Report from the Commission to the Council and the European Parliament on the implementation of the European Charter for Small Enterprises
Date: 2004-02-11
Institutions: European Commission
Subjects: EU Member State, European charter, administrative formalities, entrepreneurship, exchange of information, financing, innovation, report, small and medium-sized enterprises, technology transfer

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 11.02.2004 
COM(2004) 64 final 

REPORT FROM THE COMMISSION 
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

on the implementation of the European Charter for Small Enterprises 

EN 

   EN 

 
 
 
  
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

2. 

2.1. 

2.2. 

Key Messages .............................................................................................................. 3 

Creating the best possible environment for small businesses ...................................... 3 

Good progress made in implementing the Charter....................................................... 4 

Mutual learning and scope for more ............................................................................ 7 

Improving orchestration of small business policy........................................................ 8 

Future outlook .............................................................................................................. 9 

Progress by the Member States, Norway and the Commission in the Selected 
Priority Areas for this Reporting Period ............................................................... 10 

Introduction ................................................................................................................ 10 

Financial matters ........................................................................................................ 12 

2.21.1.  Recent developments .................................................................................................. 14 

2.2.2.  Conclusions and recommendations............................................................................ 22 

2.3. 

Strengthen the technological capacity of small enterprises, including innovation .... 23 

2.3.1.  Recent developments .................................................................................................. 25 

2.3.2.  Conclusions and recommendations............................................................................ 33 

2.4. 

Develop stronger, more effective representation of small enterprises’ interests at 
Union and national level ............................................................................................ 36 

2.4.1.  Recent developments .................................................................................................. 37 

2.4.2.  Conclusions and recommendations............................................................................ 42 

ANNEX  –  Summary  of  National  Reports  and  Commission  Activities  in  the  other 
Charter Areas 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

Education and training for entrepreneurship.............................................................. 45 

Cheaper and faster start-up......................................................................................... 49 

Better legislation and regulation ................................................................................ 51 

Availability of skills ................................................................................................... 56 

Improving online access............................................................................................. 61 

More out of the Single Market ................................................................................... 63 

Taxation...................................................................................................................... 67 

Successful e-business models and top-class small business support ......................... 69 

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1. 

KEY MESSAGES 

1.1. 

Creating the best possible environment for small businesses 

Small  businesses  play  a  central  role  in  the  European  economy.  The  average  European 
enterprise employs no more than six people. In Europe, small businesses play a much more 
important role than in other parts of the world1. These small businesses are a key source of 
jobs, business dynamism and innovation.  

To allow small businesses to play their full role in meeting the Lisbon objective, to make sure 
that they can flourish under the best possible conditions,  the Heads  of State or Government 
endorsed the European Charter for Small Enterprises in Santa Maria da Feira in June 2000. 

This  is  the  fourth  annual  implementation  report  on  the  Charter2.  It  aims  to  provide  a  brief 
overview  of  the  main  measures  undertaken  by  the  Member  States  and  the  Commission  to 
implement the Charter in the past year. As such, it seeks to identify strengths and weaknesses 
across  the  European  Union,  to  highlight  promising  national  measures  and  to  issue 
recommendations  for  future  action  and  thereby  contribute  to  the  strengthening  of  policy  in 
support of small businesses and to maintain the momentum generated by Lisbon. 

The Charter recommendations are just as relevant to enterprises in other European countries. 
The  endorsement  of  the  Charter  by  the  candidate  countries  in  April  2002  in  Maribor,  was 
followed by endorsement by the countries of the Western Balkans3 at the European Union – 
Western  Balkans  Summit  of  Thessaloniki  in  June  2003.  34  countries  have  now  committed 
themselves to applying the “think small first” principle embodied in the Charter. 

The Charter brings together all aspects of policy affecting small businesses at European and 
national level. In adopting this comprehensive approach, the Charter contributes to focus the 
attention of policy-makers at the highest level on the need for continuous improvement. 

The Competitiveness Council in March 2003 held a public debate based on the Charter report 
and a number of other documents. In its conclusions on entrepreneurship and small firms4, it 
further  called  upon  Member  States  to  listen  to  small  businesses,  to  speed  up  the 
implementation  of  the  Charter  and  to  give  strong  consideration  to  good  practices.  It  also 
invited both the Member States and the Commission to further integrate the use of voluntary 
quantitative and qualitative targets in the Charter implementation. 

Shortly  afterwards,  also  in  March  2003,  the  Brussels  European  Council5  gave  renewed 
impetus to the Charter process. The European Council encouraged Member States to speed up 
implementation of the Charter in an innovative way to ensure more effective involvement and 

1 

2 

3 

4 
5 

In Japan, for example, SMEs provide 33% of total private employment, the average Japanese company 
employing 10 people. In the United States, SMEs provide 46% of total private employment, the average 
American company employing 19 people. SMEs in Europe-19 (EEA plus Switzerland) provide 66% of 
total private employment, corresponding to over 80 million jobs. Figures concern non-primary private 
enterprises. Observatory of European SMEs 2002 / No 2, “SMEs in Europe, including a first glance at 
the candidate countries”. 
First report COM(2001) 122 final, 7.3.2001; second report COM(2002) 68 final, 6.2.2002; third report 
COM(2003) 21 final, 21.1.2003. 
Albania,  Bosnia  and  Herzegovina,  Croatia,  former  Yugoslav  Republic  of  Macedonia,  Serbia  and 
Montenegro. 
Competitiveness Council Conclusions on entrepreneurship and small firms, 3 March 2003. 
Presidency conclusions of the Brussels European Council, 20-21 March 2003, point 23. 

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consultation of small businesses in the policy-making process. It also asked Member States to 
lend greater focus to the Charter, making full use of  the  possibilities offered by appropriate 
national targets and peer review. 

The  Conference  of  Ministers  responsible  for  small  and  medium-sized  enterprises,  organised 
by the Greek Presidency in February 2003 in Thessaloniki, also greatly contributed to keeping 
up the momentum. 

In  connection  with  this  Conference,  Ministers  had  the  opportunity  to  discuss  progress  with 
representatives of small businesses and to hear their concerns at first hand. It stands to reason 
that  the  participation  of  business  organisations  in  the  Charter  process  is  indispensable. 
Clearly,  initiatives  that  are  carried  out  in  the  name  of  business  need  to  be  assessed  by 
representatives of businesses, to help judge on their impact in practice. The great interest in 
the  Charter  shown  by  business  organisations  and  their  increased  involvement  in  its 
implementation is highly appreciated. 

The Commission welcomes the continued support of the European Parliament6, the European 
Economic  and  Social  Committee7  and  the  Committee  of  the  Regions8  for  improving  the 
environment of small businesses and ensuring that the Charter is implemented in full. 

1.2. 

Good progress made in implementing the Charter 

Three  and  a  half  years  since  the  European  Charter  for  Small  Enterprises  was  endorsed,  the 
Charter has become a symbol for many SME9 organisations that public administrations – at 
EU, national and also regional and local level – take small businesses’ concerns on board. 

Progress  on  the  Charter  recommendations  has  undoubtedly  been  made  during  this  period. 
Individual measures taken may sometimes appear tiny but certainly contribute to the overall 
improvement of the environment for small businesses. 

This  year’s  report  examines  in  more  detail  progress  made  in  three  selected  priority  areas: 
Consultation  of  small  businesses,  access  to  finance,  in  particular  venture  capital  and  micro-
loans, and innovation and technology transfer. 

Consultation of small businesses is an area where a dividing line has previously been found 
between those Member States that systematically consult small businesses and those that do 
not.  While  the  number  of  new  initiatives  taken  in  this  area  is  limited,  some  encouraging 
developments  have  nevertheless  been  observed  in  the  last  year.  For  example,  the  exchange 
programmes between public administration officials and SMEs in the Netherlands and in the 
United Kingdom introduce a new channel for listening to small businesses. 

On the whole, it appears that a number of countries have well-established systems in place for 
consulting  businesses.  There  is  a  wide  array  of  consultation  mechanisms  and  the  structures 
vary from country to country according to national circumstances. An established practice, the 
Swedish Committees of Inquiry appointed by the Government to prepare legislation allow for 

6 
7 

8 

9 

European Parliament resolution on “Entrepreneurship in Europe”, PE 322.026, 23.10.2003. 
Opinions of the European Economic and Social Committee on “The role of micro and small enterprises 
in  Europe’s  economic  life  and  productive  fabric”,  INT/174,  18.6.2003,  and  on  the  “Green  Paper  – 
Entrepreneurship in Europe”, INT/178, 24.9.2003. 
Opinion  of  the  Committee  of  the  Regions  of  9  October  2003  on  the  Communication  from  the 
Commission to the Council, the European Parliament, the European Economic and Social Committee 
and the Committee of the Regions on Industrial Policy in an Enlarged Europe, ECOS-017, 27.10.2003. 
Small and medium-sized enterprises. 

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involvement of stakeholders throughout the preparatory process. Other Member States could 
take inspiration from this approach. 

Given the crucial importance of listening to small businesses to be able to think small, there 
still needs to be constant pressure for improving regular and systematic consultation of small 
businesses. “Listening to SMEs” is a key action of the Entrepreneurship Action Plan, and the 
Best  Procedure  project  on  the  involvement  of  SMEs  in  national  policymaking  will  provide 
Member States with further examples of good practices and policy recommendations. 

Access to finance is fundamental to translate business ideas into reality. Although important 
progress has been made in this area since the Charter came into being, businesses still see lack 
of  finance  as  a  major  constraint10.  Among  recent  measures,  the  Finnish  “DIILI”  scheme  to 
attract  skilled  personnel  who  participate  in  the  company  share  capital  appears  to  be  an 
innovative example. In the UK, a new tax incentive encourages the flow of private capital to 
finance  institutions  providing  microcredit  to  enterprises  in  disadvantaged  areas.  In  France, 
local investment funds are being set up, making it possible for investors, also benefiting from 
a tax incentive, to contribute to the development of a region by investing in its businesses.  

To  facilitate  small  businesses’  access  to  finance,  the  focus  should  be  geared  towards  early-
stage  finance  and  increasing  equity.  The  Austrian  seed  financing  model,  limiting  external 
intervention  in  operational  business  decisions,  demonstrates  an  interesting  approach  to 
provision  of  public  sector  risk  capital.  Several  other  new  instruments  have  been  developed 
over the past year but further efforts are needed to provide sufficient microcredit instruments 
and  guarantees.  The  longstanding  Italian  scheme  “CONFIDI”  is  an  example  of  a  well-
functioning  system  of  mutual  guarantee  societies.  Particular  attention  needs  to  be  given  to 
increasing the equity of small businesses. 

Several new measures have been taken in the area of innovation and technology transfer. 
For  example,  the  Dutch  ”TechnoParter”  initiative,  bringing  together  all  instruments  for 
innovative  start-ups,  and  the  Portuguese  Innovation  Agency,  working  to  bring  the 
entrepreneurial sector and the national scientific and technological system closer together, are 
a signal towards better coordination of innovation programmes. Yet many small enterprises in 
Europe  still  encounter  significant  problems  when  trying  to  improve  their  innovation 
performance. The majority of small businesses, precisely because of their small size, also lack 
the  competence  and  resources  needed  to  carry  out  their  own  research  and  development,  to 
introduce new technology and train their employees. 

Small  enterprises  depend  very  much  on  an  environment  that  supports  innovation.  The 
development  of  suitable  technology  and  knowledge-transfer  initiatives  is  of  paramount 
importance  to  most  of  them.  The  Danish  service  institutes  for  technologically-based 
knowledge, which have a special obligation to serve small enterprises, provide an interesting 
example of a structure well adapted to SMEs. Norway has amended the legislation concerning 
the right to employees’ inventions so that the rights to a patent are now given to the university 
and not to the researcher. As a consequence, the Universities of Oslo and Bergen are setting 
up  their  own  technology  transfer  offices.  In  Ireland,  the  Shannon  Development  Network 
brings business, education and innovation together. In Belgium, the booklet “100 Questions 
on  Innovation”  provides  information  and  guidance  to  entrepreneurs  looking  for  ways  to 

10 

Access  to  finance  is  the  second  most  important  obstacle  for  SMEs,  after  the  lack  of  skilled  labour, 
according  to  the  ENSR  Survey  2003  (reported  in  “Benchmarking  Enterprise  Policy:  Results  from  the 
2003 Scoreboard”, SEC(2003) 1278, 4.11.2003). 

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change  and  innovate.  Further  efforts  are  needed  to  develop  appropriate  technology  transfer 
mechanisms to strengthen the cooperation between science and the business community. 

Inter-company  networking  and  clusters  are  important  tools  to  foster  small  businesses’ 
innovation  potential  and  to  disseminate  innovation.  This  kind  of  cooperation  should  also 
stretch  beyond  national  borders.  The  new  German  and  Austrian  schemes  to  facilitate  trans-
national cooperation are promising examples but further initiatives to encourage cooperation 
among and between companies, also across borders, are needed. 

In some Charter areas, progress has been quite dramatic since the Charter came into being. In 
the area of cheaper and faster start-up, for example, where there has been a lot of high-level 
political attention, where several Member States have set themselves targets and where a Best 
Procedure  project11  has  made  concrete  recommendations  for  improvement,  several  Member 
States have succeeded in substantially reducing the time and costs of setting up a business. In 
some  Member  States,  online  registration  systems  have  become  operational  during  the  last 
year. 

Most  recently,  Spain  has  made  drastic  reductions  in  the  time  needed  for  registering  a 
company with its “Nueva Empresa” (New Enterprise) project, making it possible to set up a 
small  business  online  in  just  48  hours.  The  48  hours  includes  all  seven  steps  previously 
needed  (such  as  registration  with  the  tax  authorities,  the  commercial  register  and  the  social 
security authorities), compared to the 30 to 60 days needed in the past12. This is an impressive 
achievement, far exceeding the target of 42 days set by Spain for 2006. The Nueva Empresa 
project also includes a simplified bookkeeping system, tax and financial advantages as well as 
support services, thus forming a comprehensive package to help the entrepreneur get a new 
business off the ground not only quickly but also more successfully. 

Other  areas  where  previous  Charter  reports  have  signalled  progress  and  increased  efforts 
include better regulation and education for entrepreneurship. 

All  governments  are  committed  to  improving  and  simplifying  regulation  and  there  is  a 
growing  awareness  of  the  need  to  reduce  administrative  burdens  on  businesses.  In  addition, 
several Member States are in the process of revising their bankruptcy laws. However, while 
some Member States have been carrying out regulatory impact assessments for several years, 
a small number of Member States still do not seem to use regulatory impact assessments at all 
before adopting legislation. The Commission, for its part, is also putting a strong emphasis on 
improving  the  quality  of  legislation  and  on  measuring the potential impact of legislation on 
small businesses, on the basis of its 2002 Better Regulation Action Plan. 

As for education for entrepreneurship, Member States are increasingly aware of the need to 
promote entrepreneurship at all levels of education and have launched a considerable number 
of  initiatives  in  this  area.  For  example,  France  has  recently  set  up  the  “Observatoire  des 
Pratiques Pédagogiques en Entrepreneuriat” (Observatory of Educational Practices), which 
aims to stimulate exchange of good practices among teachers. The Best Procedure project on 
education and training for entrepreneurship has contributed to positive developments in this 

11 

12 

“Benchmarking the administration of business start-ups”. The Best Procedure, under the open method 
of coordination, provides a framework to support Member States’ efforts to identify and exchange best 
practices in a limited number of specific areas of particular importance for enterprises. 
30-60  days  according  to  the  Spanish  national  report  of  October  2003;  24  days  according  to  the  final 
report of the Best Procedure project of January 2002; 83 days according to the United States National 
Bureau of Research working paper of 2000. 

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area,  although  the  real  impact  of  the  measures  is  still  difficult  to  assess,  since  there  is 
obviously a time lag before visible results emerge. 

On the whole, good progress in implementing the Charter has thus been made over the last 
few years. But Europe needs to get better and keep getting better. Improving the environment 
of small businesses is a continuous process. This is why it remains crucial that Member States 
continue  to  take  action  in  line  with  the  Charter  recommendations.  Member  States  need  to 
make sure that initiatives and measures reach beyond the planning stage and see that they are 
properly implemented, evaluated and improved. 

1.3.  Mutual learning and scope for more 

The Charter process has proved extremely effective in identifying areas where Member States 
have made progress in promoting small businesses. It also provides valuable information on 
those areas where more needs to be done. What is apparent is that even though Member States 
have made efforts to implement actions under all the areas of the Charter, they tend to have 
different specialities and areas of expertise. Taken together, this adds up to a very useful fund 
of  knowledge  for  the  future  improvement  of  the  small  business  environment  throughout 
Europe,  and  it  is  the  identification  and  dissemination  of  this  knowledge,  above  all,  that 
represents the real added value of the Charter process. 

Again, an increasing number of Member States have reported that they have drawn inspiration 
from  measures  developed  in  other  Member  States  and  recommendations  of  the  Best 
Procedure  projects,  thus  benefiting  from  one  another’s  strengths.  The  open  method  of 
coordination  is  yielding  good  results.  Success  is  no  longer  kept  within  national  boundaries. 
This is real progress and the best way to bridge performance gaps in the EU. 

For  example,  several  Member  States  have  set  targets  to  reduce  administrative  burdens  and 
developed  methods  to  measure  progress  towards the  targets.  Building on  the  experiences  in 
Belgium,  Denmark  and  the  Netherlands,  Sweden  is  currently  developing  a  measurement 
method.  Following  the  example  of  the  Netherlands,  Belgium  has  set  up  a  contact  point  for 
contradictory  regulations  and  administrative  costs  where  individuals  and  companies  can 
report contradictory regulations or regulations that cannot be easily applied. 

In  keeping  with  the  impressive  example  set  by  Spain,  Austria  is  further  improving  the 
infrastructure for notaries to accelerate registration of business  start-ups, enabling this to be 
carried out within 48 hours while maintaining the same high level of legal certainty, through 
electronically certified legal acts. 

In Denmark, business impact assessments have been strengthened in several areas complying 
with the recommendations of the Best Procedure project in this area. 

Spain has taken particular care to make sure that the results of the Best Procedure projects get 
a practical response. The Directorate-General for SME Policy has compiled summary sheets 
for each project, which have been sent to Ministries, regions, business organisations and SME 
experts. Meetings have also been held with the Spanish experts who participated in the Best 
Procedure  projects  and  other  projects  under  the  Multiannual  Programme  for  Enterprise  and 

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Entrepreneurship13,  to  make  the  experts  aware  of  the  need  to  publicise  the  results  and  to 
implement the projects’ recommendations. 

The Commission  is  also  taking inspiration from the Member States. Following the example 
set  by  the  Netherlands  and  the  United  Kingdom,  Commission  officials  working  with 
enterprise-related issues will, on a pilot scale, get the opportunity to participate in externships 
of one to two weeks in a small or medium-sized business. 

