, regardless of the size of the firm. The definition is based on a classification of 'craft occupations` (127 in Germany and 151 in Luxembourg) for which a vocational qualification is required. The countries which adopt this approach are Germany, Austria and Luxembourg.

4.5.2. In Germany, the integral legislation currently in force was introduced by the Law governing the crafts industry of 28 December 1965. It has been subjected to repeated amendments over the years, with the most recent ones following on the laws of 20 December 1993 and 5 October 1994.

4.5.3. Paragraph 1(1) of the law's first title, relating to the authorization of independent craft activity, contains the main features of the traditional German concept of the craft industry, and states as follows: Independent craft activity as a fixed occupation is permitted only for natural and legal persons and for partnerships enrolled on the official register of craftsmen (first paragraph). A professional activity is deemed to be a crafts activity for the purposes of this law, when it is carried out in a craftsman-like way, and is wholly or fundamentally connected with one of the crafts listed in Appendix A of the said law (second paragraph).

4.5.4. In Austria the definition of handicrafts is contained in paragraph 1 of the Order of handicrafts: in order to pursue a crafts activity certain skills have to have been acquired through professional training courses, and extensive experience is required.

4.5.5. In order to pursue a crafts activity in Luxembourg, written authorization is required from the Ministère de l'Economie Nationale des Classes Moyennes; this is compulsory for natural and legal persons. To be admitted to the crafts sector, the craftsman must hold the relevant professional qualifications and be respected by his peers.

4.6. The artistic approach

This is a very restrictive approach, since only firms exclusively involved in artistic activities are classed as craft industries. The usual Spanish concept of handicrafts means applied art and art studies, carried out independently (Royal Decree of 1982). With due deference to regional autonomy, since 1985 (previous law of 1968) laws have been passed to regulate the crafts industry whilst taking account of the special, local features of the sector. Since 1995, Spain has been trying to shed the restrictions of the previous definition, using broader, more flexible criteria. These, starting with those set out in the Schleyer Report (), are as follows ():

- close owner/manager links within the firm;

- great reliance on human resources which can be used in conjunction with up-to-date manufacturing and management techniques;

- management and manufacturing skills of the head of the firm;

- fundamental role of the head of the firm who is directly involved in organizing the manufacturing process.

4.6.1. The British, and, in part, the Irish craft industries could also be included under this approach, even though Britain and Ireland have no legal definition of the craft industry. In the United Kingdom and Ireland, only an independent worker producing traditional or artistic handmade objects is considered to be a craft worker. There is, of course, a 'small business` sector, with marked industrial features, whereas the crafts element is generally to be found in traditional and artistic production.

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4.7. Moreover, other countries, for various reasons, are not covered by any of these three approaches.

4.7.1. In Belgium, craft industry legislation is very restrictive, and the economic and social importance of the sector is thus rather modest. The Belgian concept of handicrafts is closely bound up with the concept of small and medium sized enterprises, which in turn is included under the more general heading of the 'classes moyennes`.

4.7.2. In Greece there is an official non-legal definition, whilst in Portugal and Finland there is no legal or official definition of a craft industry. In Sweden, the Royal Decree No 596 of 26 June 1976 established the procedure for granting a craft worker diploma. This provides formal recognition of crafts activity in certain occupations.

Although there is no general definition for the craft industry in Denmark, a range of criteria is used as a basis for applying specific provisions. The most widely-used criterion is that of size, and is to be found in the study on 'Handvaerket og den Mindre Industri`: this category covers all manufacturing firms with 1 to 5 employees, and repairs, service and building firms, regardless of the number of employees.

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4.7.3. Given the enormous differences in individual national legislation, it is to be hoped that this sector will also benefit from procedures leading to a common legal basis in all EU countries. This is particularly needed for an assessment of the sector's role in the European economy, and to enhance the economic and social impact of Community and national aid policies to promote the sector.

5. The EU craft industry - statistics

5.1. Number of firms and workers

5.1.1. While much is known of the productive network of SMEs in Europe, there is a shortage of craft industry statistics (with the exception of some European countries). It is often impossible to provide a thorough, standard assessment of the important role which the craft sector plays in the European economy. This is due to the lack of adequate Member State coordination on craft sector statistics and the use of widely varying collating methods which do not allow a satisfactory comparison of data; in any case, such data are not always available, and this is also true with a view to the future accession of CEEC.