This  process  of  learning  from  each  other  needs  to  be  even  further  intensified.  As  a 
complement  to  the  recommendations  of  the  Charter  itself,  there  is  a  wealth  of  information, 
recommendations  and  examples  of  good  practices  available  in  the  Best  Procedure  project 
reports and the annual Charter reports, which are far from being fully exploited. The use of 
the open method of coordination has proved successful in this area, and its application is to be 
even further improved by better exploiting all the tools it has to offer. 

For  its  part,  the  Commission  will  make  further  efforts  to  improve  the  dissemination  of  the 
good  practices  identified.  The  discussions  initiated  in  2003  with  the  Directors-General 
responsible  for  Industry  and  SMEs  in  the  Member  States  and  the  acceding  countries,  at  the 
regular  meetings  of  the  Enterprise  Policy  Group  (EPG)14,  are  a  step  in  this  direction  and 
already provide a useful framework for joint examination of good practices15. 

The Tallinn Charter Conference16 in autumn 2003 also gave an opportunity for exchange of 
experiences,  with a  special  focus on the candidate  countries. Building on the success of the 
Tallinn  and  Maribor  Conferences,  the  Commission  will  continue  to  organise  annual 
conferences on the Charter, in order to stimulate exchange of experiences between Member 
States17. 

A  repository  of  all  recommendations  and  good  practices  of  previous  Charter  reports  and 
completed  Best  Procedure  projects  is  to  be  set  up  to  make  the  existing  information  more 
accessible and user-friendly. 

1.4. 

Improving orchestration of small business policy 

The small business environment depends on a large number of factors. Improving it requires 
measures  to  be  taken  across  a  wide  field  of  issues.  This  is  why  proper  orchestration  and 
coordination of all policies affecting small businesses is crucial. The Charter, with its ten lines 
for action, addresses these issues, going beyond enterprise policy in the strict sense. Its proper 
implementation calls for concrete action by many different actors. 

In some countries, the Charter process itself seems to have contributed to improved internal 
coordination. The annual bilateral meetings between the Commission and the Member States, 
as  well  as  the  preparation  of  national  reports,  require  contributions  from  various  Ministries 
and authorities, thus encouraging increased cooperation and coordination. 

13 

14 

15 

16 

17 

Council Decision 2000/819/CE of 20 December 2000 on a multiannual programme for enterprise and 
entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005), OJ L 
333, 29.12.2000, p. 84. 
A group advising the Commission on enterprise policy issues. The members of the group are high-level 
experts from the enterprise community and representatives of the Member States. 
During 2003, good practices in the areas of education for entrepreneurship, transfer of businesses and 
microcredit have been on the agenda. 
Organised  by  the  Commission  in  cooperation  with  the  Estonian  Ministry  of  Economic  Affairs  and 
Communications, 30 September-1 October 2003. 
This also corresponds to the request of the Competitiveness Council in March 2003. 

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Coordination between Ministries and authorities at national level can be assured in different 
ways.  Several  countries  have  developed  umbrella  initiatives  or  action  plans  in  the  fields  of 
entrepreneurship or innovation. 

Most  recently,  Norway  set  up  a  particularly  ambitious  inter-ministerial  cooperation  for  the 
development  of  its  Innovation  Policy  Plan,  presented  in  October  2003.  A  group  of  five 
Ministers, chaired by the Minister for Trade and Industry, led the work, assisted by a working 
group with representatives of three Ministries and by 12 inter-ministerial groups on specific 
topics.  External  competence  has  also  been  feeding  into  the  process.  To  ensure  follow-up  of 
the plan, an Innovation Panel, counting nine Ministers, has been set up. In addition, business 
representatives and other stakeholders will be invited to regular meetings to give their views 
on improved policy design and implementation. 

Concluding  political  agreements  between  Ministries  or  Ministers  is  another  way  to  join 
forces.  In  Italy,  a  memorandum  of  understanding  has  been  signed  between  the  Ministry  of 
Productive  Activities  and  the  Department  for  Innovation  and  Technology,  providing  for  a 
joint  action  plan  to  promote  innovation  among  SMEs.  In  France,  the  Secretary  of  State  for 
SMEs and the Minister for National Education have signed a protocol agreement, the first of 
its  kind  in  France,  aiming  to  improve  the  knowledge  of  teachers,  pupils  and  students  about 
enterprises and entrepreneurship. 

The importance of orchestrating small business policy obviously applies to the Commission 
as  well.  Besides  becoming  a  dynamic  tool  for  the  implementation  of  small  business  policy, 
the  Charter  also  ties  in  with  other  Community  policies,  in  particular  the  European 
Employment Strategy and the Internal Market Strategy, which have both just been reviewed, 
the Research Policy, the Cohesion Policy and the Broad Economic Policy Guidelines. 

The  Charter  process  has  clearly  led  to  improved  cooperation  and  coordination  between 
services involved in policies affecting small businesses. This has been further reinforced by 
the  appointment  of  the  SME  Envoy  and  the  recent  creation  of  an  SME  network  inside  the 
Commission.  This  inter-service  network  has  proved  a  useful  tool  to  increase  awareness  of 
SME  needs  inside  the  Commission  and  to  improve  coordination  on  SME  issues.  The  SME 
network  is  progressively  becoming  the  main  tool  for  coordination  of  SME  policy  in  the 
Commission,  and  contributing  to  the  development  of  an  ‘SME-friendly’  approach  for  all 
relevant EU programmes and initiatives. 

1.5. 

Future outlook 

Building  on  the  analysis  of  progress  under  the  Charter  and  on  the  well-established  Charter 
process,  the  Commission  launched  a  wider  debate  on  entrepreneurship  in  Europe  with  its 
Green Paper on entrepreneurship in January 200318. On the basis of the public consultation, 
the Commission is presenting an Action Plan19, which provides a strategic framework and a 
number  of  key  actions  for  boosting  the  European  entrepreneurship  agenda.  Reports  on  the 
Action Plan will be integrated into the Charter reporting mechanism from 2005 onwards. 

18 
19 

Green Paper “Entrepreneurship in Europe”, COM(2003) 27 final, 21.3.2003. 
“Action Plan: The European agenda for entrepreneurship”, COM(2004) 70 final, 11.02.2004 

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2. 

PROGRESS  BY  THE  MEMBER  STATES,  NORWAY  AND  THE  COMMISSION  IN  THE 
SELECTED PRIORITY AREAS FOR THIS REPORTING PERIOD 

2.1. 

Introduction 

This  is  the  fourth  annual  implementation  report  on  the  Charter.  It  aims  to  provide  a  brief 
overview  of  the  main  measures  undertaken  by  the  Member  States,  Norway  and  the 
Commission to implement the Charter in the past year. Norway accepted an invitation from 
the  Commission  to  take  part  in  the  Charter  process.  The  other  members  of  the  European 
Economic  Area,  Iceland  and  Liechtenstein,  have  not  expressed  a  desire  to  participate. 
Following  the  adoption  of  the  Charter  by  all  candidate  countries  in  April  2002  and  by  the 
countries of the Western Balkans in June 2003, their progress is analysed in separate reports20.  

The current report seeks to identify strengths and weaknesses across the European Union and 
Norway,  to  highlight  promising  national  measures  and  to  issue  recommendations  for  future 
action and thereby contribute to the strengthening of policy in support of small businesses and 
to maintain the momentum generated by Lisbon. 

The report also seeks to stimulate the exchange of experiences and good practice in Europe. 
Various  definitions  exist  of  what  is  a  “good  practice”.  For  the  purpose  of  this  report, 
initiatives  which  seem  to  have  been  particularly  beneficial  in  a  national  context  and  which 
could also be of interest to other countries have been highlighted21. Prompted by the emphasis 
put by the European Parliament22 and the European Economic and Social Committee23 on the 
importance of presenting the good practices identified in the Charter process in a user-friendly 
way, some more information is given on particularly interesting measures. 

Nevertheless,  for  reasons  related  to  its  purpose  and  length,  the  report  does  not  present  an 
exhaustive or detailed list of measures. Detailed descriptions of national measures as well as 
contact details can be found in the national reports published on the Commission website24. 

The  environment  in  which  small  businesses  operate  is  mostly  determined  under  Member 
States’ competence25. For this reason, the report draws conclusions mainly on Member States’ 
progress,  while  also  highlighting  progress  by  the  Commission.  In  addition,  the  Joint 
Employment  Report26  presents  an  overview,  based  on  national  reports,  of  Member  States’ 
response to the guideline on job creation and entrepreneurship. 

20 

21 

22 
23 

24 

25 

26 

“Report  on  the  Implementation  of  the  European  Charter  for  Small  Enterprises  in  Acceding  and 
Candidate  Countries,”  SEC(2004)  xxxx,  “Report  on  the  Implementation  of  the  European  Charter  for 
Small Enterprises in the countries of the Western Balkans”, SEC(2004) 149. 
A national initiative can only be considered a true “good practice” if it is entirely in conformity with 
relevant Community legislation, including competition and state aid rules. Identification of individual 
initiatives in this Report does not in itself imply that the measures concerned are compatible with the 
relevant  provisions  of  the  Treaty.  Highlighted  measures  have  been  selected  both  from  current  and 
previous national reports. 
European Parliament resolution on “Entrepreneurship in Europe”, PE 322.026, 23.10.2003, point 46. 
Opinion of the European Economic and Social Committee on “The role of micro and small enterprises 
in Europe’s economic life and productive fabric”, INT/174, 18.6.2003, point 4.1.1. 
For the complete reports, see 
http://europa.eu.int/comm/enterprise/enterprise_policy/charter/charter2004.htm 
The European Parliament, in its Resolution of 20 March 2002 on the results of the Barcelona European 
Council, has stated that “the responsibility for implementing nearly all the action points in the Charter 
lies with the Member States”. 
COM(2004) 24 final, 21.1.2003. 

10 

 
 
  
 
                                                 
While it is difficult to assess progress in all the areas on an annual basis, the main trends are 
outlined  below.  The  current  overview  represents  the  Commission’s  understanding  of  the 
situation based on information communicated by the Member States27. 

The  analysis  of  progress  in  the  Member  States  and  Norway  is  based  on  detailed  national 
reports  and  on  bilateral  meetings  between  the  Commission  and  national  authorities  which 
took  place  in  July-October 2003.  Following  the  example  set  last  year,  national  business 
organisations  actively  participated  and  expressed  their  views  at  all  bilateral  meetings.  An 
Internet consultation on national reports was open to all interested parties and announced at a 
meeting with European business organisations in October 2003 and also by e-mail to some 30 
European  business  organisations28.  At  Commission  level,  an  inter-service  group  bringing 
together all services with activities for small and medium-sized enterprises has prepared the 
analysis on Commission progress. 

Most measures do not produce visible short-term results and progress in all areas cannot be 
fully assessed on a yearly basis. Nor should Member States strive to launch a great number of 
annual measures. Consolidation, evaluation and improvement of existing measures is equally 
important.  Following  the  invitation  of  the  Competitiveness  Council  in  March  2003  to 
strengthen the review of national developments by prioritising a selected number of Charter 
areas each year, the current report examines in more detail progress in the areas of 

– 

– 

– 

Access to finance, in particular venture capital and micro-loans; 

Innovation and technology transfer; and 

Consultation of small businesses. 

European business organisations were invited to comment as to their main concerns in these 
areas at a meeting in June 200329. 

The present report mainly covers the period autumn 2002 to autumn 2003 but given the long-
term span of most measures, a certain overlap between annual reports is inevitable.  

Considering the Charter’s commitment to using “effective indicators to assess progress over 
time” and the  request of the Competitiveness Council to “continue the work on a voluntary 
basis on quantitative and qualitative targets with the aim of further integrating their use in the 
implementation  of  the  European  Charter  for  Small  Enterprises”,  the  report  attempts  to 

27 

28 

29 

Unless otherwise stated, the source of the information on measures in the Member States and Norway 
contained in the present report is the national reports or information received at bilateral meetings. 
See consultation at http://europa.eu.int/comm/enterprise/enterprise_policy/charter/charter2004.htm. The 
following  business  organisations  provided  comments,  also  published  at  this  site:  Zentralverband  des 
Deutschen  Handwerks,  ZDH  (The  German  Confederation  of  Skilled  Crafts),  Svenskt  näringsliv 
(Confederation  of  Swedish  Enterprise)  and  Företagarnas  Riksorganisation  (Federation  of  Private 
Enterprises  in  Sweden).  On  the  basis  of  the  German  and  Swedish  national  reports,  respectively,  the 
organisations gave their views on which measures work well and which measures could be improved. 
References  to  some  of  the  specific  comments  are  made  in  the  current  report  in  connection  with  the 
description of the measures concerned. On a more general level, the German Confederation of Skilled 
Crafts expressed the opinion that despite initiatives like “Pro Mittelstand” and the appointment of the 
authorised representative of the Federal Government for SMEs, insufficient attention is paid to SMEs’ 
concerns in overall economic policy and in the preparation of legislation in Germany. 
Following this invitation, Eurochambres and the European Federation of Accountants (FEE) provided 
written comments on the Charter process in general and on the three priority areas. 

11 

 
 
  
 
                                                 
describe  quantitative  progress  on  the  basis  of  relevant  indicators  of  the  Enterprise  Policy30, 
Innovation31  and  Internal  Market32  Scoreboards.  It  also  emphasises  the  relevant  voluntary 
quantitative  targets  in  enterprise  policy  declared  by  the  Member  States  in  2002  and  200333. 
The  voluntary  national  targets  stem  from  Member  States’  agreement  on  enterprise  policy 
indicators closely linked to the Charter recommendations. 

The  issue  of  indicators  and  targets  in  the  context  of  the  Charter  was  also  discussed  at  the 
bilateral  meetings.  While  for  a  majority  of  Member  States  there  is  agreement  on  the 
usefulness of appropriate targets, national administrations stressed the difficulties in defining 
relevant  indicators,  preferably  reflecting  the  situation  of  small  businesses  only,  due  to 
constraints  in  data  availability.  To  stimulate  discussions,  the  Commission  representatives 
informally suggested that, in the context of the Charter, setting a small number of ambitious 
but  realistic  common  targets  at  EU  level  could  help  focus  work.  A  majority  of  national 
administrations  were  basically  supportive  of  this  idea,  although  with  certain  reservations  in 
some  cases.  Since  there  are  still,  however,  diverging  views  among  the  Member  States  on 
whether  such  common 
improve  Charter 
implementation, it is not likely that agreement will be found in the short term. Obviously any 
targets,  in  order  to  be  meaningful,  need  to  be  accompanied  by  appropriate  strategies  and 
policy measures. As to indicators, there is a clear need for improved official statistics through 
the European Statistical System in the areas of the Charter. 

targets  would  effectively  contribute 

to 

While this report clearly identifies measures targeted specifically at micro-enterprises or small 
enterprises,  many  of  the  initiatives  analysed  have  been  designed  to  support  both  small  and 
medium-sized  enterprises.  The  Commission  considers  that,  even  if  these  measures  do  not 
exclusively  target  enterprises  with  fewer  than  fifty  employees,  this  does  not  diminish  their 
value  or  impact  on  small  businesses.  Both  the  Commission  and  the  Member  States  have 
therefore adopted the approach of including in the current report all initiatives with an impact 
on small and medium-sized enterprises, while highlighting those measures that seem to have 
the strongest impact on small enterprises. 

2.2. 

Financial matters 

“Entrepreneurs  need  finance  to  translate  ambitions  into  reality.  In  order  to  improve  the 
access of small enterprises to financial services, we will: 

Identify  and  remove  barriers  to  the  creation  of  a  pan-European  capital  market  and  to  the 
implementation of the Financial Services Action Plan and the Risk Capital Action Plan; 

Improve  the  relationship  between  the  banking  system  and  small  enterprises  by  creating 
appropriate access conditions to credit and to venture capital; 

Improve  the  access  to  the  structural  funds  and  welcome  initiatives  by  the  European 
Investment Bank to increase funding available to start-ups and high-technology enterprises, 
including equity instruments.” 

30 

31 
32 
33 

“Benchmarking  Enterprise  Policy:  Results  from  the  2003  Scoreboard”,  SEC(2003)  1278,  4.11.2003. 
Unless  otherwise  stated,  the  Enterprise  Policy  Scoreboard  is  the  source  of  the  data  on  indicators 
contained in the present report. 
SEC(2003) 1255, 10.11.2003. 
Internal Market Scoreboard, No 12, May 2003; Press release IP/04/33, 12.1.2004. 
The Enterprise Policy Scoreboard is the source of all information on targets declared by the Member 
States contained in the present report. 

12 

 
 
  
 
                                                 
Improving  access  to  finance  is  an  important  aspect  of  fostering  the  development  of  small 
businesses in Europe. The conditions in the financial markets influence access to finance. The 
business  cycle  downturn  has  made  external  and  internal  small  business  financing  more 
complicated,  but  the  gradually  improving  growth  will  also  improve  financing  opportunities 
for  small  businesses.  External  financing  has  been  harder  to  get  because  many  banks  and 
venture capital funds have suffered losses in their SME portfolios and their risk aversion has 
increased. Banks assess the lending applications more carefully and demand more collateral. 

Venture  capital  is  an  option  for  only  a  small  minority  of  small  businesses,  that  is  those 
businesses that expect rapid growth. In the long-term, venture capital is expected to become 
more important, since the equity base in many SMEs needs to be reinforced.  

Business angels, who are informal or formal individual investors, provide both financing and 
managerial  experience.  Business  angel  networks  increase  the  efficiency  of  matching  angels 
and entrepreneurs. Raising awareness about the benefits and services of business angels and 
angel  networks  is  the  first  step  in  increasing  their  investments.  Another  important  step  is 
improving entrepreneurs’ prospects of success in attracting business angel investment through 
increasing  their  investment  readiness.  This  is  important  because  entrepreneurs  need  to 
understand the differences between sources of finance and the specific role of business angels. 
Entrepreneurs’  investment  readiness  and  realistic  business  plans  will  facilitate  the  dialogue 
with business angels. 

Most  small  enterprises  are  sole  traders  or  partnerships,  and  microcredit  –  lending  of  small 
amounts of money, up to €25 000 – is in many cases an important source of finance for them. 
As banks often perceive microcredit as a high risk and low return activity due to the important 
failure rate and the high handling costs, there is a market gap in this area. 

In order to bridge this market gap, at least partially, public support is available in all Member 
States. At national level, public promotional banks, when existing, are playing an active role 
and remain an efficient and effective vehicle for providing part of the credit and/or guarantee, 
in  particular  where  large-scale  operations  are  required.  In  addition,  guarantee  (co-  and 
counter-guarantee)  schemes  and  mutual  guarantee  societies  make  it  easier  for  the  credit 
institution  to  provide  microcredit  because  its  risk  exposure  is  reduced  and  its  capital 
requirement  is  mitigated.  At  European  level,  the  microcredit  guarantee  window  under  the 
Multiannual  Programme  for  Enterprise  and  Entrepreneurship  (2001-2005),  based  on  a  risk-
sharing  principle  and  managed  by  the  European  Investment  Fund,  enables  financial 
institutions to increase their microcredit exposure. 

The  last  Charter  report  concluded  that  access  to  finance  remains  an  important  constraint  to 
businesses across the EU and that the creation of flexible microcredit programmes by some 
Member  States  was  encouraging.  Member  States  were  invited  to  further  support  financing 
institutions  to  improve  small  businesses’  access  to  finance,  in  particular  to  microcredit,  in 
accordance with their national environment. Member States were also urged to implement the 
necessary  fiscal  and  structural  reforms  to  promote  investment  in  venture  capital  funds  as 
recommended  in  the  framework  of  the  Financial  Services  Action  Plan.  The  report  further 
concluded  that  business  angels  constitute  an  increasingly  important  source  of  financing  for 
small businesses and encouraged Member States to raise awareness about business angels, to 
promote  a  legal  and  fiscal  environment  favourable  to  risky  investments  in  small  businesses 
and to support local and regional business angels’ networks. 

The  selected  priority  area  for  the  current  report  is  “Access  to  finance,  in  particular  venture 
capital and micro loans”. Nevertheless, all relevant measures which fall under the “Financial 
matters” Charter area have been included in this section of the report. 

13 

 
 
  
 
2.2.1.  Recent developments 

Indicators and targets 

Three Member  States  have put in place quantitative targets in the area of access to finance. 
France aims to reach €1 billion investment per year in risk capital in 2010 and Ireland aims 
for  venture  capital  investment  corresponding  to  0.80%  of  GDP  by  2006.  Another  target  for 
Ireland  is  2-3  newly  listed  companies  per  year  from  2006,  and  the  Netherlands  wants  to 
increase  the  level  of  state  guarantees  granted  annually  (BBMKB)  to  €450  million, 
corresponding to 3 500 credits, of which 60% relating to start-ups. 

Based  on  a  number  of  indicators,  the  2003  Enterprise  Policy  Scoreboard  concluded  that 
developments  in  the  area  of  access  to  finance  have  been  negative  in  recent  quarters.  SMEs 
report that access to finance remains a major constraint for their growth34.  

In nearly all Member States new listings (IPOs) relative to existing firms continued to decline 
in 2002, but at a much slower pace. 

Venture  capital  markets  have  also  experienced  serious  strains,  seeing  falling  capital 
investment  in  all  Member  States  in  2002,  Sweden,  Finland,  the  Netherlands  and  the 
United  Kingdom  having  the  largest  markets  for  venture  capital  in  relation  to  GDP  and 
Greece,  Austria  and  Portugal  having  the  smallest.  A  worrying  trend  has  also  been  the 
weakening of the early stage and seed investments during the last three years in favour of later 
stage financing. 

An encouraging development is the increase, albeit modest, in the number of business angel 
networks  since  1999,  notably  in  France,  Germany,  Sweden,  Denmark,  the  United 
Kingdom,  Spain  and  the  Netherlands.  Luxembourg  has  currently  no  business  angel 
network, and Portugal, Austria and Finland only have one each. 

Member States 

Various new financial measures for start-ups have been developed. 

Belgium  has  introduced  a  “loan  50+”  for  people  aged  over  50  who  wish  to  become  self-
employed  or  start  a  business  and  a  “BAN  loan”  to  complement  the  financial  support  from 
business angels. It has also set up a new fund called “Starters Fund” which is a public sector 
initiative  to  mobilise  private  external  funding  for  business  start-ups  and  transfers.  The 
investors will, under certain conditions, receive a tax reduction of the actual payments. 

Denmark is launching a new DKK 500 million (ca €67 million) “entrepreneurship fund” in 
liaison with a number of private investors to close gaps in the capital finance market which 
commonly appear in the earliest stages. The Netherlands is reviewing its financial instruments 
for innovative start-ups. 

Finland: Service to match work input for shareholding 

The PreSeed services of Sitra (The Finnish National Fund for research and Development) aim 
at  remedying  the  market  failure  pertaining  to  preseed  financing  for  technologically oriented 
companies.  

34 

Access  to  finance  is  the  second  most  important  obstacle  for  SMEs,  after  the  lack  of  skilled  labour, 
according to the ENSR Survey 2003 (reported in the 2003 Enterprise Policy Scoreboard). 

14 

 
 
  
 
                                                 
The “DIILI” service launched in April 2003 is the latest addition to Sitra’s PreSeed family of 
services which also include “INTRO” and “LIKSA”35. The founding idea of Sitra PreSeed is 
to  bring  together  entrepreneurs,  market  information  providers,  business  angels  and 
experienced  sales  and  business  professionals  at  the  INTRO  market  place,  which  SITRA 
coordinates.  Within  this  environment,  the  company  undergoes  a  series  of  true  value  adding 
measures carried out at the right time. As a consequence, the company becomes increasingly 
attractive for initial private capital investments. 

The  rather  limited  sales  and  business  competences  of  companies  have  been  the  most 
important  reason  for  slowing  down  the  operation  of  the  well-functioning  INTRO  market 
place. The new DIILI service has brought forth a significant improvement to rectify this while 
encouraging and increasing entrepreneurship. Through the INTRO market place, DIILI allows 
business  professionals  to  examine  start-up  companies  as  potential  job  opportunities  at  the 
same time as these companies are quoted as investment targets for business angels. Under the 
DIILI  scheme,  the  expert  taking  on  sales  responsibilities  in  the  company  exchanges  his 
competence  against  the  company’s  shares.  The  expert  joins  the  company  with  an 
entrepreneurial risk and, in the beginning, probably with limited pay. When this takes place at 
the  right  time  in  relation  to  the  investment  cycle,  the  sales  competence  brought  in  by  the 
expert also acts as a trigger for initial investment into the company, thus correcting the market 
failure.  

Regarding financial instruments for business transfers, the French trial scheme “Prêt à la 
Reprise  d’Entreprise  –  PRE”  (business  purchase  loans)  in  five  regions  was  such  a  success 
that  it  will  become  generally  available.  The  Austria  Wirtschaftsservice  has  created  a 
“Succession  bonus”  to  support  entrepreneurs  and  SMEs  which  are  close  to  transferring  the 
ownership  of  the  business.  Saved  capital  which  is  used  for  a  new  start-up  or  a  take-over  is 
eligible for a non-repayable state bonus of 14%. 

Two new microcredit schemes have recently been developed. 

France  has  introduced  a  specific  legal  framework  that  allows  accredited  non-profit 
associations  to  borrow  from  banks  in  order  to  provide  micro  loans.  The  first  accredited 
association  was  ADIE,  a  dedicated  mircocredit  institution  specialised  in  supporting  the 
creation  and  development  of  businesses  by  the  unemployed  or  those  in  receipt  of  the 
minimum wage. Before this new framework a non-profit association could only provide loans 
from its own equity. 

United Kingdom: Tax incentive to encourage microcredit 

In order to improve access to finance for enterprises from disadvantaged communities, both 
existing  businesses  and  start-ups,  the  UK  Government  provides  capital,  revenue  and  loan 
guarantee  support  to  around  40  Community  Development  Finance  Institutions  (CDFIs) 
through the Phoenix Fund. These are independent financial institutions, usually locally based 
and with strong links to business support providers and community organisations. They offer 
loans  on  commercial  terms  to  businesses  with  viable  plans  but  which  are  unable  to  access 
some  or  all  of  their  requirements  from  conventional  sources.  CDFIs  do  not  generally  seek 
collateral and make their lending decisions based on the likely impact of the business on the 
community rather than conventional credit scoring techniques. 

35 

LIKSA  aims  at  targeting  companies’  own  resources  at  acquiring,  analysing  and  refining  business 
information related to its commercialisation. It offers economic resources and experts for this task. 

15 

 
 
  
 
                                                 
In  order  to  encourage  the  flow  of  private  capital  through  CDFIs  the  United  Kingdom’s 
Community  Investment  Tax  Relief  (CITR),  which  came  into  operation  in  March  2003, 
provides  an  incentive  to  investors  providing  patient  capital  to  CDFIs.  An  individual  or 
corporate investor willing to provide capital to a CDFI either as a loan or as share capital for 
at  least  five  years  will  receive  a  tax  relief  of  5%  of  the  amount  invested  in  each  of  five 
successive  tax  years.  CDFIs,  which  must  be  accredited  by  the  UK  government’s  Small 
Business  Service  to  attract  this  investment,  then  lend  to  start-ups,  existing  enterprises  and 
community projects. As of July 2003, 20 CDFIs have been accredited and between them these 
institutions intend to raise £88 million (ca €125 million) from investors for on-lending over 
the next three years. 

To  attract  venture  capital,  Belgium  has  introduced  a  new  type  of  collective  investment 
organisation  called  “Private  Pricaf”.  It  encourages  private  investors  to  subscribe  at  least 
€250 000  in  the  capital  of  an  unlisted  company,  without  having  to  set-up  and  run  the 
company. The Greek “New Economy Development Fund” (TANEO) has started its operations. 
It  is  a  fund  of  funds  with  the  aim  of  minority  participation  in  investment  schemes  in 
innovative, preferably new economy, companies. Italy is developing a public-private measure 
to facilitate access to venture capital by SMEs in less-favoured regions and by new firms. It 
will  make  public  funds  available  to  banks  and  financial  intermediaries  for  the  purchase  of 
short-term and minority shareholdings. 

France: Investment funds to encourage local investments 

The  French  Economic  Initiative  Act,  adopted  by  Parliament  in  July  2003,  includes  the 
creation  of  local  investment  funds  (“Fonds  d’investissement  de  proximité”,  FIP).  This 
measure primarily concerns regional SMEs, which frequently encounter difficulties in finding 
professional investors that correspond to their characteristics. 

The  purpose  of  FIPs  is  to  collect  savings  from  the  public  willing  to  invest  in  businesses 
established in a specific region. The viability of the investment is not, therefore, the investor’s 
sole  objective.  The  development  of  a  region  through  the  performance  of  the  businesses 
located there may also be a deciding factor. 

FIPs can intervene in a zone of maximum three adjacent regions – either French or in another 
EU Member State (special provisions are also laid down for overseas departments). The funds 
will be similar to venture capital mutual funds and must invest at least 60% of their assets in 
SMEs, 10% of which must be earmarked for business creation. 

Relations between FIPs and local authorities, if the latter wish to provide support, will be laid 
down in agreements which may stipulate investment priorities in sectors of activity or types of 
business.  Investment  in  FIPs  will  be  made  particularly  attractive  for  private  individuals  by 
means of a significant tax incentive, which may amount to a reduction in income tax of 25% 
of the amount invested, up to a maximum of €12 000 for a single person and €24 000 for a 
couple. 

At regional level, the Flemish Community in Belgium has set-up the “ARKimedes Fund” to 
attract  venture  capital  from  institutional  and  private  investors  to  Flemish  SMEs.  Under  this 
scheme,  private  individuals  qualify  for  tax  credits.  In  the  United  Kingdom,  the  “Bridges 
Community  Development  Venture  Capital  Fund”,  a  £40  million  (ca  €57  million)  fund 
capitalised  50:50  by  the  government  and  private  sector  investors,  was  launched  to  make 
equity  investments  in  SMEs  with  growth  potential  which  are  located  in  the  25%  most 
disadvantaged  electoral  wards  in  England.  In  addition,  “Early  Growth  Funds”  are  being 
created  in  each  English  region  of  the  United  Kingdom  to  encourage  the  provision  of  risk 

16 

 
 
  
 
capital  to  start-ups  and  other  businesses  in  the  early  stages  of  growth.  They  also  aim  to 
demonstrate to private sector investors that commercial returns can be achieved by investing 
in early growth businesses. 

Austria: A new model for public sector risk capital  

Austria  Wirtschaftsservice  GmbH  (AWS),  a  public  financing  intermediary  set  up  in  2002, 
provides  funds  with  risk  capital  character  in  the  form  of  subordinated  loans  as  equity 
substitute. The financing decision is taken following an extensive screening of the company, 
acceptance of its business plan and approval by an independent advisory body. 

Based  on  the  characteristics  of  the  business  plan,  a  pre-determined  share  of  the  company’s 
profits  is  to  be  paid  as  a  fee  for  the  capital  made  available.  This  implies  that,  in  the  early 
years,  there  is  no  payment  when  the  company  incurs  financial  losses  from  its  business 
operations.  Equally,  no  reimbursements  of  the  funds  provided  are  due  for  such  years.  A 
representative of the AWS attends the board meetings of the company but does not normally 
interfere  in  operating  decisions,  except  in  case  of  major  deviations  from  the  business  plan. 
However, high-level advice and coaching for the new entrepreneur is available at any time.  

On  the  one  hand,  this  model  allows  companies  to  be  free  from  cash  outflows  and  balance 
sheet charges in the early years of heavy investments, contrary to regular loans. On the other 
hand,  the  payment  of  a  part  of  the  profit  in  good  times  does  not  hamper  the  company’s 
operation. 

It  thus  provides  a  response  to  the  fears  -  which  are  particularly  common  among  small 
businesses - about too strong external intervention from venture capitalists.  

As to guarantee mechanisms, the Austria Wirtschaftsservice provides guarantees for loans 
without  collateral  up  to  a  maximum  of  €75 000.  Three  new  regional  Mutual  Guarantee 
Societies have been set up in Portugal. 

Italy: Nation-wide system of mutual guarantee societies 

For  more  than  30  years,  Italy  has  encouraged  the  creation  of  mutual  guarantee  societies, 
“CONFIDI”, the primary role of which is to offset the difficulties that small businesses face 
in  accessing  credit.  CONFIDI  is  a  nation-wide  mutual  guarantee  system  that  includes  680 
private  companies  (each  with  its  own  legal  and  administrative  autonomy),  where  almost 
1 000 000 entrepreneurs are members. 

These funds guarantee credit for SMEs, up to 80% of the loan for new businesses and 50% for 
existing businesses. The maximum amount guaranteed is €500 000, no personal collateral is 
required and the interest rates applied are those reserved by banks for their major clients. For 
the SME, this means a lower interest rate than if the loan application was not supported by a 
CONFIDI, which deposits 50% of the loan value in cash on a bank account. 

For each euro guaranteed by the CONFIDI scheme, the multiplier effect is at least 10 of the 
loan  awarded,  depending  on  the  individual  CONFIDI  involved.  Each  credit  assessment  is 
made  by  a  local  CONFIDI,  not  by  the  bank.  The  past  results  are  excellent:  1.6%  of  default 
rate, instead of 8% for the craft sector in general. 

Since 2000 it has been possible for CONFIDIs to receive the support of the SME Guarantee 
Fund, a counter-guarantee scheme set up by the Ministry of Productive Activities, resulting in 
an increase in guarantee operations benefiting businesses. 

17 

 
 
  
 
At regional level, the Flemish Community in Belgium has concluded framework agreements 
with private banks, which stipulate that credit applications by SMEs that fulfil certain criteria 
will be 75% guaranteed by the Flemish authorities. The Walloon region of Belgium is setting 
up  a  specific  company  “SOCAMUT  S.A.”  whose  task  is  to  counter-guarantee  50%  of  the 
value  of  the  guarantees  issued  by  mutual  guarantee  associations  in  the  region  for  business 
creation,  growth  and  business  transfer.  The  mechanism  is  aimed  exclusively  at  micro 
enterprises.  The  “Guarantee  Fund”  of  the  Brussels-Capital  region  of  Belgium  is  now 
providing  entrepreneurs  with  the  possibility  to  apply  directly  for  guarantees  without  the 
intermediation  of  a  bank.  Having  received  the  Fund’s  approval,  the  entrepreneur  can  shop 
around the various financial institutions to obtain the most favourable terms. 

Greece is planning to set up its first business angel network and France adopted a specific 
legal  status  for  business  angels,  the  “Business  Angel  Sole  Proprietorship”  (“Société 
unipersonnelle d’investissement providentiel”, SUIP). The aim of this scheme is to increase 
the  number  of  business  angels.  The  SUIP  enjoys  substantial  tax  benefits.  Ireland  has 
established  a  database  of  more  than  50  high  net  worth  business  angels,  with  over  €12.7 
million  available  to  invest  in  small  and  medium  enterprises.  To  complement  the  existing 
private  business  angel  networks,  the  Dutch  government  is  currently  considering  supporting 
the  creation  of  new  networks  at  regional  level.  In  Sweden,  17  organisations  have  already 
received grants to build regional business angel networks. Sweden also finances a project that 
searches for female business angels and prepares them for participating in other networks. In 
Portugal,  business  angel  activity  has  been  promoted  in  conferences  and  press  articles.  A 
specific Action Plan is envisaged in the future. Norway is planning to set up business angel 
networks  in  the  fields  of  biotechnology  and  ICT.  It  also  provides  a  28%  tax  incentive  for 
business angels investing in start-ups from the university research sector. 

Several  other  financial  measures  have  also  been  reported.  Denmark  is  working  to 
consolidate  all  provisions  on  financial  institutions  into  the  “Financial  Business  Act”.  This 
will  contribute  to  increased  simplification,  efficiency  and  transparency  in  the  financing  of 
SMEs.  In  Germany,  the  merger  of  the  KfW  and  the  DtA  promotional  banks  into  KfW-
Mittelstandsbank has brought more transparency to the financial instruments offered to SMEs, 
introduced  some  improvements  to  the  products  and  simplified  the  processes.  Ireland  has 
commissioned a study to undertake a cross-country comparison of the financial assistance for 
start-ups  available  from  both  the  state  and  the  private  sector  in  other  EU  countries  and 
another study on the policy and supports available to micro-enterprises in Ireland. Austria has 
set  up  Austria  Wirtschaftsservice  Gesellschaft  m.b.H  as  a  one-stop-shop  for  all  federal 
financial  support  for  enterprises.  It  brings  together  several  existing  support  organisations 
under one roof. Austria has also adopted an “Action Plan to strengthen the capital market” 
and Portugal has introduced a new financial programme “PRIME” to support investment and 
to modernise enterprises.  

At  regional  level,  the  Walloon  region  in  Belgium  is  providing  various  new  mechanisms  to 
facilitate  funding  of  university  based  spin-offs.  As  a  pilot  project,  the  region  is  encouraging 
small enterprises requiring venture capital to hire an external administrator to their Board of 
Directors  by  contributing  partly  to  the  employment  costs.  In  the  United  Kingdom,  the 
Scottish Executive introduced a new “early-stage equity investment package” to address the 
gap  for  investments  below  £500 000  (ca  €709 000).  Moreover,  an  “Investment  Readiness 
Programme”  has  been  introduced  to  help  growth  businesses  with  the  cost  of  developing 
proposals  to  a  stage  and  quality  at  which  they  are  likely  to  succeed  in  attracting  equity 
investment,  the  programme  offers  up  to  50%  of  this  cost  to  a  maximum  of  £10  000  (ca 
€14 200). 