5.1.2. In the EU there are some 16 million productive firms (16 030 000 firms in 1995) excluding the farming sector ().

5.1.3. Around 50 % of these are individual, craft, professional enterprises and small businesses with no employees. The other 50 % is made up of micro-businesses, of which 7 million have between 1 and 9 employees, and a million have between 10 and 49 employees. There are not many medium-sized (between 50 and 249 employees) and large firms (more than 250 employees) - 155 000 and 35 000 respectively - although they are of considerable significance to the economy, since they account for around 45-50 % of employment and turnover figures for the non-agricultural productive sector. Generally speaking, the average European firm has a workforce of around 6.

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The three new Member States (Austria, Sweden and Finland) have 900 000 firms (5,6 % of the total) with around 5,55 million employees (6,3 % of the total).

5.1.4. Whilst these statistics enable us to quantify the number of firms in Europe, there is no adequate information for the craft industry. In some countries the number of firms and the size of the workforce are underestimated because definitions and criteria are applied systematically. In Spain, for example, there are 14 920 official craft firms, which is probably an underestimate (). On the other hand, in countries where estimates of the extent of the craft industry are based on firms with a workforce of less than nine, it is possible to err in the opposite direction.

5.1.5. The type of legal definition also affects the size of the firm, e.g. in countries where there are no size restrictions on the craft industry, firms are much bigger than in countries where a ceiling exists.

5.1.6. The above comments show how the absence of any European regulation for craft-related firms affects an assessment of the size of the sector, and highlights three main problem areas:

- it is not currently possible to assess the size of the European crafts sector, due to diversity in calculating the reference period and in collating methods;

- no method of compiling statistics based on minimum common denominators;

- changes in the growth of the sector.

5.1.7. The final Resolution which was adopted by 15 European craft sector experts (one for each Member State) at the Second symposium on European craft industry statistics () is a step towards initiating a common inquiry whose main objective is to help solve the statistical side of these problems.

5.1.8. The following table represents an attempt to group together available statistics referring to the approaches outlined above. The following features emerge:

1) an economic comparison of the data is not possible;

2) the available data underestimate the phenomenon;

3) where national legislation exists, the economic significance of the craft industry for the national economy emerges.

5.1.9. One of the most interesting indicators is the significance of the sector in terms of the number of firms and the size of the workforce compared to the figures for firms as a whole.

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5.1.10. In spite of the obvious limitations (particularly the fact that these comments are valid for countries where the craft industry is not regulated), this is extremely useful in providing an albeit rough idea (overestimated in some cases and underestimated in others) of the size of the crafts-related sector in Europe.

5.1.11. Three important features emerge from the analysis of the main results:

- in general, there are more craft firms in countries which have a legal definition of the craft industry;

- the significance of the craft industry is probably underestimated in countries such as Spain and Great Britain. It is no coincidence that both countries tend to use the term 'artistic` when defining crafts-related firms;

- in countries where the professional approach prevails, the size of the craft workforce compared to the total number of people employed by SMEs is greater, with the exception of Italy. This means that, quite apart from the legal definition, in terms of employment the sector is an integral part of the Italian production system.

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5.2. The craft industry's contribution to GDP and exports

5.2.1. The craft industry's contribution to GDP is also of some interest. The available data only regard certain Member States. The sector plays an important role in Italy, accounting for 12 % of GDP, compared to 9,6 % in Germany and 5,6 % in Austria. The middle ground is occupied by the Netherlands (3,5 %), France (5,1 %) and Greece (3 %). The role of the craft industry is underestimated in Spain (0,33 %). In many of these countries, the craft industry's contribution to GDP is greater than that of agriculture (e.g. Italy).

Craft industry growth and employment (1991 = 100)

Professional approach

Enterprises Employment

Austria Austria

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Source: Data processed by Istituto G. Tagliacarne Source: Data processed by Istituto G. Tagliacarne

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Germany Germany

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Source: Zentralverband des Deutschen Handwerks

processed by Istituto G. Tagliacarne Source: Zentralverband des Deutschen Handwerks

processed by Istituto G. Tagliacarne>END OF GRAPHIC>

Luxembourg Luxembourg

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Source: Chambre des Métiers de Luxembourg data,

processed by Istituto G. Tagliacarne Source: Chambre des Métiers de Luxembourg data,

processed by Istituto G. Tagliacarne>END OF GRAPHIC>

Craft industry growth and employment (1991 = 100)

Sector/size approach

Enterprises Employment

France France

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Source: SIRENE/INSEE data, processed by Istituto G. Tagliacarne

Source: SIRENE/INSEE data, processed by Istituto G. Tagliacarne

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Italy Italy

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Source: ISTAT/CERVED data processed

by Istituto G. Tagliacarne Source: ISTAT/CERVED data processed

by Istituto G. Tagliacarne

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Netherlands Netherlands

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Source: EIM, Annuel yearbooks of craft data,

processed by Istituto G. Tagliacarne Source: EIM, Annuel yearbooks of craft data,

processed by Istituto G. Tagliacarne

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Craft industry growth and employment (1991 = 100)

Artistic approach

Enterprises Employment

Spain Spain

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Source: Fundación Cultural Espanõla para el fomento

de la artesanía data, processed by Istituto G. Tagliacarne Source: Fundación Cultural Espanõla para el fomento

de la artesanía data, processed by Istituto G. Tagliacarne

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Ireland

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Source: CSO data processed by Istituto G. Tagliacarne>END OF GRAPHIC>

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5.2.2. Statistics relating to craft industry exports are available for some countries. It can be seen that even the smallest firms are able to compete on the export market, which is not merely the prerogative of larger firms. A good example of this is Italy, where the craft industry accounted for 18,3 % of total exports in 1994; this figure is even higher than the sector's contribution to GDP. Craft industry exports are also significant in Denmark, where they account for 6 % of total exports. Conversely, the figures for Germany (2 % of total exports) and France (4,2 % of total exports) are lower than the craft industry's performance as a percentage of GDP. In Austria, the craft industry accounts for 2,8 % of total exports.

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5.3. The craft industry in Europe - the trend of the last five years

5.3.1. Recent years have seen substantial expansion of craft industries in many European countries. Statistics show an increase in the number of craft businesses in nearly all of eight countries (Austria, Germany, France, Italy, Ireland, Luxembourg, the Netherlands and Spain) in 1991-1994/1995. France and Spain differ in that they have had uneven growth in the number of businesses. The trend in France can be divided into two periods: the decrease in 1991-1993 was followed by an increase (though insufficient to make up for the ground lost earlier) in 1994/1995. In Spain, however, the number peaked in 1992, fell in 1993, and rose again in both 1994 and 1995. There was no comparable trend in employment, which increased in Germany, Austria and Luxembourg, and decreased in the other countries. In Italy, France and the Netherlands, there have been two distinct trends in the number of craft firms and employment in recent years, with an increase in the former and a downturn in the latter. This can be partly explained by the appearance of new enterprises: many apprentices quit their salaried jobs to set up their own business; thus the employed move on to self-employment.

5.4. Regional aspects

5.4.1. In the Europe of the regions, the craft industry is less evenly distributed than might be thought. In Italy, Germany and Austria, there is a direct correlation between high per capita GDP levels and the concentration of enterprises, whereas in France it is the reverse: here, the regions with medium-low per capita GDP levels have the highest density. In practice, and contrary to common perception, the craft industry is to be found both in highly-developed areas and in those which are lagging behind - in fact in many areas it has sown the seeds for much entrepreneurial activity; in Italy, for example, the regions with the highest level of craft activity are Tuscany, the Marches, Veneto, etc., i.e. regions with a medium-high level of economic development (). In particular, the craft industry contributes to the development of areas in which there is a strong business base and/or industrial areas. A survey conducted by Istituto G. Tagliacarne reveals that the most dynamic industrial areas, or those which are more likely to act as a magnet, are those with a high concentration of craft firms, particularly the north-eastern (Veneto) and central (Tuscany and the Marches) regions (). The same is true of Germany, where regions such as Baden-Württemberg and Bavaria - two of the highest-income regions in Europe - have the highest craft industry density. In Austria, the high-density areas are the Vienna area and Lower Austria. On the other hand, in France it is Corsica, the Midi-Pyrénées, Limousin and Languedoc-Rousillon which are ahead of all other areas, despite having a medium-low per capita income ().

5.4.2. Turning to the weaker areas of the European Union, southern Italy has a less developed craft industry. This is not true of Spain, where Andalusia (a less developed region) is one of the regions with the highest level of craft activity, and Great Britain, where Scotland has the highest craft industry density.

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5.5. The lack of adequate information makes this overview of craft industry statistics necessarily patchy and incomplete, thus highlighting the need for a European programme to improve craft-industry statistics.