18 

 
 
  
 
Commission 

In  November  2003,  the  Commission  adopted  its  fifth  and  last  progress  report  on  the  1998 
Risk  Capital  Action  Plan  (RCAP)36.  This  report  noted  that  taking  the  RCAP  period  as  a 
whole,  considerable  progress  has  been  achieved  and  all  political  and  many  technical 
objectives  have  been  attained.  The  European  risk  capital  industry  is  now  more  mature  and 
professional  than  in  1998.  Enterprises’  and  public  authorities’  awareness  about  the  strategic 
importance of this sector and the possibilities provided by this type of financing is now well 
enshrined  in  Europe.  The  RCAP  has  played  a  political  role  in  supporting  those  directly  or 
indirectly  involved  in  risk  capital  activities.  The  philosophy  behind  the  RCAP  is  already 
permeating  other  regional,  national  and  Community  policies  and  programmes.  In  order  to 
keep  up  the  momentum,  the  Commission  will  continue  to  follow  the  European  risk  capital 
markets closely.  

The Commission also published its eighth progress report on the Financial Services Action 
Plan (FSAP)37, concluding that the overall financial outlook strengthens the political case for 
integrating  financial  services  within  the  EU.  Progress  towards  adopting  the  necessary 
legislative  measures  to  create  an  integrated  market  remains  on  the  right  track  and  it  is 
crucially important to complete all the remaining legislative measures. 

The  2002  annual  report38  on  the  three  financial  instruments  under  the  Multiannual 
Programme for Enterprise and Entrepreneurship (2001-2005), the ETF Start-up Scheme, the 
SME  Guarantee  Facility  and  the  Seed  Capital  Action39,  shows  that  mainly  small 
enterprises with fewer than 10 employees have benefited from the SME Guarantee Facility. 
At the end of 2002, the number of SMEs benefiting from the Facility was 125 164, compared 
with 112 581 at the middle of 2002 and 92 408 at the end of 2001. Final beneficiaries with up 
to 10 employees made up 93% of the total number of SMEs and final beneficiaries with up to 
50 employees made up 99% of the total number of SMEs40. This clearly demonstrates that the 
Facility is firmly focused on the target population of the Charter. 

In December 2003, the Commission adopted the Communication “Access to finance of small 
and medium-sized enterprises”41, aiming to update the Council on progress in SME finance 
since  the  2001  report  “Enterprises’  access  to  finance”42  and  to  review  the  public  policy 
framework in SME finance. The report concluded that to efficiently promote entrepreneurship 
in Europe, further European, national and regional public sector actions should be focused on 
improving the functioning of the  financial markets, in particular in the new Member States, 
reducing  the  gap  in  early-stage  financing,  in  particular  guarantees  and  microcredit,  and 
increasing equity in SME balance sheets. 

36 

37 

38 

39 
40 
41 
42 

Services: 

Communication  from  the  Commission  on  implementation  of  the  risk  capital  action  plan  (RCAP), 
COM(2003) 654 final, 4.11.2003. Based on the Communication from the Commission “Risk Capital: A 
key to Job Creation in the European Union”, SEC(1998) 522, April 1998. 
Nine  months 
“Financial 
http://europa.eu.int/comm/internal_market/en/finances/actionplan/index.htm 
Report from the Commission, “Growth and Employment Initiative: Measures on financial assistance for 
innovative  and  job  creating  Small  and  Medium-Sized  Enterprises  (SMEs)”,  COM(2003)  480  final  of 
5.8.2003. 
All managed by the European Investment Fund (EIF) and delivered via financial intermediaries. 
Data as at 30.6.2002. 
COM(2003) 713 final, 1.12.2003. 
SEC(2001)1667, 19.10.2001. 

3.6.2003; 

FSAP”, 

deliver 

left 

the 

to 

19 

 
 
  
 
                                                 
Also  in  November  2003,  the  Commission  services  published  the  report  “Microcredit  for 
small businesses and business creation: bridging a market gap”43, which was drafted with 
a working group of experts from Member States, acceding and candidate countries. The report 
emphasised  the  diversity  of  actors  in  the  field  of  microlending,  such  as  public  promotional 
banks,  savings  banks,  co-operative  banks  and  non-banks.  The  report  noted  that  guarantee 
schemes often share the risk with microcredit institutions and highlighted the importance of 
business  support  services.  The  different  practices  were  reflected  in  particular  in  setting  the 
interest  rates.  The  report  indicated  that  the  interest  rate  income  from  microcredit  activities 
should allow an institution to cover all its costs and risks related to this activity so that it can 
become self-sustaining and independent of public subsidies. 

In November 2003 the Commission published the yearly report on progress under the CREA 
Seed Capital Action. The Action, financed by the Third Multiannual Programme for SMEs 
(1997-2000)44,  supported  recently  created  seed  capital  funds  with  at  least  €4  million  of 
investment capital as a way of overcoming an early-stage financing gap. The 19 active funds 
selected  in  1998-1999  have  invested  €150.9  million  in  218  companies,  creating  2 205  new 
jobs. The majority of these funds invest locally or regionally in new enterprises in information 
technology,  communications,  electronics  and  life  sciences.  Total  divestments  for  the  funds 
have been €47.6 million, of which 85% has been written off. 

In its conclusions of December 2001, the Industry Council invited the Commission to “draft a 
Code of Conduct between banks, finance providers and SMEs in order to improve their 
understanding of each other”. After several meetings of a working group with representatives 
of  European  banking  and  SME  organisations,  a  draft  was  agreed  in  autumn  2003  by 
Eurochambres, UEAPME45, UNICE46, and the European Group of Savings Banks, one of the 
main European provider of loans to SMEs. The European Association of Co-operative Banks 
and the Banking Federation of the European Union requested more time for the consultation 
of their national members. 

The  Commission  published  in  June  2003  a  guide  on  Credit  insurance  for  European 
SMEs47  which  assesses  the  need  to  manage  the  risks  inherent  in  providing  trade  credits  to 
customers.  If  these  risks  are  not  covered,  they  might  cause  severe  liquidity  constraints  and 
ultimately  insolvency.  Therefore,  SMEs  should  carefully  review  different  instruments  for 
managing  this  risk,  which  include  credit  insurance,  risk  management  by  the  SME  itself, 
factoring, buying information from agencies, using collecting agencies and bank guarantees. 

A  study  on  factoring48  conducted  for  the  Commission  focused  on  the  role  that  factoring 
plays in financing SMEs across Europe. Factoring gives businesses access to finance based on 
their sales growth. The total volume of factoring across Europe has grown by 57% over the 
period 1998-2000, although the starting level was low, and increases were registered in each 
Member  State.  The  report  suggested  that  factoring  is  specifically  targeted  and  suitable  for 
smaller businesses. However, due to its high costs, factoring is only of interest to fast-growing 
companies and not an option for every small business. 

43 
44 

45 
46 
47 
48 

http://europa.eu.int/comm/enterprise/entrepreneurship/financing/index.htm 
Council  Decision  97/15/EC  of  9.12.1996  on  a  third  Multiannual  programme  for  small  and  medium-
sized enterprises (SMEs) in the European Union (1997 to 2000). 
European Association of Craft, Small and Medium-sized Enterprises. 
Union of Industrial and Employers’ Confederations of Europe. 
http://europa.eu.int/comm/enterprise/entrepreneurship/financing/index.htm 
Factoring 
http://europa.eu.int/comm/enterprise/entrepreneurship/financing/index.htm 

through  advance  payment  against 

is  a  way 

liquidity 

increase 

receivables; 

to 

20 

 
 
  
 
                                                 
In  the  framework  of  the  Gate2Growth  Initiative49,  a  pan-European  database  of  investment 
opportunities, a number of existing business planning tools for the innovative entrepreneur 
were gathered, including online tutorials which outline the different sources of finance exist, 
including  venture  capital,  business  angels,  commercial  banks  and  stock  markets,  what  the 
expected investment criteria are and how to approach the investors. A pilot was launched to 
develop a business plan diagnostic methodology to provide feedback on investor-readiness 
and  to  apply  and  validate  it  in  practice,  which  will  allow  for  checking  and  scoring  the 
completeness of a business plan against a number of pre-set criteria developed by investment 
experts.  A  network  of  18  regional  entry  points  has  been  established,  composed  of  Business 
and  Innovation  Centres  (BIC)  and  Innovation  Relay  Centres  (IRC)  (see  heading  2.3.1)  with 
specific expertise in financing innovation. The I-TecNet network of early stage technology 
venture  capital  investors  was  re-launched  in  2003.  The  objective  of  this  network  is  to 
enhance  the  capacity  of  European  early-stage  venture  capital  operators  and  similar 
professional  private  equity  investors  to  invest  in  innovative  companies  and  help  these 
companies to realise their growth potential. 

The  results  from  technology  rating  pilot  projects  conducted  in  previous  years  were 
compiled for publication and dissemination50. The aim of these projects was to produce viable 
methods, tested and accepted at European level, enabling innovative SMEs in the process of 
developing  technological  projects  to  be  rated  by  financial  operators  according  to  the  risks, 
building  on  proven  technology  business  appraisal  techniques.  The  outcome  could  be  usable 
by  banks  and  other  providers  of  early  stage,  small-scale  financing  to  identify  technology 
businesses with high growth potential. 

In the context of the MEDIA programme, the “Growth and Audiovisual: i2i Audiovisual”51 
experimental action aims to encourage banks and financial institutions to invest in the content 
industries.  In  particular,  in  the  context  of  acting  as  a  catalyst  for  support  for  the  film  and 
audiovisual  industry,  the  European  Investment  Bank  (EIB)  makes  credit  lines52  available  to 
the  specialised  banking  sector  for  the  funding  of  SMEs  in  audiovisual  creation,  audiovisual 
technology or the performance of subcontracting in this sector. 

The  Commission  adopted  in  August  2003  the  revised  indicative  guidelines  for  the  mid-
term review of Structural Fund Programmes53, which is taking place end 2003 / beginning 
2004.  The  Charter  recommendations  are  reflected  in  these  guidelines  and  SME  issues  in 
general will be reviewed in the course of the midterm review. A diversification of the range of 
public financing instruments for SMEs is encouraged. The Commission’s initial guidelines for 
the period 2000-200654 stressed the need to achieve the best leverage from operations funded 
from the Community budget by favouring support to private sources of financing, such as risk 
and venture capital, and public-private partnerships. The Commission Regulation on eligible 
expenditure55,  revised  in  June  2003,  defines  conditions  and  recommendations  for  the 
financing of risk and venture capital, loan funds and guarantee funds. A Guide to Risk Capital 

49 
50 
51 
52 
53 
54 

55 

http://www.gate2growth.com 
Publication foreseen in early 2004. 
http://europa.eu.int/comm/avpolicy/media/i2iav_en.html 
Global Loan and Risk Sharing Global Loan. 
COM (2003) 499 final, 25.8.2003. 
The Structural Funds and their coordination with the Cohesion Fund: Guidelines for programmes in the 
period 2000-2006, 1.7.1999, 
www.europa.eu.int/comm/regional_policy/sources/docoffic/official/guidelines/coord_en.htm 
Commission Regulation (EC) No 1145/2003 of 27.6.2003 amending Regulation (EC) No 1685/2000 as 
regards the rules of eligibility for co-financing by the Structural Funds, OJ L 160, 28.6.2003, p. 48. 

21 

 
 
  
 
                                                 
 
Financing in Regional Policy56 has been published and should become a practical document 
for  all  involved,  at  regional  and  national  level,  in  risk  capital  related  activities.  The 
programming of Structural Funds shows that the guidelines are being followed and that, as a 
result, the interventions in risk capital funds and guarantee funds will reach about €1,4 billion 
in the period 2000-2006 , i.e. more than double compared to the 1994-1999 period. 

The  Commission  is  closely  following  the  progress  achieved  in  the  Basle  Committee 
negotiations on the new Capital Adequacy Framework for banks. Following a request from 
the European Council57, the Commission will publish a study on the impact of the new capital 
adequacy framework on the European economy, in particular SMEs, foreseen for early 2004. 

2.2.2.  Conclusions and recommendations 

The  previous  Charter  reports  have  identified  access  to  finance  as  a  major  constraint  for 
enterprises  while  still  signalling  progress  in  this  area.  The  developments  over  the  past  year 
show  that  several  new  measures  to  improve  the  situation  have  been  taken.  Yet,  as  shown 
above, access to finance still remains an important constraint to businesses across the EU. 

Among  the  recent  developments,  the  many  new  measures  taken  in  Belgium,  such  as  the 
Starters  Fund,  the  Private  Pricaf  and  the  ARKimedes  Fund  to  attract  private  investors,  are 
worth highlighting. The British initiative to allow non-banks to offer micro credit, combined 
with  a  tax  incentive  and  the  French  local  investment  funds  are  interesting  examples  of  new 
ways of funding. The Finnish DIILI scheme to attract skilled personnel who participate in the 
share  capital  is  another  innovative  example.  A  particularly  encouraging  signal  is  the 
development of the first business angel network in Greece. 

Experiences from public sector actions aiming to improve small businesses’ access to finance 
have shown that best results are achieved when the public sector works in close cooperation 
with  financial  markets  and  encourages  their  development.  Public  action  should  primarily 
focus on general framework conditions and act as a catalyst for private sector involvement. In 
particular, sector-specific targeted financing actions have proven to be inefficient as there is 
no objective way of anticipating market developments several years ahead. 

To  efficiently  promote  entrepreneurship  and  to  facilitate  enterprises’  access  to  finance  in 
Europe, further public sector actions at European, national and regional level need to be taken. 
The persistent gap in early stage finance makes it necessary that the public sector continues 
to  work  with  the  private  sector  to  overcome  it.  As  bank  loans  remain  the  main  financing 
instrument  for  small  businesses,  the  need  for  guarantees  that  share  the  risks  between  the 
private and the public sector is evident in order to facilitate SMEs’ access to bank loans. In 
this  regard,  securitisation  could  be  an  interesting  field  to  explore.  Using  national  and  local 
banks as intermediaries makes the guarantee mechanisms accessible for small businesses. The 
longstanding Italian scheme CONFIDI is an example of a well-functioning system of mutual 
guarantee societies. 

An important tool to address early-stage finance is microcredit. Its scope and intensity differ 
considerably between countries. The public sector can facilitate the provision of micro credit 
through  an  enabling  environment  and  tax  incentives  for  investors  supplying  funds  to 
microcredit  retailers.  Public  support  can  also  be  offered  by  providing  funds  to  specialised 
lenders, by sharing part of the risk with specialised guarantee societies and/or by promoting 

56 
57 

www.europa.eu.int/comm/regional_policy/sources/docgener/guides/risk/risk_en.pdf 
Barcelona European Council, 15-16 March 2002. 

22 

 
 
  
 
                                                 
business  support  services.  Microlending  programmes  should  aim  for  sustainability  so  that 
public sector support could gradually decrease. 

– 

To  facilitate  small  businesses’  access  to  finance,  efforts  should  be  geared  towards 
early-stage finance, in particular guarantees and microcredit.  

The  needs  of  entrepreneurial  growth  companies  and  the  mainstream  European  small 
businesses  are  different,  but  both  need  stronger  balance  sheets  with  enough  equity. 
Retained  earnings  are  the  best  form  of  financing  growth  and  investment.  The  sources  for 
additional  equity  are  informal  risk  capital  investors,  venture  capital  funds  and  institutions 
providing  quasi-equity  instruments  such  as  subordinated  loans.  The  subordinated  loans  of 
Austria  Wirtschaftsservice,  limiting  external  intervention  in  operational  business  decisions, 
demonstrate an interesting approach to provision of public sector risk capital. 

– 

– 

– 

– 

Review  of  tax  laws  to  examine  whether  they  inhibit  firm  growth  by  taxing  retained 
earnings more than distributed profits is recommended. 

The  development  of  liquid  and  well-functioning  venture  capital  markets  is 
encouraged. 

Further  promotion  of  the  possibilities  provided  by  business  angels  should  be 
continued. 

Investments  by  informal  risk  capital  investors  should  be  promoted  through  tax 
breaks. 

The  Commission  is  engaged  in  many  different  initiatives  to  improve  access  to  finance  for 
small  businesses.  The  Community  financial  instruments  provide  European  leverage  and 
support  for  SME  financing.  The  completion  of  the  Risk  Capital  Action  Plan  is  a  major 
achievement and completing the Financial Services Action Plan will lead to better availability 
of  both  bank  lending  and  equity  finance.  Studies  and  projects  to  exchange  good  practices 
further contribute to improvements. 

2.3. 

Strengthen the technological capacity of small enterprises, including innovation 

“We  will  strengthen  existing  programmes  aimed  at  promoting  technology  dissemination 
towards  small  enterprises  as  well  as  the  capacity  of  small  business  to  identify,  select  and 
adapt technologies. 

We  will  foster  technology  cooperation  and  sharing  among  different  company  sizes  and 
particularly  between  European  small  enterprises,  develop  more  effective  research 
programmes  focussed  on  the  commercial  application  of  knowledge  and  technology,  and 
develop  and  adapt  quality  and  certification  systems  to  small  enterprises.  It  is  important  to 
ensure that a Community patent is available and easily accessible to small enterprises. 

We  will  foster  the  involvement  of  small  enterprises  in  inter-firm  cooperation,  at  local, 
national,  European  and  international  levels  as  well  as  the  cooperation  between  small 
enterprises and higher education and research institutions. 

Actions at national and regional levels aimed at developing inter-firm clusters and networks 
should  therefore  be  supported,  pan-European  cooperation  between  small  enterprises  using 
information  technologies  enhanced,  best  practice  in  co-operative  agreements  spread,  and 
small enterprises cooperation supported to improve their capabilities to enter pan-European 
markets and to extend their activities in third country markets.” 

23 

 
 
  
 
Efficiency and cost advantage, quality, speed and flexibility are critical for business success. 
However, these factors are no longer enough for long-term competitiveness. Enterprises must 
now constantly innovate to re-invent product and services and consequently evolve business 
strategies  to  respond  to  market  demands,  which  in  turn  necessitate  continual  adaptation  of 
organisational structures and processes. 

the 

from 

latest  “Community 

Figures 
the  European 
“Innobarometer”59  as  well  as  analysis  from  the  “European  Trend  Chart  on  Innovation”60 
confirm  that  many  small  enterprises  in  Europe  still  encounter  significant  problems  with  the 
improvement of their innovation performance. 