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6. Training for the craft industry: an introduction

6.1. In the craft industry - perhaps more than in other sectors - the firm is the centre for training activities, and professional skill and ability are prerequisites for success. Often, access to the profession is subject to rules, certificates, etc. which specify the official 'skills` needed to carry out a particular activity. In this sense, training is a major factor in the continual growth and development of the sector, particularly when considered against the background of the range of possibilities and options available in the 'training sector`: from the formal teaching of basic and specialist skills (including manual skills) and know-how, to the inculcation of good business practice and styles of management.

6.2. The national training systems - both initial and ongoing - are thus a prerequisite for the existence, continuity and development of the professionalism of the players in SMEs - and especially craft industry SMEs.

6.3. The key feature is the integration of the education system and industry provided by combined work/training schemes, apprenticeships, work-experience placements and ongoing training. The latter serves two purposes: first, it keeps workers up to date; secondly, it builds on the body of accumulated knowledge, which is often unique and passed on informally.

6.4. Finally, in some countries the status of craftsman is governed by precise regulations and is subject to an exacting procedure (exams, certificates, practical tests, etc.); this highlights the need many countries feel to preserve the 'uniqueness` of the craft professions, by maintaining their distinguishing features. This is also necessary to achieve recognition of the quality of the craft professions, in order to safeguard the interests of consumers and end-users. In Sweden, for instance, 'journeyman's` and 'mastercraftsman's` certificates are required for 100 typical craft sector activities, representing a wide range of occupations from baker to ice-cream maker.

6.5. The institutional background

6.5.1. A coordinated group of people is involved in programming, organizing and carrying out the (initial and continuous) vocational training courses. The group is structured as follows: a) central government - ministries, ministerial departments and governments agencies; b) local government; c) sector-specific associations (both nationally and locally, with their own training centres across the country).

6.5.2. Some specific institutes and vocational training centres play an important role, (e.g. AMU, a Danish centre found in many Danish cities; the Chamber of Handicrafts in Germany; COLO - national vocational training centres in the Netherlands; and the Local Education Authorities in England and Wales).

There is a distinct correlation between (initial and ongoing) training systems and the SME sector, in particular the craft industry. It should be emphasized, however, that in some countries there are no dedicated craft industry training centres: in Ireland craft industry training is part of secondary education and training schemes for jobseekers; in Denmark it is covered by the Basic Vocational Education (EUD) section of Higher Technical Examination Courses (HTX) and the Labour Market Training System (AMU - system, which is mainly responsible for providing training and refresher courses for skilled and semi-skilled workers).

6.5.3. The two vocational training systems differ in their target groups: young people in the case of initial vocational training and adults in the case of continuous vocational training. Moreover, the two types of training have different aims: the first prepares the trainee and introduces him/her to working life by providing students with the theory and practice needed to set up a business and/or start a professional activity. Its strong links with manufacturing make it effective. The second type offers maintenance and upgrading of skills, and retraining courses; its effectiveness is a result of the frequency of the programmes and its close links with the concept of lifelong learning.

6.5.4. The integration referred to is best exemplified by the combined work and training/education schemes. These combine hands-on training in the workplace with education or training courses in vocational and technical schools.

In these schemes, the firm and the school are partners; they share roles and responsibilities, and this formula - which assumes that the world of education and the world of work are 'permeable` - underpins the framing of active training policies which help to boost the economy.

6.5.5. Moreover, this rotation between work experience and training highlights the need to think of the formal training system and industry as being responsible for the other's growth and enhancement.

The apprenticeship is certainly the most popular way of achieving this rotation. It is a combination of work and training experience for young people, who acquire - by means of a 'learning contract` - the basics they need to work in a firm. As already shown, the apprenticeship is subject to an agreement (or contract) concluded between the employer and the apprentices (via their respective legal representatives).

6.5.6. In the crafts sector, the entrepreneur's role as trainer is particularly important. It allows the inculcation of specific professional skills, together with a package of managerial skills which are typical of the smaller firm: the development of craftsmanship at a professional level requires both intense, interactive support, backed up by detailed training procedures, and specific planning and marketing skills, and - more generally - managerial strategies.

For the most part, the actual content of the apprenticeship is the fruit of close cooperation between government organizations and the social partners which represent the craft industry.