Innovation  Survey”58  and 

Small  businesses  in  Europe  and  their  innovation  needs  are  highly  heterogeneous.  This 
requires policy instruments that are equally differentiated and cover the regional, national and 
European level. It should be underlined that small businesses depend more than large firms on 
the  optimisation  of  regional  innovation  systems.  However,  comprehensive  and  comparable 
information on regional innovation policies is particularly scarce. 

To  understand  the  innovation  needs  of  small  businesses,  it  is  useful  to  differentiate  the 
population  of  firms  along  the  spectrum  from  new  technology  based  start-ups  to  traditional 
small  firms  and  crafts.  Evidence  from  the  above  surveys  shows  that  high-tech  start-ups 
depend mainly on the availability of innovation finance, on intensive interaction with science 
institutions  and  on  efficient  systems  for  protection  of  intellectual  property  rights.  More 
traditional  small  businesses,  on  the  other  hand,  depend  more  on  intensive  interaction  with 
innovative  customers  and  technology  providers,  on  their  access  to  technology  and  market 
intelligence and on constantly upgrading their human resources. 

The majority of small businesses lack the competence and resources needed to carry out their 
own  research  and  development  (R&D),  to  introduce  new  technology  and  train  their 
employees. They may even have problems in recognising their own needs for technology or 
in  the  innovation  process.  Small  enterprises  depend  very  much  on  an  environment  that 
supports innovation. In this context, the development of technology and  knowledge transfer 
initiatives is of paramount importance for most of them. 

The broad definition of technology transfer covers the shift of ideas from the science base 
and their uptake by industry but also the transfer of knowledge between companies. There are 
a  number  of  ways  in  which  policy  makers  may  influence  the  uptake  of  research  results  by 
industry for incorporation into improved products, processes and services. 

More  specifically,  indirect  methods  include  the  modification  of  framework  conditions  and 
institutional structure to allow greater interaction between public sector research institutes and 
businesses. Examples of such measures that indirectly facilitate the promotion and diffusion 
of  knowledge  include:  (1)  Science  parks,  regional  technology  centres,  liaison  offices  in 
academic and research organisations and other kinds of intermediaries; (2) Legal framework, 
including intellectual property considerations, facilitating the technology transfer; (3) Tax and 
financial incentives, such as financial support schemes providing high-risk loans to innovative 
businesses;  and  (4)  Specific  funds  for  research  and  technological  development  (RTD) 
generating new knowledge which will be subsequently transferred to the industry. 

58 
59 
60 

Eurostat. 
http://www.cordis.lu/innovation-policy/studies/ca_study3.htm 
http://www.cordis.lu/innovation-policy/studies/gen_study8.htm 

24 

 
 
  
 
                                                 
Direct  methods  promoting  transfer  of  knowledge  between  organisations  and  individuals 
include: (1) Programmes for transfer and exploitation of results; (2) Schemes for mobility of 
personnel, encouraging individuals to work within other organisations bringing knowledge to 
their hosts and learning from them; (3) Information diffusion measures making organisations 
more aware of scientific and technological opportunities; and (4) Co-operative schemes with 
industry and demonstrator projects. 

Technology  transfer  from  science  to  traditional  small  business  usually  does  not  function 
through  direct  contact  as  the  cultures  at  universities  or  large  research  organisations  are  too 
different  from  small  enterprises.  Thus,  increased  technology  transfer  to  small  enterprises 
requires intermediaries in the form of technology transfer organisations, of which there are a 
great variety in Europe. 

More direct contacts exist between research organisations and high tech based start-ups, either 
in  the  form  of  university  spin-offs,  or  start-ups  fostered  in  technology  parks  or  technology 
based  incubators.  Combinations  of  such  measures  supplemented  by  further  support  are 
increasingly  applied  in  order  to  create  clusters  around  specific  technology  fields.  By 
agglomerating research and industrial developments, small businesses are profiting from the 
ready availability of knowledge and the possibilities to network with firms in their region.  

Another form of cooperation between research and small businesses, which seems to be better 
adapted to the needs of these businesses, are co-operative research institutes. These institutes 
appear more appropriate for the dissemination of intermediate technologies rather than cutting 
edge  technologies.  Less  spectacular  as  regards  their  innovativeness,  this  kind  of  technology 
transfer is, however, important as regards its short-term economic impact. 

Last  year’s  Charter  report  concluded  that  recent  developments  in  promoting  clusters  and 
technology  networks  involving  small  and  medium-sized  enterprises  were  encouraging  and 
that various promising initiatives had been launched. The report suggested however that there 
was still plenty of scope for exchange of good practice in areas such as promoting technology 
transfer  from  university  to  small  businesses  and  supporting  innovation  both  in  technology-
based small businesses and also in the more traditional sectors. Member States were invited to 
contribute actively to the Best Procedure project on improving technology transfer institutions 
and encouraged to further develop technology clusters and enterprise networks at national and 
regional level. Such measures should be implemented with a long-term perspective to ensure 
effective results. 

The selected priority area for the current report is “Innovation and technology transfer”, thus 
focusing on the specific issue of technology transfer and also explicitly including innovation. 
Nevertheless,  all  relevant  measures  which  fall  under  the  Charter  area  “Strengthen  the 
technological capacity of small enterprises” have been included in the reporting. 

2.3.1.  Recent developments 

Indicators and targets 

Eight  Member  States  have  set  quantitative  targets  in  the  area  of  R&D  spending.  Denmark, 
Germany  and  France  have  translated  the  Barcelona  target  to  increase  R&D  investment  in 

25 

 
 
  
 
EU  to  3%  of  GDP  by  2010  directly  into  national  targets,  while  Spain,  Portugal,  Austria, 
Ireland and Finland have chosen more intermediate targets61. 

Spain, Ireland and the Netherlands have also set targets related to patents. Spain aims for 24.5 
European patents per million people in 2006 and 40.7 European patents per million people in 
2010,  Ireland  wants  350  patents  applied  for  per  million  people  in  2006  and  100  patents 
granted per million people in 2006, and the Netherlands aims to be in the leading group by 
2010 as to share in EPO patents. 

In addition, the Netherlands has set a number of targets related to R&D expenditure on ICT, 
high-tech  start-ups  and  innovation:  higher  growth  than  in  other  technology  areas  for  R&D 
expenditure  on  ICT  by  enterprises  and  research  institutions;  50%  increase  in  number  of 
techno-starter enterprises in 2004 and in the leading group in 2010; to be among the leading 
EU  Member  States  in  2010  for  share  of  innovative  enterprises,  co-operating  innovative 
enterprises  and  innovative  enterprises  co-operating  in  research;  and,  finally,  to  be  in  the 
leading group in 2010 as to profit from innovations. 

A variety of indicators in the 2003 European Innovation62 and Enterprise Policy Scoreboards 
show that the EU needs to improve its performance in the area of innovation and knowledge 
diffusion. However, there is substantial variation in performance between Member States. 

R&D expenditure as a percentage of GDP in the EU has not increased in 2001. R&D ratios of 
below  or  around  1%  in  Greece,  Portugal,  Spain,  and  Italy  outweigh  the  3%  plus  ratios  of 
Sweden and Finland63. 

The number of patents has been increasing from 2000 to 2001, including the number of high 
tech patents. Some Member States registered more patents relative to the population than the 
United States – Sweden, Finland, Germany, the Netherlands, Luxembourg and Denmark 
–  but  only  Sweden,  Finland  and  the  Netherlands  registered  more  high  tech  patents.  The 
target  of  the  Netherlands  to  get  into  ‘the  leading  group’  by  2010  as  to  the  share  of  EPO 
patents seems to already have been met according to this data. 

Member States 

In the area of innovation, Germany has launched the “SME innovation initiative” which aims 
at  the  promotion  of  technology  start-ups.  The  initiative  will,  inter  alia,  provide  funding,  tax 
relief  for  investments  in  these  companies  and  encourage  better  links  between  SMEs  and 
research  institutions.  In  Italy,  a  memorandum  of  understanding  was  signed  between  the 
Ministry  of  Productive  Activities  and  the  Department  for  Innovation  and  Technology.  This 
provides  for  a  joint  action  plan  for  the  development  of  initiatives  designed  to  promote 
innovation among SMEs and will lead to joint regulatory and financial measures. 

61 

62 
63 

Member States have set the following targets on General Expenditure on R&D (GERD): Austria (2.5% 
in  2005),  Denmark,  Germany  and  France  (all  3%  in  2010),  Ireland  (2.8%  in  2006),  the  Netherlands 
(among the leading EU Member States in 2010) and Portugal (1% in 2003). In addition, three Member 
States have set targets for increasing Business Expenditure on R&D (BERD): Denmark (2% in 2010), 
Spain (0.84% in 2003) and the Netherlands (EU average in 2005, among the leading EU MS in 2010). 
Finland  had  previously  targeted  GERD,  but  has  recently  changed  this  and  instead  set  the  target 
of €1 700  million  governmental  intramural  expenditure  on  R&D  in  2007,  corresponding  to  ≥1%  of 
GDP.  “Benchmarking  Enterprise  Policy:  Results  from  the  2003  Scoreboard”,  SEC(2003)  1278, 
4.11.2003. 
SEC(2003) 1255, 10.11.2003. 
Sweden: 3.8% in 1999 (latest year available); Finland: 3.7% in 2001 (latest year available). 

26 

 
 
  
 
                                                 
Germany and Austria: Schemes to encourage trans-national cooperation 

– 

Programme 

for  Competence 

Germany will grant, as from 2004, a special promotion bonus for trans-national cooperation 
under  its  PRO  INNO  scheme  (Innovationskompetenz  mittelständischer  Unternehmen 
programme 
SMEs 
international  research 
www.forschungskoop.de).  PRO  INNO  supports  national  and 
cooperation by SMEs with each other or with research institutions, as well as entry or re-entry 
of enterprises into research and development. Approximately 77% of the enterprises promoted 
have fewer than 50 employees. 40% of enterprises are under 5 years old and a further 35% are 
6-10  years  old.  The  widespread  effect  of  PRO  INNO  is  marked.  Since  1999,  roughly  €1.3 
billion has been spent on R&D in some 3 900 enterprises. The special bonus for trans-national 
cooperation  aims  to  give  SMEs  stronger  incentives  to  become  part  of  international  research 
networks. 

Innovation 

among 

in 

In Austria, twelve projects were selected in April 2003 for promotion under the STRAPAMO 
pilot  project  (Bildung  von  strategischen  F&T-Partnerschaften  mit  Mittel-  und  Osteuropa  –
Formation  of  strategic  R&D  partnerships  with  Central  and  Eastern  Europe).  These  projects 
are intended to step up the creation of technological axes between Austrian technology parks, 
research  skills  centres,  technology-oriented  clusters  and  cooperative  research  institutes,  and 
their counterparts in Central and Eastern Europe. Central to this is the creation of synergies 
between growth centres and with it the utilisation of ‘win-win potential’. Each of the projects 
involves  at  least  six  enterprises,  at  least  three  of  them  from  Austria.  The  main  partner 
countries are Slovenia, Hungary and Slovakia. 

The Netherlands is currently reviewing all policy measures for innovative start-ups with the 
view of bringing all instruments under one initiative called “TechnoPartner”. This structure 
consists  of  three  pillars:  TechnoPartner  Financing  (provides  risk  capital  in  the  pre-seed  and 
the  seed  phase),  TechnoPartner  Contest  (promotes  entrepreneurship  among  researchers  and 
potential  techno  start-ups)  and  TechnoPartner  platform  (informs  techno  start-ups  on  how  to 
start the business, helps research institutions to become more entrepreneurial, organises  and 
maintains  an  incubator  network,  monitors  developments  in  relevant  sectors  and  raises 
awareness through seminars and conferences).  

To bring the entrepreneurial sector and the national scientific and technological system closer 
together,  the  Portuguese  Innovation  Agency  (AdI)  has  taken  over  the  management  of  the 
innovation programmes of the Ministry of Economic Affairs and the Ministry of Science and 
Higher  Education.  Portugal  has  also  introduced  the  “NEST  Programme”  to  support  the 
creation  of  technology-based  enterprises  by  participating  in  their  capital.  Norway  has 
amended the legislation concerning the right to employees’ inventions so that the rights to a 
patent  are  now  given  to  the  university  and  not  to  the  researcher.  As  a  consequence,  the 
Universities of Oslo and Bergen are setting up their own technology transfer offices. 

At regional level in the United Kingdom, the SMART scheme in England has been replaced 
by  two  new  products.  The  “Grant  for  Research  and  Development”  provides  grants  to  help 
individuals  and  SMEs  research  and  develop  technologically  innovative  products  and 
processes, following feedback from small businesses this eliminates the de minimis research 
project  element  that  was  present  in  the  previous  scheme.  The  “Grant  for  Investigating  an 
Innovative Idea” provides grants to help fund consultancy costs for expert help on a range of 
issues,  including  technology,  marketing  and  organisational  factors  that  may  be  necessary  to 
improve  an  SME’s  capability  to  innovate.  Wales  has  launched  its  Innovation  Action  Plan 
“Wales  for  Innovation”.  This  sets  out  the  schemes  and  actions  which  will  or  already  are 
helping  small  businesses  to  make  the  most  of  innovation,  commercialisation  of  research 

27 

 
 
  
 
activity and technology transfer from higher education and further education institutions into 
Welsh businesses. 

Belgium: Innovation booklet to entrepreneurs – “100 Questions on Innovation” 

(Innovation 

“Innovatiezakboekje” 

The Flemish Community in Belgium in 2002 complied and distributed an updated edition of 
the 
booklet, 
http://www.innovatie.vlaanderen.be/innovatiezakboekje).  This  free  booklet,  entitled  “100 
Questions  on  Innovation”,  is  available  in  Dutch  as  well  as  in  English.  It  is  a  practical 
information  booklet  and  guide  for  entrepreneurs  and  company  directors  wishing  to  make 
changes  and  looking  for  ways  to  innovate.  One  hundred  questions  and  answers  provide  a 
good  overview  with  practical  information  to  help  on  the  way.  In  this  way,  the  booklet 
contributes to making it is easier to transpose an idea into an innovative product or service or 
to  transfer  technology.  It  has  been  conceived  to  provide  a  stimulus  and  introduction  to  the 
different possibilities, angles and resources to innovate. 

Several  countries  report  on  measures  to  promote  technology  transfer  from  universities  to 
SMEs. Denmark is introducing an action plan to strengthen the cooperation between SMEs 
and  Danish  and  foreign  knowledge  institutions.  In  order  to  encourage  an  open  market  for 
knowledge and technology, as a first step, Denmark has created a technology transfer office 
for  biotechnology.  The  Netherlands  is  taking  several  actions  to  improve  the  interaction 
between universities and SMEs and the actors in the national innovation system. For example, 
it plans to set up an Innovation Platform based on the Finnish model. Austria has launched the 
“FH  plus”  programme  to  strengthen  application-oriented  research  at  universities  in 
cooperation  with  the  business  community.  This  gives  SMEs  access  to  research  results  and 
enables  them  to  improve  their  ability  to  innovate.  Portugal  has  introduced  the  “IDEIA” 
programme  (Applied  Business  Research  and  Development)  to  foster  collaboration  between 
enterprises  and  organisations  on  the  National  System  for  Science  and  Technology  (SCTN). 
Norway  is  replacing  its  current  “Technology  Transfer  from  Research  Institutes  to  SMEs” 
programme  by  a  new  R&D  programme  “KOMPMEG”  which  aims  at  promoting  research 
based competence.  

To  support  technology  cooperation  between  companies,  Greece  has  initiated  the 
“Promoting SME networking programme”. The programme aims at supporting actions with 
specific  business  results,  e.g.  the  completion  of  a  joint  project  or  the  creation  of  permanent 
joint ventures. 

With regard to research programmes, Ireland has established a high-level steering group to 
assess  the  implications  of  the  European  Research  Area  policies  and  to  prepare  a  national 
action  plan  for  increasing  R&D  investment  in  Ireland.  It  has  also  established  a  “National 
Support  and  Information  Service”  with  the  objective  of  co-ordinating  the  promotion  of 
participation,  particularly  by  SMEs,  in  the  Sixth  Framework  Programme  for  RTD.  At 
regional level in Belgium, in order to encourage the participation of the SMEs in the Walloon 
region in the Sixth Framework Programme for RTD, the region grants a subsidy equal to 25% 
of the Community aid64. In addition, the financial body of the region counter-guarantees the 
bank  guarantees  to  the  European  Commission  for  the  remaining  75%  of  the  eligible 
expenditure. In the United Kingdom, the “Scottish Proposal Assistance Fund” has been set up 
to increase Scottish industry participation in Sixth Framework Programme for RTD. Scotland 
is also seeing the establishment of three market-based “Intermediary Technology Institutes”. 
They will focus on pre-competitive research in areas of high global market potential in order 

64 

The percentage can be reduced in order to respect the Community rules on state aid for R&D. 

28 

 
 
  
 
                                                 
to  deliver  a  change  in  cultural  approach  to  commercialisation  and  business  investment  in 
R&D, and are designed to help increase business R&D spending, strengthen the capability of 
existing leading, technologically aware companies and help create new ones. 

Sweden  has  launched  the  “VINNOVA  incubator  programme”  which  gives  incubators  a 
maximum of 50% grant in order to commercialise scientific-based business ideas. The United 
Kingdom  is  currently  working  to  establish  a  set  of  nationally  recognised  standards  and 
benchmarks  for  business  incubation  which  will  be  capable  of  assessment  and  accreditation. 
At  regional  level,  Northern  Ireland  in  the  United  Kingdom  is  developing  its  first  Science 
Park.  The  Science  Park  aims  initially  to  cater  for  new  spin-out  companies  from  the 
universities and industry and seeks to attract research and development units from indigenous 
companies and inward investors. 

Ireland: The Shannon Region Knowledge Network 

in 

the 

Shannon  Region, 

The  Knowledge  Network 
http://www.shannon-
dev.ie/K_Network/Index.html,  was  launched  in  2001  by  Shannon  Development,  a  regional 
development  agency.  It  comprises  technology  park  and  incubator  infrastructure  as  well  as 
linkage systems to the regions third level education sector. It is a unique initiative creating a 
network  of  key  technology  locations  in  the  Shannon  Region.  Five  locations  –  the  National 
Technology Park Limerick, Kerry Technology Park, Tipperary Technology Park, Information 
Age  Park  Ennis,  and  Birr  Technology  Centre  –  singularly  and  collectively  work  to  bring 
business,  education  and  innovation  together  to  create  dynamic  and  exciting  world-class 
locations  for  living  and  working  in  the  knowledge  age.  Each  location  within  the  Shannon 
Development  Knowledge  Network  has  an  Innovative  Works  facility  –  ‘smart’  buildings 
specifically focussed on ‘bringing business to life’.  