6.5.7. The apprenticeship is often a compulsory requirement - and not only in the craft sector - for admission to a profession. In Austria more than 200 professions use the apprenticeship system; in Great Britain the modern apprenticeship system - which started up in 1995 - underlies the National Vocational Qualification System (NVQ), based on the identification of industrial skills; it guarantees a person's ability to carry out an activity at a specific level (in Great Britain there are currently 500 NVQs for 150 occupations, which cover 80 % of all occupations); in Ireland, most apprentice training programmes have been carried out under a single system since 1995: the Standard Based Apprenticeship Programme, FAS - the government agency for jobs and employment - is responsible for planning the activities of all apprentices throughout the various stages of the apprenticeship, and for the training activities which back up hands-on experience within the firm. Training is given in Vocational Schools, Regional Technical Colleges and at the Dublin Institute of Technology.

6.5.8. The final stage of the apprenticeship often includes a theoretical/practical exam. In Germany and Austria, in order to pass the final exam which confers admission to a specified trade, e.g. carpenter, the student must show s/he can 'produce` a product, or carry out some concrete task to prove s/he has the aptitude and skills needed for the relevant profession.

6.5.9. Often the representative organizations of the sector set up and run dedicated vocational training centres (e.g. Finland: Craft Trades Training Foundation; France: Apprentice Training Centre; Italy: centres belonging to the sector's two main organizations: 'Confartigianato` [Confederazione Nazionale dell'Artigianato] and the 'CNA` [Confederazione Nazionale dell'Artigianato]), or play an active role in promoting training for the sector (in Great Britain, the government-funded Craft Councils promote craft-related education at all levels of formal and informal training).

6.5.10. The craft sector - and particularly the vocational training element - is governed by national legislation: in Spain, the Organic Law for the General Ordering of the Education System (LOGSE), which provides the main thrust of the regulations governing training for Craft Activities and Design; in Italy, the Framework Act for the Craft Industry; in Austria, the law on vocational training (Berufsausbildungsgesetz); in Germany, the vocational training programme (Handwerksordnung und Berufsausbildungsgesetz); in Holland the Framework Act for Continuous Training (Kaderregeling Bedrijstakgewijze Scholing), in force since 1 January 1995, etc.

In France, an accord paritaire (September 1994) on vocational training, signed by the UPA (Union Professionnelle de l'Artisanat) and the social partners, aims to promote apprenticeships and, inter alia, provides craft workers with 'time benefit` for training activities.

6.5.11. Apprentices' wages are often calculated according to occupation, and are increased yearly: e.g. in Denmark, apprentices' wages are set by special sector commissions, which include social partner representatives. The level of remuneration depends on the type of work, the length of training and the age of the apprentice (usually about 18 years old).

6.6. Craft industry participation in training activities

The basic concept underpinning the whole training strategy is that the craft firm must be at the heart of training activities.

As the Thyssen Report for the European Parliament points out, it is no coincidence that the EP Committee on Social Affairs has called for training funds to target the craft industry, and for the following action to be initiated:

- emphasize the firm's training role by conferring the status of 'maître d'apprentissage`;

- exchanges of skills and know-how;

- Europe-wide recognition of the apprenticeship diploma.

6.6.1. Training initiatives to support and encourage craft industry start-ups are mostly included in programmes and/or national and regional initiatives to boost start-ups. Training is thus one of the main tools - an integral part of a start-up package which includes financial incentives, advice, technical assistance and tutorship - which specifically aim to pass on basic managerial know-how.

6.6.2. The main problem in designing a training course of this type is usually of a cultural nature, since:

- the craftsman generally has a production-centred corporate strategy in the narrow sense;

- the craft industry concentrates too much on the product;

- new enterprises, which have grown out of older firms, are particularly prone to this problem.

6.6.3. Consequently, training becomes an instrument of growth for the craft industry, and especially for its new entrepreneurs, by:

- improving the ability to spot and solve corporate problems, other than those strictly related to manufacturing;

- giving the budding entrepreneur a more global view of company and market strategies;

- promoting cooperation between micro-businesses in order to improve business relationships and procedures for exchanges of know-how, etc.;

- developing the language skills needed to do business on foreign markets.

6.6.4. These training programmes should not, however, be occasional or 'one-off` occurrences; it is vital that they be provided on a regular basis. In practice, this means designing a strategy based on the continuous training of the budding entrepreneur.