The  network  aims  at  stimulating  new  technology  start-ups  and  attracting  new  mobile 
knowledge 
transfer  and  research 
commercialisation as well as the knowledge economy in areas dominated by traditional sector 
activity. 

intensive  enterprise.  It  also  promotes 

technology 

Some  new  support  services  have  been  developed  in  this  area  since  last  year.  Ireland  has 
launched a “Technology Development Advisory Service” which assists companies to develop 
new  processes  and  products  and  promotes  networking  amongst  private  sector  actors  with 
expertise  in  innovation.  Finland  has  launched  a  project  to  develop  and  extend  the  business 
development  and  business  incubator  services  directed  at  technology  and  know-how  driven 
business start-ups. It also gives assistance in drafting a technology strategy to an enterprise or 
a research  unit.  The assistance comprises of a free strategy guide, a database  of consultants 
and funding. 

Denmark: Service institutes for technologically based knowledge 

In  Denmark,  the  eleven  institutes  making  up  the  Approved  Technological  Service  Institutes 
(GTS)  network  develop  and  communicate  technologically  based  knowledge  to  private 
companies  and  public  institutions.  Knowledge  provided  by  the  GTS  network  include  areas 
such  as  biotechnology,  energy  and  environment  issues,  electronics,  acoustics,  toxicology, 
building and industry, management and organisation, and standardisation. 

The  GTS  institutes  provide  technological  service  for  all  types  of  companies,  but  have  a 
special obligation to serve small enterprises. The GTS institutes have about 20 000 different 
customers a year. About 90% are SMEs. 

29 

 
 
  
 
The  GTS  institutes  are  independent,  non-profit  institutes  authorised  by  the  Minister  for 
Science, Technology and Innovation. Basic grants are allocated on the basis of a strategy plan 
mapping out the technical or scientific areas in which the individual institute must build up 
competence. 

Two  new  tax  schemes  have  been  introduced  in  this  area.  As  part  of  its  Innovation  Plan, 
France has developed the initiative “Aide aux projets de RD portés par les jeunes entreprises 
innovantes”  (Aid  to  R&D  projects  by  young  innovative  businesses)  which  provides 
reductions  in  social  security  contributions  and  tax  reductions  to  encourage  R&D  projects. 
Portugal provides a fiscal reserve for fixed capital investments or investments in innovation 
and development. The reserve consists of a 20% reduction of the company’s tax assessment. 

Commission 

In  April  2003  the  Commission  adopted  the  Communication  “Investing  in  research:  an 
action plan for Europe”65, which sets out actions required to ensure sustained and coherent 
progress towards the objective set by the Barcelona European Council to increase investment 
in  European  R&D  to  3%  of  GDP  by  2010.  The  Action  Plan  proposes  that  Member  States 
consider  setting  targets  for  the  participation  of  SMEs  in  their  national  R&D  programmes. 
Other actions aim at improving access of SMEs to debt and equity financing for research and 
innovation  activities  through  better  use  of  national  guarantee  mechanisms,  adapting  where 
appropriate  fiscal  treatment  of  risk  capital  to  avoid  double  taxation  of  investors  and  funds, 
strengthening  or  extending  future  guarantee  schemes  and  risk  capital  activities  managed  by 
EIF,  and  promoting  the  use  of  technology  rating  to  better  appraise  risks  and  rewards 
associated to investments in technology based SMEs. 

The  Sixth  Framework  Programme  for  research,  technological  development  and 
demonstration  activities  (2002-2006)66  (FP6)  supports  SMEs  with  respect  to  research, 
innovation and technology transfer by facilitating their collaboration with research institutions 
and  other  business  partners,  including  large  enterprises.  The  participation  of  SMEs  in  the 
priority  thematic  areas  of  the  Integrating  and  Strengthening  the  European  Research  Area67 
specific programme of FP6 is strongly encouraged, with more than 15% of the budget aimed 
for SMEs, i.e. at least €1.7 billion. The monitoring of SME participation is being carried out 
by  the  SME  Interservice  Task  Force,  established  in  December  2002  and  involving  all 
Commission services responsible  for the implementation of the priority thematic areas. One 
of its first actions has been to establish targets of SME participation per priority thematic area. 
New  measures  to  facilitate  SME  participation  wherever  appropriate  are  being  developed. 
Furthermore, several priority thematic areas have taken their own initiatives to this purpose, 
such as workshops and information seminars. RTD projects co-financed by FP6 may receive 
additional co-financing from the Structural Funds to reduce the level of financial participation 
by the entity benefiting from the project 

Economic  and  Technological  Intelligence  is  one  of  the  activities  under  FP6  that  supports 
SMEs with respect to research and innovation. The scheme provides funding for projects that 
may include, for example, technology audits to identify SME needs and direct SMEs towards 

65 
66 

67 

COM(2003) 226 final/2, 4.6.2003. 
Decision No 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning 
the Sixth Framework Programme of the European Community for research, technological development 
and  demonstration  activities,  contributing  to  the  creation  of  the  European  Research  Area  and  to 
innovation (2002 to 2006), OJ L 232, 29.8.2002, p. 1. 
More information on the European Research Area at   
http://europa.eu.int/comm/research/era/index_en.html 

30 

 
 
  
 
                                                 
the appropriate instruments in FP6, or promote interactions among the innovation players. In 
2003, 115 proposals were received. The projects will be specifically oriented to promote the 
participation of SMEs in the priority thematic areas. Participants are intermediaries working 
with  or  for  SMEs  and  SMEs  associations  or  groupings,  such  as  National  Contact  Points 
(NCPs, see below), Innovation Relay Centres (IRCs, see below), SME incubators, industrial 
organisations, chambers of commerce and public administrations.  

As  to  “Horizontal  research  activities  involving  SMEs”  under  FP6,  the  first  call  for 
proposals  for  cooperative  research,  closed  in  April  2003,  had  an  indicative  budget  of  €95 
million. 668 proposals were submitted and around 60% of participants of eligible proposals 
submitted  were  SMEs.  The  first  call  for  collective  research,  with  a  budget  of  €40  million, 
received  125  proposals.  Collective  research  is  a  new  scheme  under  FP6,  following  a  pilot 
action under FP5, involving associations and groupings of SMEs that assign a significant part 
of  science  and  technology  research  to  RTD  performers  and  retain  the  intellectual  property 
rights  of  the  results.  The  projects,  which  have  important  dissemination  and  training 
components, are expected to have significant impact on large communities of SMEs. 

The  SME  National  Contact  Point  (NCP)  network  is  being  closely  involved  through 
information  and  training  events  with  respect  to  FP6  in  order  to  ensure  a  coherent  approach 
and high level of service. In April 2003, the network was informed of loan opportunities from 
the  European  Investment  Bank  (EIB)  and  the  European  Investment  Fund  (EIF)  to  SMEs 
participating  in  FP6.  The  Intellectual  Property  Rights  Helpdesk  (IPR  Helpdesk)68  also 
continues  to  give  support  to  a  large  number  of  SMEs  which  are  current  or  potential 
participants in European Community funded RTD projects. 

In June 2003, the Commission presented the outcome of a project, carried out with the help of 
national  experts  from  Member  States,  acceding,  candidate  and  EFTA/EEA  countries,  on 
enterprise clusters and networks at a seminar in Copenhagen69. The project report gives an 
overview  on  how  the  participating  countries  and  the  Commission  take  into  account  clusters 
and  networks  in  their  policies,  presents  examples  of  good  practices  and  provides  experts’ 
recommendations to support cluster development. Identifying market failures and upgrading 
policies,  providing  cluster  management  infrastructure,  developing  links  between  research, 
university  and  industry  and  implementing  appropriate  education  and  training  programmes 
were  mentioned  as  key  priorities  at  national  and  regional  level.  At  the  EU  level,  the  report 
suggested  that  action  should  consist  of  raising  awareness  of  the  benefits  and  pitfalls  of 
clusters for the regions and the SMEs, by providing a framework for exchange of experience, 
information and good practices and in reinforcing synergies between all areas of policy. 

The  Innovation  Relay  Centres  (IRCs)70  form  the  largest  network  in  Europe,  with  68 
regional  IRCs  in  31  countries71,  aimed  at  supporting  innovation  and  transnational 
technological cooperation with a range of specialised business support services. IRC services 
are primarily targeted at technology-oriented SMEs, but are also available to large companies, 
research  institutes,  universities,  technology  centres  and  innovation  agencies.  The  IRC 
Network  works  together  with  the  Euro  Info  Centres  (EICs)  and  the  Business  Innovation 
Centres  (BICs)  under  the  ‘EU  business  support  networks’  umbrella,  “B2Europe”.  It  also 
works  in  collaboration  with  the  IPR  Helpdesk  (see  above)  and  Gate2Growth  initiative  (see 
heading  2.2.1).  Furthermore,  the  two  operational  arrangements  concluded  in  2002  with  the 

68 
69 
70 
71 

http://www.ipr-helpdesk.org/index.htm 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/cluster/index.htm 
http://irc.cordis.lu 
EU  Member  States,  the  acceding  countries,  Bulgaria,  Romania,  Iceland,  Israel,  Norway  and 
Switzerland. 

31 

 
 
  
 
                                                 
European initiative EUREKA and the European Space Agency (ESA) for the promotion and 
dissemination  of  EUREKA  and  ESA  RTD  results  through  the  IRC  Network,  have  been 
implemented  in  the  course  of  2003.  The  IRCs  are  currently  co-funded  by  FP5.  The  IRC 
Network will continue its operation within FP672, and the new contractual phase will start in 
April 2004 for the IRCs which were selected following a call for proposals published in April 
2003. Following an external evaluation, 71 IRC project proposals, involving 232 participants, 
were recommended for contract negotiations. These new IRC projects will run for a period of 
four years and will cover all 31 countries. 

The Innovating Regions in Europe (IRE) network73 offers regions a unique joint platform 
for  collaboration  and  exchange  of  experiences  and  ideas  on  the  development  and 
implementation  of  regional  innovation  policies  and  schemes.  The  network  is  open  to  all 
European  regions,  including  those  in  acceding  and  candidate  countries,  committed  to  the 
development of innovation. The network aims to create an inter-regional learning process for 
the  formulation  and  implementation  of  regional  innovation  policies  and  support  actions.  It 
also  seeks  to  promote  trans-regional  innovation  projects  and  activities.  Some  120  European 
regions  have  received  support  from  the  Commission  for  the  formulation  of  regional 
innovation  strategies  by  using  a  tried  and  tested  approach  to  innovation  policy-making  at 
regional level. The IRE network continuously encourages and supports thematic and sectoral 
regional  groupings.  During  2002-2003,  14  IRE  Thematic  Networks  have  been  supported, 
bringing together over 200 innovation stakeholders to facilitate the exchange of good practice 
on  specific  regional  innovation  policy  topics  such  as  clusters  and  networks,  university-
industry links and innovation in large metropolitan areas. 

The  work  continues  in  the  framework  of  the  Best  Procedure  project  on  “Improving 
institutions for the transfer of technology from science to industry”, launched in autumn 
2002. In addition to an expert group with delegates from the participating countries and the 
Commission, a study contract has been awarded, which also includes a survey of technology 
transfer  institutions.  The  project  covers  various  activities  in  the  area  of  relations  between 
industry and science, in particular issues on IPR, mobility of researchers and spin-offs. It will 
analyse  the  degree  to  which  the  incorporation  of  transfer  mechanisms  (institutions)  has 
become  common  practice,  develop  a  typology  of  such  institutions  and  define  framework 
conditions  and  factors  which  are  important  for  their  success.  By  applying  benchmarking  on 
the  basis  of  qualitative  and  quantitative  information  and  by  identifying  best  practices, 
recommendations will be formulated on how to improve the presence, quality and efficiency 
of such institutions. The final report will be presented in the first half of 2004. 

The Commission published the study “Growth paths of technology-based companies in life 
sciences and information technology”74. This study, conducted on behalf of the Commission 
with funding from the Innovation and SMEs programme, looks at the conditions which help 
as  well  as  the  conditions  which  hinder  the  development  of  high-tech  companies  in  two  key 
sectors,  life  sciences  and  information  technology  and  includes  a  number  of  policy 
recommendations. 

The ProTon Europe network, launched in 2002 as part of the Gate2Growth Initiative (see 
heading  2.2.1),  continued  its  work  to  stimulate  the  commercial  uptake  of  publicly  funded 
R&D throughout Europe by further developing the professional skills of those working in this 

72 

73 
74 

Under  the  “Research  and  Innovation”  activity  of  the  specific  programme  “Structuring  the  European 
Research Area” of FP6. 
http://www.innovating-regions.org 
ISBN  92-894-4569-6,  NB-NA-17054-EN-C,  2003,  156  p,  http://www.cordis.lu/innovation-
policy/studies/gen_study10.htm 

32 

 
 
  
 
                                                 
field.  ProTon  is  a  pan-European  network  of  technology  offices  linked  to  public  research 
organisations and universities. 

In  May  2003,  the  Commission  Staff  Working  Paper  “Building  the  Knowledge  Society: 
Social and Human Capital Interactions”75, developed with the support of ESDIS76, focused 
among other things on enterprise-related aspects such as networking, virtual corporations and 
communities of practices77. The report provided input for a Council Resolution on Social and 
Human Capital78, which calls on the Member States “to encourage enterprises, particularly 
SMEs, also using the Structural Funds and abiding by the competition rules, in the adoption 
of innovative work practices such as networking, clustering, e-business and e-work” and “to 
harness  the  potential  of  organisational  learning  and  knowledge  management  solutions  to 
enhance  both  social  and  human  capital  in  the  enterprise  and  foster  innovation  and 
competitiveness”. 

The  eGap  project79,  funded  by  the  IST  Priority  (see  heading  5  of  the  Annex)  and  by  the 
project partners, is carrying out pioneering research on telework in SMEs in six countries80. 
The  final  report  of  the  project  is  expected  in  mid  2004.  The  MEDIA  programme  supports 
pilot  projects81  aimed  at  improving  access  to  European  audiovisual  content  and  at  taking 
advantage  of  opportunities  arising  from  the  development  and  introduction  of  new  and 
innovative technologies, including digitisation and new methods of dissemination. A number 
of projects are currently supported to define ways in which the audiovisual sector can benefit 
from new technologies. 

GALILEO, the European satellite radio-navigation programme financed by both public and 
private funds launched in 200282, will also lead to a new generation of universal services in 
sectors such as transport, telecommunications, agriculture and fisheries. The growth prospects 
of  the  products  and  services  markets  connected  with  satellite  radio-navigation  are 
considerable,  and  the  programme  will  support  the  competitiveness  of  European  businesses, 
including small ones, and contribute to conditions which are favourable for innovation. 

2.3.2.  Conclusions and recommendations 

Strengthening  the  technological  capacity  of  small  enterprises  is  an  area  where  the  previous 
Charter implementation report considered the progress made to be encouraging but expressed 
the  need  for  more  exchange  of  good  practice.  Further  progress  has  been  made  since  the 
previous  report,  which  is  highlighted  by  the  vast  number  of  new  measures  recently 
introduced. For  example, the Dutch TechnoPartner initiative and  the Portuguese Innovation 
Agency  are  a  signal  towards  better  coordination  of  innovation  programmes.  Moreover,  the 
Greek  SME  networking  programme  shows  enhanced  efforts  to  support  technology 
cooperation between companies. 

75 
76 

77 

78 

79 

80 
81 
82 

SEC(2003) 652, 28.5.2003. 
High  Level  Group  on  the  Employment  and  Social  Dimension  of  the  Information  Society  - 
http://europa.eu.int/comm/employment_social/knowledge_society/esdis_en.htm 
Such  as  informal  groups  of  engineers  from  around  a  company  who  come  together  to  share  ideas, 
identify best practices and brainstorm. 
2512th Council meeting – Employment, Social Policy, Health and Consumer Affairs – Luxembourg, 2-
3 June 2003. 
http://www.egap-eu.com;  the  article  “Regulatory  Framework  and  Telework  in Some  European  Model 
Regions” provides interesting information on this topic: http://www.egap-eu.com/egap/pdf/EGap02.pdf. 
Finland, France, Hungary, Italy, the United Kingdom and Japan. 
http://europa.eu.int/comm/avpolicy/media/pilot_en.html 
Council  Regulation  (EC)  No  876/2002  of  21  May  2002  setting  up  the  Galileo  Joint  Undertaking,  OJ 
L 138, 28.5.2002, p. 1. 

33 

 
 
  
 
                                                 
The  problems  of  small  enterprises  to  identify,  select  and  adapt  technologies  are  widely 
recognised. To tackle these problems, most Member States base their policies to a large extent 
on  “technology  centres”.  However,  small  businesses  are  not  always  satisfied  with  the 
services of such centres as they do not necessarily respond to their needs. 

Despite  major  improvements  over  the  last  years,  technology  transfer  from  science  to 
enterprises  has  not  yet  become  a  central  issue for  publicly  funded  research  organisations  or 
universities. As always, there is no single good practice which all should follow. However, it 
is  recognised  that  strengthening  the  cooperation  and  interaction  between  science  and  the 
business community is frequently the result of a combination of measures. The Danish service 
institutes for technologically-based knowledge, which have a special obligation to serve small 
enterprises,  provide  an  interesting  example  of  a  structure  well-adapted  to  SMEs.  Moreover, 
the change in the Norwegian legislation giving the rights to a patent to the university and not 
to  the  researcher  has  resulted  the  Universities  of  Oslo  and  Bergen  to  set  up  their  own 
technology  transfer  offices.  In  Ireland,  the  Shannon  Development  Network  brings  business, 
education  and  innovation  together.  For  disadvantaged  regions,  technology  transfer  activities 
are extremely important. 

– 

– 

– 

– 

Public  policy  could  help  “technology  centres” 
their 
professionalism  and  adopt  an  attitude  based  on  the  needs  of  their  customers  by 
encouraging  independent  benchmarking  and  labelling.  Public  support  for  these 
centres should not lead to distortions of the market. 

further  develop 

to 

transfer  mechanisms,  establishing  adequate 

transfer 
Devising  appropriate 
organisations  and  offering  a  sufficient  range  of  respective  services  to  enterprises 
should  become  general  practice.  This  will  require  the  adaptation  of  framework 
conditions  governing  the  strategies  and  behaviour  of  research  organisations, 
professionalisation  of  such  services,  and  stimulation  of  SMEs’  acceptance  of  such 
services. 

Better integration and exploitation of synergies between the National (or Regional) 
Innovation Systems and the European Community initiatives on technology transfer 
such as the ProTon and the IRC Network, the ESA Technology Transfer Programme, 
the activities of the Joint Research Centre should be promoted and supported. 

Sector-based  technology  transfer  initiatives  involving  users’  associations  and 
specialised research departments should be promoted. 

Inter-company contacts are another important channel for the diffusion of innovation among 
small businesses. Encouraging the diffusion of excellence should therefore be of high policy 
priority.  One  of  the  advantages  of  these  schemes  is  that  they  do  not  only  demonstrate  new 
technologies  as  such  but  also  cover  the  efficient  use  of  new  technologies  in  a  real  world 
environment,  including  the  organisational  innovations  that  go  with  the  introduction  of  such 
technologies. 