6.6.5. In this respect, three European examples can be quoted. In Ireland, for example, the main programmes for SMEs (Enterprise Development Programme, the Training Support Scheme, the Plato Programme and the Country Enterprise Board) provide management assistance, training, assistance/guidance and back-up for (potential) small businesses. In Greece, the OAED (Manpower Employment Organization) runs a programme to help new entrepreneurs (co-funded by the European Social Fund), the main aim of which is to provide financial support for individual start-ups.

In Luxembourg, the Chamber of Commerce - through the Enterprise Start-up Service (SCE) - provides budding young craft industry entrepreneurs with information and advice, and offers personal service and assistance.

7. National craft industry and SME policies

7.1. At Community level, the Delors White Paper on Competitiveness, Growth and Employment recognizes the important contribution made by SMEs and the craft industry to the economic growth of the European Union. At national level, too, the Member States see small firms as a flywheel for growth - particularly in the weakest areas - and as one of the best ways of creating new jobs. It is here that the craft industry has made and can continue to make a major contribution. A survey carried out in Italy in 1988 () reveals that some two-thirds of new entrepreneurs came from a 'crafts` background. Further research has shown that small and micro-businesses maintain employment levels better than medium-sized and large firms when there is a downturn in the economy.

7.2. This means that the small business and craft sector, if backed by selective intervention policies - targeted rather than scatter-gun - can make an important contribution towards creating new firms and new jobs.

7.3. Generally speaking, Member State legislation on the sector aims to:

- improve business competitiveness;

- enhance smaller firms' ability to cope with economic and technological change;

- safeguard and create jobs;

- ensure a wide choice and high standard of goods and services.

7.4. The following is a summary of the main types of EU Member State intervention for SMEs and the craft industry in recent years:

7.5. Austria

- support for SMEs (KMU - Förderungsgesetz 1996);

- subsidized credit;

- consultancy and training relief;

- funding for R & D;

- support for internationalization.

7.6. Belgium

- Introduction of a SME barometer to promote awareness of SME issues and encourage appropriate intervention policies;

- improved access to a topped-up 'Transfer Fund` for smoother transfers of undertakings;

- social security reforms.

7.7. Denmark

- Tax policy reform - more public investment and tax reform;

- special concessions for businesses.

7.8. Germany

- Tax relief for businesses;

- interest relief;

- reduction in corporate profit tax;

- 30-point programme to achieve the aims of the Delors White Paper, and special concessions for new businesses.

7.9. Greece

- Privatization, tax and competition reforms;

- Regional aid.

7.10. Finland

- Development fund - special guarantees for services to firms;

- insurance relief for SMEs;

- relief for minority partners.

7.11. France

- Medelin Plan: tax reform, access to credit, competition, bureaucracy, cooperation between firms;

- Guarantee Fund for productive investment;

- FFCGA;

- Multiannual guidance programme for the craft industry (tax reforms, access to credit, competition, red tape);

- plan for SMEs;

- Law of July 1996 on the development and promotion of trade and the craft industry.

7.12. Ireland

- Reduced fiscal drag on corporate profits;

- aid for new businesses (Seed Capital Scheme).

7.13. Italy

- A relaunch of technological innovation, with a development plan made up of 8 sub-programmes relating to tax relief, direct subsidies, etc.;

- Artigiancassa action on funding (encouraging young people and women to set up in business, protection of the environment, services for businesses, technological innovation, etc.) and concessions (interest subsidies, royalties, and subsidiary guarantees) for craft firms (26 878 interest subsidies and 2 214 subsidiary guarantees were granted in 1995);

- Laws 488 and 341 - tax relief, one-off payments, etc.

7.14. Netherlands

- 'Meer werk, weer werk` plan for improved market flexibility;

- R& D grants;

- apprenticeship plan;

- tax relief.

7.15. Portugal;

- PEDIP II Programme (SME development plan);

- PROCOM Programme (for business);

- concessions for export;

- help with funding.

7.16. United Kingdom

- Cooperation and improved competitiveness;

- bank guarantee plan;

- concessions for investment;

- Uniform Business Rate.

7.17. Spain

- credit for SMEs via the Instituto de Credito Oficial (ICO);

- capital grants;

- regional measures.

8. Priorities for the European craft industry - some ideas for discussion

8.1. Bearing in mind the special nature of crafts issues - dealt with in various ESC opinions and Commission and EP documents - and emphasizing the importance of the crafts sector to the European economy in terms of the number of firms, employment and contribution to GDP, the Committee feels that the sector should be backed up by appropriate EU policy action; this should be specific, but complement existing policies for SMEs, taking account of their particular circumstances, and aim to raise the economic and social profile of the craft industry, and especially to support it as a breeding ground for new enterprises and new jobs.

8.2. Action to promote the growth of the craft industry should take heed of the following four priorities:

- emphasize the distinctive features of the craft industry compared to other SMEs, both in EU, national and local consultations and negotiations and in implementing Community economic and social policies;

- promote the creation and development of a European cultural identity for the craft industry;

- support the economic development of craft industries, by improving their competitiveness and providing easier access to the single market;

- encourage craft industries and their representatives to take part in exchange and cooperation programmes, both within the Community and in the framework of EU relations with third countries.

8.3. The following eleven action lines cannot pretend to cover all the needs of European micro-businesses, but they do provide a springboard for identifying procedures which could provide some of the answers.

8.4. The eleven priority action lines are as follows:

8.4.1. Social consultation

Provision should be made for representation of craft industry and SME interests in the negotiations referred to in Article 4 of the agreement on social policy in the Treaty on European Union, insofar as the relevant organizations are represented at European level ().

8.4.2. Boost business competitiveness

The entrepreneur must have access to a team of advisors who follow the progress of the firm and its employees from start to finish ('life-long advising`), even when the firm changes hands.

To this end, we need to:

1) promote the sector by providing, via the ESF and the Structural Funds, specific funding from the competent ministries for SMEs and the craft industry;

2) support training programmes for 'business advisers` in the craft sector's organizations, and also back cooperation and exchange schemes for them in the various Member States.

8.4.3. Establishment of the European Academy for Craft Industries and SMEs

The Academy's role must be to further the aims of the industry, and provide a coordination centre for European craft industry research and training institutes, and a think tank for European craft industry problems and for Commission proposals.

8.4.4. Support for the development of a 'European identity` for the craft industry and small business culture throughout Europe

Proposed action in this area includes:

1) strengthening the various Member State training centres which are particularly geared towards the study and implementation of new technologies;

2) improved awareness of the role of the craft industry and small businesses in the economy, via better statistical analysis and research into specific subjects, particularly into the sector's key role as regards women in business, and jobs for young people and the disabled;

3) establishment of a permanent observatory for the craft industry in Europe, within the framework of the European Observatory for SMEs.

4) encouraging freedom of establishment and freedom to provide services, as provided for under Directive 64/427/EEC of 7 July 1964 ().

8.4.5. Enhanced role for apprenticeships and promotion of combined work/training schemes

In view of the pre-eminence of the apprenticeship as a means of passing on craft-industry skills, and considering that combined work/training is vital to the development of the sector, the following four action areas are recommended:

1) boost the firm's role in training by involving the craft industry's representative organizations in the creation of a European qualification;

2) encourage skills and know-how exchanges between firms, and especially between young craftsmen who have just completed their apprenticeship and those responsible for training within a firm and/or in specialist centres;

3) promote recognition of apprenticeship diplomas, with a view to creating a European diploma (the cooperation experience between the French APCM (Assemblée Permanente des Chambres de Métiers) and the ZDH (Zentralverband des Deutschen Handwerks) in Germany could be useful here);

4) strengthen action to support employment and create new firms; this action could include finance, worker flexibility, continuous training for apprentices/budding entrepreneurs.

8.4.6. Improve information for micro-businesses

The specific nature of small and micro-businesses - acknowledged in several Committee Opinions and at the Berlin Conference - is evidence of the need to improve information for micro-businesses. To this end, the following are suggested:

1) improve Euro-info Centre activities via heightened cooperation between professional associations, making selected, targeted information available, and focusing on the quality rather than the quantity of the information provided, whether as hard copy or software;

2) make better use of the know-how of craft industry and SME organizations and networks as channels of information and advice on how to harness national and Community funds for the craft industry, particularly those earmarked for innovation and technology transfers;

3) develop an innovation culture which encourages use of new technologies and quality certification in micro-businesses;

4) build on the findings of the Munich preliminary conference - held to pave the way for the Third European Conference on Craft Industries in Milan - regarding the inclusion of the craft industry in the information society.