– 

Diffusion  of 
encouraged.  

innovation 

through 

inter-company  contacts  should  be 

further 

Clusters are often indicated as one tool to foster the innovation potential and competitiveness. 
The  need  for  trans-national  cooperation  is  particularly  important  for  regional  technology 
cluster  initiatives.  Despite  the  important  trend toward  this  kind  of  policies  in  most  Member 
States,  these  initiatives  are  not  always  based  on  a  thorough  and  realistic  analysis  of  the 

34 

 
 
  
 
potential of the region to become a player on European and international scale. Furthermore, 
there is no evidence of any systematic evaluations of cluster policies. 

– 

– 

– 

The  creation  of  favourable  framework  conditions  to  improve  the  performance  of 
clusters should be supported. 

Designing regional cluster policies should be based on the needs of the region and 
its SMEs, yet avoiding an isolated or “inward looking” approach. 

The  development  of  appropriate  evaluation  tools  to  assess  the  achievements  and 
results  of  clusters  and  the  role  of  cluster  policies  in  their  development  is 
recommended. 

The balanced combination of cooperation and competition (“co-opetition”) is recognised as 
an essential aspect of any innovation culture. This balance takes different forms depending on 
sectoral  and  national  conditions.  A  positive  attitude  towards  cooperation,  both  among 
companies  and  between  companies  and  know-how  providers,  seems  to  be  unequally 
distributed in Europe. This is a cause of concern because the European Innovation Scoreboard 
shows that innovation cooperation correlates with the overall innovation performance. While 
the culture of cooperation in innovation seems to be well-rooted in the Nordic countries, this 
is much less the case in Southern European countries. The recent policy initiatives of Italy and 
Greece in this domain should therefore be pursued with high priority. 

– 

Policies to foster cooperation among companies and between companies and know-
how providers should be strengthened. 

The vast majority of national schemes to enhance co-operative research and innovation are 
still limited to national participants. Implicitly, this acts as an incentive for the participating 
enterprises to limit their scope of cooperation to national partners. This is counterproductive 
and  does  not  help  small  businesses  to  grasp  the  opportunities  of  internationalisation.  The 
German and Austrian schemes to facilitate trans-national cooperation are showing the way in 
the right direction. 

– 

Schemes  for  trans-national  co-operative  research  and  innovation  should  be 
encouraged. 

A  number  of  countries  implement  policies  aimed  at  increasing  the  mobility  of  human 
resources  between  SMEs  and  science  institutions.  The  benefits  of  such  mobility  schemes 
for  technology  based  start-ups  are  straightforward.  However,  it  is  less  obvious  for  more 
traditional businesses to draw equal benefits from these schemes. One of the problems might 
be that many mobility schemes are strictly one-way and more oriented towards the needs of 
young  graduates  or  doctoral  candidates  to  whom  they  provide  initial  employment.  The 
Commission has addressed this problem in the Communication “Researchers in the European 
Research Area: one profession, multiple careers”83 and proposes to launch a series of targeted 
initiatives  to  exchange  examples  of  good  practice  from  all  European  countries  and  to 
disseminate them widely. 

– 

83 

Mobility  schemes  offering  senior  engineers  and  scientists  a  part-time  job  as 
“visitors”  or  allowing  them  to  diversify  their  activities  at  the  end  of  their 
professional life could be useful for small businesses. 

COM(2003) 436 final, 18.7.2003. 

35 

 
 
  
 
                                                 
Small  businesses  are  often  confused  by  the  existence  of  competing  and  overlapping 
innovation  support  schemes  and  policies.  The  need  for  policy  streamlining  is  particularly 
acute in countries where regional and national innovation policies are developed in parallel. 
National  internet  portals  are  a  good  remedy  against  such  problems  but  there  is  a  need  for 
policy  coordination  already  at  the  design  stage.  Many  countries  seem  to  be  suffering  from 
unclear  or  overlapping  competencies  of  ministries  and  implementing  agencies.  Portugal 
tackled  this  problem  recently  with  the  creation  of  a  National  Innovation  Agency.  Other 
Member  States  are  working  on  appropriate  solutions  that  would  fit  their  national  traditions 
and  requirements.  The  Finnish  “Science  and  Technology  Policy  Council”  is  widely 
recognised as a model for policy coordination and stakeholders’ involvement. 

– 

Further  streamlining  of  innovation  support  schemes  and  innovation  policy  is 
recommended. 

There  is  room  for  improving  innovation  policies  to  address  the  situation  of  millions  of 
enterprises,  notably  small  businesses  that  are  not  necessarily  high-tech  but  need  to  adapt 
rapidly  to  changing  market  conditions.  Measures  to  help  SMEs  in  traditional  sectors,  also 
including  services,  to  manage  innovation,  buy  licences,  equipment  and  software,  absorb 
technologies,  and  measures  to  enhance  interconnections  of  clusters  from  different  locations 
are key to a more proactive contribution of innovation policies to competitiveness and growth. 

Innovation  policies  in  many  countries  still  lack  explicit,  accountable  and,  where  possible, 
quantifiable policy objectives. This is a major drawback for the evaluation of these policies. 
While  the  Commission  initiative  “Investing  in  research:  an  action  plan  for  Europe”84 
significantly  boosted  the  trend  towards  accountability  in  R&D  policy,  a  similar  drive  still 
needs  to  be  initiated  in  the  area  of  innovation  policy.  The  conditions  for  target  setting  in 
innovation  policy  will  be  enhanced  by  the  availability  of  SME  specific  figures  on  crucial 
aspects of innovation under the Community Innovation Survey. 

– 

Member  States  should  implement  the  request  of  the  European  Council  to  define 
national objectives in innovation. 

The Commission considers innovation and technology transfer an important political priority. 
The  main  contribution  at  EU  level  relates  to  trans-national  networking  and  policy 
benchmarking.  The  potential  for  trans-national  learning  is  particularly  strong  in  the  area  of 
policy design and policy evaluation. European quality guidelines for policy evaluations could 
be  of  help.  The  forthcoming  “Innovation  Action  Plan”  will  develop  in  greater  detail  the 
adequate response to the policy challenges outlined above. 

2.4. 

Develop stronger, more effective representation of small enterprises’ interests at 
Union and national level 

“We  will  complete  a  review  of  how  the  interests  of  small  businesses  are  represented  at  EU 
and national level, including through the social dialogue.” 

The two latest Charter implementation reports emphasised the need for better representation 
of  small  business’  interests  and  stressed  that  Member  States  and  the  Commission  have  to 
speak to small businesses first, to be able to think small. Otherwise, the voice of the bulk of 
European business is lost. 

84 

COM(2003) 226 final/2, 4.6.2003. 

36 

 
 
  
 
                                                 
Small businesses can be consulted in many different ways. Consultation may take place, for 
example,  directly,  via  business  organisations,  via  the  Internet,  through  sample  surveys, 
business  panels,  meetings,  expert  groups,  “envoys”85  or  specific  Ministries.  The  social 
dialogue also provides a framework for consultation, permitting the voice of small businesses 
to  be  heard  together  with  the  voice  of  the  employees  of  these  businesses.  Furthermore, 
consultation of the business community on initiatives and legislative proposals affecting small 
businesses can be arranged either on an obligatory or on a voluntary basis. 

It  is  of  utmost  importance  to  consult  businesses  on  new  legislative  proposals  and  on  the 
application of current rules in order to better identify their impact. One way of ensuring that 
legislation does not create unnecessary additional burdens and costs is to perform systematic 
and structured impact assessments for legislative proposals. Another way is to test draft legal 
acts in small businesses (business test panels). 

The stage of the decision-making process at which consultation takes place is also an issue of 
major importance. Consultation at a very late stage will not do much to contribute  to  better 
representation of small businesses’ interests. 

Another  important  issue  where  practices  differ  is  the  analysis  and  use  of  the  responses  or 
opinions from small businesses. Sometimes the results are published, and sometimes there is 
even an obligation to provide feedback to businesses. 

If contacts are via the business organisations, it is also important for the national authorities to 
know  how  the  internal  consultation  with  the  member  enterprises  of  these  business 
organisations functions. They need to know this to be able to assess how far these business 
organisations reflect the interests and concerns of small enterprises. 

Finally,  systematic  consultation  mechanisms  need  to  be  ensured  also  in  policies  other  than 
enterprise policy which affect small businesses, e.g. employment, social affairs, environment, 
trade, culture and education. 

Last year’s Charter report, as well as the report of the previous year, underlined that regular 
consultation  of  small  businesses  in  legislation  and  policy  making  remained  weak  across  the 
EU. Very few Member States had reported developments in this field. However, performance 
was found to be rather uneven and the report suggested that some countries were performing 
well  as  regards  systematic  consultation  of  small  businesses.  Member  States  were  urgently 
recommended  to  provide  opportunities  for  small  businesses  to  voice  their  interests  in 
legislation and policy making in a systematic way. 

2.4.1.  Recent developments 

Member States 

The main new measures to take SME opinions onboard since the previous implementation 
report are described below. 

Denmark  has  evaluated  its  business  test  panels  which  have  now  been  improved  in  order  to 
strengthen their ability to provide qualitative recommendations and to find alternative ways to 
regulate.  It  has  also  developed  checklists  for  lawmakers  to  raise  awareness  of  the  needs  of 
companies  at  an  earlier  stage  in  the  law  making  process  and  to  ensure  that  the  interests  of 
businesses have been taken into account.  

85 

Specific contact person or office in public administration looking after SME related issues. 

37 

 
 
  
 
                                                 
The  Greek  “e-Business  Forum”  is  a  permanent  mechanism  for  the  state  to  consult  the 
business  and  academic  community  on  e-business  issues.  The  forum  has  now  established  a 
website  at  www.ebusinessforum.gr.  The  website  provides  information  on  the  forum’s  work 
and on trends and developments in e-business in Greece and in other countries. 

France has further increased the dialogue between the public administration and the business 
organisations.  This  has  resulted  in  the  setting  of  common  objectives,  in  particular  in  the 
framework  agreement  signed  between  the  Department  of  Enterprises  (DECAS)  and  the 
Assemblée des Chambres Françaises de Commerce et d’Industrie. Furthermore, the Secretary 
of State for SMEs has opened an internet site allowing direct dialogue between himself and 
those interested in business creation. 

In Italy, consultation of SMEs has been consolidated in the decision making system for many 
years.  However,  three  new  measures  have  recently  been  set-up.  With  regard  to  industrial 
property,  an  expert  in  industrial  property  for  small  enterprises  has  been  appointed  at  the 
Italian  Patents  and  Trade  Marks  Office  (UIBM)  and  regular  meetings  with  business 
organisations  are  held.  In  addition,  the  chambers  of  commerce  have  introduced  area 
development  schemes  based  on  a  consultative  model  bringing  together  public  and  private 
bodies  and  local  manufacturers.  The  Ministry  of  Productive  Activities  has  also  organised  a 
group  to  bring  together  representatives  from  the  relevant  departments  and  small  business 
organisations to develop new support initiatives for SMEs. 

To  facilitate  contact  with  the  public  administration,  the  Netherlands  has  established  contact 
points for the two main business organisations in the Ministry of Economic Affairs. 

Sweden: Committees of Inquiry preparing legislation 

The  Swedish  Government  regularly  appoints  Committees  of  Inquiry  to  investigate 
complicated  issues,  on  the  basis  of  specific  terms  of  reference.  The  Committees  work 
independently and their findings are presented in a report. The Committees of Inquiry often 
organise their work to make sure that all parties concerned are involved, for instance in expert 
groups and hearings. The Committees are under obligation to perform an impact assessment if 
their proposals have a significant effect on small business. The impact assessment is included 
in the report. 

The  legal  proposal  or  policy  proposal  from  the  Committee  of  Inquiry  is  sent  out  by  the 
Government for consultation to all parties concerned, normally for three months. The written 
answers from the parties concerned are in most cases summarised into one document, which 
is  public  although  not  published  on  the  Internet.  The  written  answers  from  organisations, 
public bodies and private persons are also public. 

When  a  proposal  is  sent  out  for  consultation,  organisations  often  contact  the  responsible 
Ministry  directly,  asking  for  meetings  with  politicians  and  civil  servants.  Such  requests  are 
almost  always  granted.  On  some  occasions,  the  Government  also  uses  hearings,  often  in 
addition to the circulation of documents. 

On  the  basis  of  the  results  of  the  consultation  and  the  report,  the  Government  prepares  its 
legal  proposal,  which  is  submitted  to  the  Parliament.  The  proposal  is  accompanied  by  the 
preparatory  texts  to  the  proposal.  The  result  of  consultation  is  published  in  this  text, 
presenting  all  parties’  views  together  with  a reasoning  of  why  some  views  have  been  taken 
into account and others have not. 

38 

 
 
  
 
In the United Kingdom, the Department of Trade and Industry has introduced an element of 
corporate leadership through the setting up of a Strategy and an Executive Board, as well as 
Group  Boards  reflecting  the  main  strategic  areas  of  the  department.  A  team  of  independent 
members  drawn  from  business,  union  and  academic  backgrounds  serve  on  these  boards, 
offering independent expert advice on how the department can work more effectively. 

The Netherlands and the UK: Exchange programmes between officials and SMEs 

The Dutch Ministry of Economic Affairs started, in January 2003, together with two business 
organisations and two employers’ organisations a traineeship programme in which the policy 
advisors of the Ministry spend one or two weeks in an enterprise. The aims of the programme 
are to raise the policy advisors’ awareness of the impact of policy initiatives to the business 
reality, to give the companies a better idea of how the government works and to provide the 
companies an opportunity to provide input at an early stage of policymaking. 

In the United Kingdom, all senior officials in the Department of Trade and Industry are, since 
2003, required to spend at least one week each year in a business. Middle ranking officials are 
also encouraged to spend at least one week in a business during each posting. Most officials 
have chosen to spend time with an SME. 

Commission 

Commission: SME Envoy 

Listening more to SMEs was the main motive for the designation of an SME Envoy, within 
the Commission’s Enterprise Directorate General, two years ago. Indeed, the role of the SME 
Envoy is to better integrate the SME dimension in EU policies, listening to SMEs and their 
representatives and highlighting their concerns to the different Commission services. 

Progressively,  the  SME  Envoy  has  acquired  good  visibility,  and  this  function  is  now  well 
known  in  the  SME  business  community.  The  SME  Envoy  acts  as  a  proactive  interface 
between  SMEs  and  the  Commission,  through  regular  contacts  with  European  and  national 
business  organisations.  Further  development  of  contacts  with  SME  business  organisations, 
entrepreneurs  themselves,  and  other  stakeholders  are  taking  place,  in  particular  in  the 
acceding countries. 

These  contacts  are  useful  for  considering  the  specific  interests  and  needs  of  SMEs  in  EU 
policies,  and  they  will  be  pursued.  Among  the  issues  that  arise  most  often  are  access  to 
finance, skills shortages, regulatory burdens, quality of business support and the functioning 
of  the  internal  market.  Some  other  concerns  are  even  more  specific,  e.g.  in  relation  to  a 
specific  directive  or  regulation,  and  have  implied  focused  contacts  with  other  Commission 
services.  This  is,  for  example,  the  case  for  the  proposal  on  the  registration,  evaluation  and 
authorisation of chemicals. Employment legislation is another example with the review of the 
working time directive and the protection of workers’ personal data. 

At  the  same  time,  the  SME  Envoy  has  looked  at  a  number  of  EU  programmes  particularly 
relevant  to  SMEs,  with  the  objective  of  maximising  SMEs’  participation.  Involvement  has 
been particularly important as regards research and regional policies. 

Cooperation with other Commission services has  been  increased through the constitution of 
an SME network inside the Commission. This inter-service network has proved itself to be a 
useful  tool  to  increase  the  awareness  of  SME  needs  inside  the  Commission  and  to  improve 
coordination on SME issues. The SME network is progressively becoming the main tool for 

39 

 
 
  
 
coordination  of  SME  policy  in  the  Commission,  and  contributing  to  the  development  of  an 
‘SME friendly’ approach for all relevant EU programmes and initiatives. 

The SME Envoy also contributed to improving the visibility of information for SMEs through 
publications, presence at SME events, press articles, etc. He has dealt with many queries from 
SMEs, trying to provide them with specific information and, when needed, to facilitate their 
contacts with other Commission Directorates-General. 

A  Best  Procedure  project  on  Consultation  of  Stakeholders  in  the  shaping  of  small 
business  policy  at  national  and  regional  level  was  launched  in  autumn  2003.  The  project 
will  examine  the  current  situation,  including  how  the  consultation  is  organised  in  different 
countries.  Indicators  for  monitoring  of  progress  will  be  developed  and  good  practices 
identified.  Recommendations  and  policy  measures  for  increasing  the  involvement  of 
stakeholders  in  the  consultation  process  will  also  be  proposed.  Final  results  are  expected  in 
early 2005. 

Following the Commission’s commitment in the Better Regulation Action Plan of June 2002 
(see heading 3 of the Annex) to improve stakeholders’ participation in its consultations, the 
Commission adopted in December 2002 the Communication “Towards a reinforced culture 
of  consultation  and  dialogue  –  General  principles  and  minimum  standards  for 
consultation  of  interested  parties  by  the  Commission”86.  The  minimum  standards  state, 
among other things, that when defining the target groups for a consultation, the Commission 
should  take  into  account  the  need  for  a  proper  balance  between  the  representatives  of  large 
and  small  organisations  or  companies  and  also  strive  to  allow  at  least  8  weeks  for  written 
public consultations. Accessible via the portal “Your Voice in Europe”87, the Commission’s 
single  access  point  for  all  public  consultations,  there  have  been  (or  are  currently  running) 
some 30 open public consultations since January 2003. 

In  February  2003,  the  Enterprise  Directorate-General  of  the  Commission  upgraded  its 
pioneering  stakeholder  consultation  web  pages  (running  since  July  2001)  to  include  all 
consultations  related  to  enterprise  policy,  as  well  as  all  regular  enterprise  dialogues, 
stakeholder  groups  and  meetings.  It  also  offers  a  link  to  a  web  page  listing  the  major  EU 
events  of  interest  to  businesses  and  professional  organisations.  The  new  multilingual  entry 
page  called  “Enterprise  DG  in  dialogue”88  also  gives  direct  access  to  “Your  voice  in 
Europe”. As a result businesses can now easily access, via these sites, all consultations related 
to policy actions likely to affect them. This should particularly benefit small enterprises that 
normally have less time and resources to inform themselves of such initiatives than do larger 
firms. 