8.4.7. Simplify bureaucracy

Four priorities have been identified:

1) allow micro-businesses more time than larger firms to apply regulations (except labour law provisions), since their lower turnover often makes compliance costly and complex for craftsmen and shopkeepers;

2) provide tax measures to encourage the establishment, transfer and expansion of craft firms, especially those which operate across national frontiers;

3) support the establishment of management centres able to help small businessmen to cope with the tax and accounting obligations prescribed by national law;

4) monitor the impact of new Community legislation on craft firms, particularly in relation to their specific nature as opposed to SMEs, so as to ensure that the letter of the law is respected and to avoid the disastrous financial and managerial consequences for the craft industry of unsuitable legislation.

8.4.8. Incentives for cooperation and exchanges between micro-businesses and their organizations

In order to keep abreast of economic developments, micro-businesses need to cooperate and pool information with other Community and third-country businesses.

To this end, the Committee would recommend:

1) support for cooperation between craft industry organizations and between technical and operational centres associated with the craft industry;

2) top priority to be given, within the framework of the Structural Funds, to economic and financial incentives for micro- and small businesses;

3) encouragement for collective organization and the development of a cooperative mentality, by helping the craft industry to organize itself around a system of common enterprises, including at cross-Community level.

Such a strategy should be underpinned by concerted action involving the local authorities, the Member States and the European Union.

8.4.9. Promote a culture of innovation for craftsmen and small businesses

Economic growth, competitiveness and the creation of new jobs all depend on an increased ability to innovate. In order to achieve these objectives, a culture of innovation must be created. This is necessary both as far as the end-product is concerned, and also for the organizational and marketing side of the industry.

8.4.10. Promote the improvement and development of transport and communication networks

The internationalization of businesses and the globalization of the economy require, perhaps most of all, an efficient transport network and a communications capability for the individual economic operators. An important contribution could be provided by enabling the craft industry to transport its products as cheaply as possible, and providing it with the possibility to communicate easily with other craft sector operators via state-of-the-art communications technology (Internet, E-mail, etc.).

8.4.11. Step up craft industry job creation initiatives

Simple measures could be taken to make takeovers and start-ups easier, by:

- providing financial assistance, e.g. 'soft` loans, mutual guarantees, or protection of family assets;

- creating a truly equitable tax regime for capital gains, unearned income, transfer tax and VAT recovery;

- encouraging good practice amongst competitors.

Brussels, 20 March 1997.

The President of the Economic and Social Committee

Tom JENKINS

() EU Commission, White Paper on the Single Market, Brussels, 1985.

() Source: Eurostat.

() EU Commission, L'artisanat et les petites entreprises face à l'intégration européenne, Résultats de la deuxième Conférence européenne de l'Artisanat et des Petites entre-prises à Berlin, 4. 9. 1995.

() Opinion of the Economic and Social Committee on SMEs and Craft Industries, OJ No C 322, 16. 12. 1992.

() See also: COM(94) 207 final, 3. 6. 1994; Council Resolution of 10 October1994, OJ No C 294, 22. 10. 1994; COM(95) 362 final, 8. 9. 1995.

() For a more detailed discussion of craft industry legislation in Italy, France and Germany, see Giacomelli G., Scudier G., Giacomelli Giovanna, Casella L.: L'impresa artigiana in Europa, Padova, 1995.

() ESC Opinion on SMEs and craft industries, OJ No C 322, 16. 12. 1992.

() The four criteria identified in Spanish legislation were discussed at the First symposium on European craft industry statistics, organized by the Istituto G. Tagliacarne, under the aegis of Commission DGXXIII, in Rome, September 1994.

() The data refers to firms in the 15 Member States, and includes those with more than 250 employees. However, these firms only make up 0,22 % (35 000 firms) of the total.

() IKEI in San Sebastian provided the estimates for Spain.

() The second symposium on European craft industry statistics was organized by the Istituto Guglielmo Tagliacarne, under the aegis of Commission DG XXIII in Rome on 20-21 March 1996.

() Cf Ist. G. Tagliacarne - Reddito e occupazione nell'artigianato, Roma, 1995.

() Cf Ist. G. Tagliacarne - Unioncamere, Rapporto sull'impresa e sulle economie locali, Roma, 1995.

() Source: Ministère des PME - Direction de l'Artisanat, La France de l'Artisanat, Paris, 1995.

() Survey carried out nationwide by Istituto G. Tagliacarne.

() Cf. Point 1.8 of the ESC Opinion on social dialogue; OJ No C 89, 19. 3. 1997.

() This was one of the European Community's first directives. Between 1964 and 1982, the Community adopted a further six directives on self-employment in industry and the craft sector, enshrining the concepts of freedom of establishment and the freedom to provide services for most craft industries.