The Interactive Policy Making (IPM) initiative89 consists of two internet-based instruments 
which  enable  small  enterprises,  amongst  others,  to  bring  their  needs,  opinions,  views  and 
problems  to  the  attention  of  policy-makers.  The  IPM  Feedback  Mechanism  is  a  large 
database used by the Commission and the encoding intermediaries, Euro Info Centres (EICs) 
being the intermediaries for SME related matters. Cases are collected on a regular basis and in 
a structured way, in order to obtain concrete knowledge of existing problems and difficulties 
that stakeholders experience when exercising their Internal Market rights in the widest sense. 
During  2002,  major  technical  and  structural  improvements  were  made  and  the  networks 

86 
87 
88 
89 

COM(2002) 704 final, 11.12.2002. 
http://europa.eu.int/yourvoice/index_en.htm 
http://europa.eu.int/comm/enterprise/consultations/index.htm 
http://europa.eu.int/yourvoice/ipm/ 

40 

 
 
  
 
                                                 
encoding the cases were enlarged. From January to early September 2003, 1077 cases were 
reported  by  small  enterprises90.  Regular  detailed  analysis  on  specific  topics  began  in  July 
2003,  the  first  topic  being  the  area  of  mutual  recognition  of  non-harmonised  products. 
Subsequent  analyses  will  include  difficulties  in  e-business  and  e-commerce.  During  2002, 
some EICs organised special conferences and published papers or leaflets in order to address 
an information deficit that became apparent through the mechanism. In October 2003, the EIC 
Annual  Conference  also  discussed  how  to  better  use  the  results.  Collaboration  between  the 
EICs, their host structures, the Member States and the Commission can improve the position 
of small enterprises. The Commission regularly checks and monitors the use of the results and 
also elaborates models for best practice. Through the use of the second IPM instrument, the 
IPM  online  consultations,  all  Commission  services  can  create  structured,  Internet-based 
questionnaires. A structured questionnaire enables Commission services to obtain up-to-date 
and statistically valid consultation results. The aim of this new type of consultation is to work 
more  efficiently,  quickly  and  easily  with  the  opinions  collected.  Both  tools  are  promoted 
through “Your Voice in Europe”. 

In May 2003, the Commission appointed new members for the Professional Chamber of the 
Enterprise Policy group (EPG), a high-level advisory board with experts from the business 
community – mainly SMEs, trade unions and academics. The chamber was enlarged from 35 
to  45  members  and  now  includes  11  experts  from  the  acceding  countries.  Since 
November 2000,  the  two  sections  of  the  EPG  (Professional  Chamber  and  Directors-General 
responsible for Industry and SMEs in the Member States) advise the Commission on all major 
enterprise policy initiatives. The Commission also continued to hold regular meetings with 
European  business  organisations,  with  particular  emphasis  on  those  who  represent  SMEs 
and have a horizontal approach. 

The newly established European  Business  Test Panel (EBTP) has  been created to consult 
up to 3 000 businesses drawn from six major sectors91 in the national economies and includes 
1 288  small  enterprises.  The  EBTP  complements  other  forms  of  consultation,  having  the 
distinct advantages of providing quick access to business opinions and being representative of 
a pan-European view. 

In  2003,  in  the  framework  of  the  Pilot  Action  of  Excellence  on  Innovative  Start-ups, 
PAXIS92,  the SUN&SUP  measure  was  launched.  This  is  a  double  network  representing  the 
European  start-up  community,  one  network  consisting  of  start-up  representatives  and  the 
other  of  start-up  service  providers.  The  two  networks  will  work  together  to  improve  key 
services at the European level. They will also provide the Commission with recommendations 
on the establishment of a “voice of the European start-ups”. 

The contractor charged by the Commission services with providing information to SMEs and 
crafts  businesses  on  standards,  certification,  quality  and  norms  and  with  organising  SMEs’ 
participation  in  the  standardisation  bodies  at  national,  European  and  international  level 

90 

91 

92 

Including self-employed; corresponding to 23% of the total number of cases reported by enterprises of 
all sizes. In the period 2000-2002, some 23 900 cases from small enterprises, including self-employed, 
were collected, corresponding to about 65% of the total number of cases reported by enterprises of all 
sizes. 
Manufacturing,  construction,  wholesale  and  retail  trades,  transport  and  communication,  financial 
intermediation and other services. 
http://www.cordis.lu/paxis/ 

41 

 
 
  
 
                                                 
will continue the work until July 2004, following the renewal of the service contract made in 
200393. 

Some  of  the  many  other  examples  of  Commission  services’  consultation  involving  small 
businesses  include  the  public  consultation  organised  in  October  2003  as  part  the  mid-term 
review of the eEurope 2005 Action Plan94, and ad hoc consultations on proposals concerning 
taxation, such as the consultation on the “Home State Taxation” pilot scheme for SMEs (see 
heading 7 of the Annex)95. 

The  European  Association  of  Craft,  Small  and  Medium-sized  Enterprises,  UEAPME96,  is 
listed  in  the  annex  to  the  2002  Commission  Communication  on  the  European  Social 
Dialogue97 as one of the organisations to be consulted under the terms of Article 138 of the 
Treaty. In the bipartite dialogue, the concerns of Europe’s SMEs have continued to be taken 
into  account  during  2003,  through  the  inclusion  of  UEAPME  to  the  European  inter-
professional  social  dialogue.  As  a  signatory  party  to  the  inter-professional  social  partners’ 
joint  multi-annual  work  programme  2003-200598,  UEAPME  has  played  a  full  role  in  the 
implementation of the measures foreseen for 2003, including the updated Joint Declaration on 
Workers with Disabilities, the first annual report on the implementation of the framework of 
actions  for  the  lifelong  development  of  competencies  and  qualifications,  the  seminars  on 
mobility, stress and gender equality, the work on restructuring which resulted in a joint text 
submitted in October and the negotiations on stress at work which began in September. Also 
at  sectoral  level,  representatives  of  SMEs  are  involved  in  the  social  dialogue.  As  to  the 
tripartite  dialogue,  UEAPME  and  representatives  of  its  member  organisations  have 
participated as part of the employers’ delegation in the Tripartite Social Summit. UEAPME 
has also continued to take part in the concertation processes on employment, macro-economic 
issues,  employment  and  education  and  training  at  European  level.  In  addition,  a  number  of 
projects funded by the Commission in the area of “Industrial relations and social dialogue” 
are  being  promoted  by  or  involve  the  participation  of  small  enterprise  organisations  at 
national and regional level. 

2.4.2.  Conclusions and recommendations 

Consultation of small businesses is an area where the previous Charter implementation reports 
have  found  a  dividing  line  between  those  countries  that  systematically  consult  small 
businesses  and  those  that  do  not.  While  the  number  of  new  initiatives  taken  in  this  area  is 
limited, some encouraging developments have nevertheless been observed in the last year. 
For example, the exchange programmes between SMEs and public administration officials in 
the Netherlands and in the United Kingdom provide a rather innovative model. Furthermore, 
the  recently  established  National  Competitiveness  and  Development  Council  in  Greece  and 
the enhanced dialogue with business organisations in France demonstrate increasing efforts in 
this area. 

On the whole, the general descriptions on small business consultation in the national Charter 
implementation  reports  show  that  several  countries  have  well-established  systems  in  place. 

93 

94 

95 
96 
97 
98 

This applies to a limited number of standards; 
http://europa.eu.int/comm/enterprise/entrepreneurship/craft/craft-priorities/craft-standardisation.htm. 
Communication  from  the  Commission,  “eEurope  2005:  An  information  society  for  all”,  COM(2002) 
263 final, 28.5.2002, www.europa.eu.int/information_society/eeurope 
http://europa.eu.int/comm/taxation_customs/taxation/consultations/home_state_sme.htm 
A body representing some 7 million SMEs and craft enterprises across the EU. 
“The European Social Dialogue, a force for innovation and change”, COM(2002) 341 final, 26.6.2002. 
Available at http://europa.eu.int/comm/employment_social/soc-dial/social/index_en.htm. 

42 

 
 
  
 
                                                 
There is a wide array of consultation mechanisms used by the Member States and Norway 
ranging  from  mandatory  to  informal  consultation,  from  regular  contacts  to  consultation  on 
specific  issues  and  from  permanent  structures  to  specific  meetings.  Observatories  or  other 
systems  of  regular  collection  of  SME  opinions,  as  mentioned  by  Greece,  Spain,  the 
Netherlands  and  Austria  this  year,  also  seem  quite  common.  One  way  to  facilitate  contacts 
between public administrations and SMEs is to appoint a specific SME Envoy. Germany with 
its Federal Government representative for SMEs still appears to be the only country that has 
established one. 

The  consultation  mechanisms  vary  from  country  to  country  according  to  national 
circumstances.  On  one  hand,  the  regulated  mandatory  permanent  structures,  e.g.  at  federal 
level in Belgium and Austria, seem to render good results, but they might be difficult to copy 
into other countries. On the other hand, the strong informal consultations, e.g. in Ireland, also 
seem to be effective for feeding SMEs’ concerns into the political decision-making process. 
Only  by  allowing  businesses  to  have  a  say  in  policy  making  early  on  is  it  possible  to 
genuinely ensure that new policies are useful for small businesses. 

One of the key actions of the Entrepreneurship Action Plan, the Best Procedure project on 
Consultation of Stakeholders in the shaping of small business policy at national and regional 
level, will allow a more thorough analysis of the situation in the different countries. 

– 

– 

– 

– 

Regular  meetings  between  specific  SME  contact  points  or  ministries  and  business 
organisations  are  needed  to  maintain  a  constant  exchange  of  information  and 
receive input. This should be combined with specialised hearings, internet or other 
consultations or expert groups. 

Consultations should take place at the earliest possible stage. 

The identification of general opinion trends among small enterprises and conducting 
statistically meaningful surveys on concrete political issues are recommended. 

Member States and Norway are invited to contribute actively to the Best Procedure 
project  on  Consultation  of  Stakeholders  in  the  shaping  of  small  business  policy  at 
national and regional level. 

Many countries report on having regular meetings with business organisations. However, one 
should  bear  in  mind  that  such  meetings  are  only  useful  if  there  is  a  two-way  flow  of 
information between the business representatives and the public authorities. Ideally, business 
organisations should also be able to participate in the setting of the agendas of these meetings 
in  order  to  avoid  a  too  limited  choice  of  issues  to  be  discussed.  Otherwise,  issues  of  major 
concern for businesses but which are not necessarily seen as something on which to consult 
businesses,  for  instance  trade  issues,  environmental  issues,  education,  services  of  general 
interest or infrastructure questions, may be left out of the agenda. 

– 

– 

Meetings with business organisations should allow for a proper dialogue. 

Business organisations should have influence on the topics to be discussed. 

In order to ensure substantial input from enterprises and that this input is properly taken into 
account,  the  number  and  scope  of  consultations  must  be  matched  by  sufficient  analytical 
capacities  in  the  public  administration.  The  publication  of  opinions  of  the  business 
community or the results of consultations or other tools such as regulatory impact assessments 

43 

 
 
  
 
contributes to transparency and ensures that the opinions are actually taken onboard. This is 
already the case in some countries such as Luxembourg, Finland, Sweden and Norway. 

– 

– 

Public  administrations  should  ensure  that  they  have  sufficient  human  resources  to 
analyse the results of the consultations. 

Publication of the results of consultations is recommended. 

The Commission puts a strong emphasis on improving its dialogue with small businesses. The 
adoption  of  the  general  principles  and  minimum  standards  for  consultation  is  a  step  in  this 
direction.  The  “Entrepreneurship  Action  Plan”  with  its  “Listening  to  SMEs”  key  action 
foresees further ambitious work to this end. 

44 

 
 
  
 
SUMMARY OF NATIONAL REPORTS AND COMMISSION ACTIVITIES IN THE OTHER CHARTER 
AREAS 

ANNEX 

1. 

EDUCATION AND TRAINING FOR ENTREPRENEURSHIP 

“Europe  will  nurture  entrepreneurial  spirit  and  new  skills  from  an  early  age.  General 
knowledge  about  business  and  entrepreneurship  needs  to  be  taught  at  all  school  levels. 
Specific  business-related  modules  should  be  made  an  essential  ingredient  of  education 
schemes at secondary level and at colleges and universities. 

We  will  encourage  and  promote  youngsters’  entrepreneurial  endeavours,  and  develop 
appropriate training schemes for managers in small enterprises.” 

Indicators and targets 

The United Kingdom has set the target of raising the number of people considering going into 
business.  The final  report  of  the  new  project on education and training for entrepreneurship 
(see  below  in  the  section  on  Commission  activities),  coordinated  by  the  Commission, 
proposes a number of indicators suitable for targeting. 

Member States 

Most  of  the  new  measures  in  secondary  education  involve  closer  cooperation  with  local 
enterprises. Denmark is encouraging partnerships with enterprises on a contractual basis, e.g. 
for  concrete  projects  in  connection  with  the  final  exams,  in-service  training  and  job-swap 
opportunities  for  teachers.  France  has  launched  a  School-Business  Week  to  develop 
cooperation  between  enterprises,  the  educational  world  and  pupils.  In  Ireland,  an  enterprise 
education  initiative  has  been  developed  by  Celtic  Enterprises99  to  allow  students  an 
opportunity to experience entrepreneurship at first hand and, in Italy, the new “Law reforming 
the education and training system” enables secondary level students above the age of 15 to 
complete second-cycle studies as part of a work-study scheme. Finally, Norway has launched 
a new programme called “Pupils Enterprises” aimed at 13-16 year olds in lower secondary 
schools.  

Other initiatives at secondary level include the Austrian “Package of teaching materials’ for 
entrepreneurship education” which will be made available to all Austrian secondary schools 
in the 2003/2004 academic year both as a hard copy and as a CD-ROM. The United Kingdom 
is  making  £60  million  (ca  €85  million)  available  to  secondary  schools  in  2005-2006  to 
support  the  delivery  of  enterprise  learning.  In  addition,  Enterprise  Advisers  will  work  with 
1000 secondary schools in deprived areas to help deliver the enterprise entitlement, to provide 
advice  to  head  teachers  on  improving  links  with  business,  and  to  encourage  the  use  of 
enterprise techniques in school management. 

Concerning secondary education at regional level, the Flemish and the French communities 
in  Belgium  have  introduced  entrepreneurship  in  secondary  education.  Moreover,  the 

99 

A  partnership  set  up  between  County  Enterprise  Boards  in  the  South  East  and  development 
organisations in West Wales. 

45 

 
 
  
 
                                                 
autonomous region of Asturias in Spain has launched the “Empresa joven europea” (Young 
European Enterprise) educational programme in the 2003-2004 academic year. 

Regarding  university  level,  Belgium  has  established  a  Chair  in  Entrepreneurship  at  the 
Solvay  Business  School  to  foster  entrepreneurship  among  future  graduates.  The  Danish 
Action  Plan  for  Entrepreneurship  proposes  to  establish  an  MBA  in  entrepreneurship  and 
innovation and an education for researchers of entrepreneurship and innovation management. 
In  addition,  Denmark  has  launched  an  “Entrepreneurial  Barometer”  to  monitor  the 
entrepreneurial activity and awareness among students. Based on the results, a reward is given 
to the entrepreneurial university of the year. In the United Kingdom, the “Enhancing Student 
Employability  Coordination  Team”  has  been  set  up  to  encourage  the  embedding  of  work-
related  skills  more  widely  across  higher  education.  The  Norwegian  School  of 
Entrepreneurship is developing a two-year Master’s degree in Entrepreneurship.  

Many new initiatives have been taken to encourage commercialisation of business ideas and 
better  links  with  businesses  at  university  level.  Belgium  has  created  an  Entrepreneurship 
Centre at the Université Libre de Bruxelles to support and promote the creation of companies 
by members of the university community and by identifying “dormant” projects run by teams 
of  research  workers  and  students.  The  Danish  government  supports  partnerships  between 
universities  and  organisations  promoting  entrepreneurship.  Ireland  has  worked  intensively 
during  the  last  year  with  the  Third  Level  Educational  sector  to  improve  the  systems  and 
procedures  by  which  research  is  commercialised.  In  particular,  it  has  supported  academic 
entrepreneurship  courses  in  two  colleges.  In  addition,  a  national  IBEC  Business  Education 
Links  Scheme  is  under  way  in  over  100  schools  in  Ireland.  The  programme  strengthens  the 
links  between  businesses  and  second  level  schools  to  provide  students  with  learning 
experiences  that  prepare  them  to  play  an  active  role  in  the  world  of  work  and  enterprise. 
Finally, Italy has introduced two-year postgraduate courses applying a new teaching method 
of business simulation at schools. The courses are offered by the schools in cooperation with 
local businesses. 

At  regional  level  in  the  United  Kingdom,  the  “Young  Enterprise  Graduate  Programme”  is 
being introduced into 13 further education and higher education institutions across Wales to 
enable  students  to  experience  setting  up  and  running  their  own  company.  It  is  designed  to 
develop  attitudes  and  skills  necessary  for  personal  success, 
learning  and 
employability  and  to  enable  students  to  consider  self-employment  and  business  creation  as 
future  career  options.  To date 56 students  have set  up  15 companies in  8 institutions across 
Wales. 

lifelong 

Some  of  the  new  measures  cover  all  levels  of  education.  Denmark  has  launched  an  Action 
Plan  on  entrepreneurship  which  includes  measures  for  education  and  training  at  all  levels. 
The French Secretary of State for SMEs and the Minister for National Education have signed 
a  protocol  agreement  to  develop  entrepreneurial  spirit  in  education.  Spain  has  introduced 
entrepreneurship as an objective to be achieved in every single stage of education. In addition, 
a  series  of  supporting  materials  have  been  prepared.  These  include  a  teacher’s  guide  and  a 
pack of material called “Laboratorio empresarial” (Business Laboratory), which teaches in a 
simple and fun way how the market economy operates. At regional level, Wales in the United 
Kingdom has established an Action Plan for Entrepreneurship which aims at inspiring a new 
generation  of  entrepreneurs.  Northern  Ireland  has  also  set  up  an  Entrepreneurship  and 
Education Action Plan which aims at integrating entrepreneurship and education. 

During the past year, some new entrepreneurship competitions have been launched. Greece 
has  introduced  an  Annual  National  Competition  for  Innovative  and  Pioneering  Business 

46 

 
 
  
 
Plans. The competition is targeted at students from vocational training institutes, universities 
and  technical  colleges.  Since  2002,  Austria’s  simulated  business  enterprises  have  had  the 
opportunity of taking part in an annual quality competition and of acquiring the ÜFA quality 
symbol. In the United Kingdom, BBC’s Tomorrow’s World Live Show in conjunction with 
the  Young  Foresight  initiative100  ran  a  national  competition  for  young  people  to  design 
products for the future. Over 300 schools participated and some of the designs have already 
been patented and are expected to hit the market in 2004. 

With  regard  to  information  and  research  on  entrepreneurship  education,  as  part  of  the 
Action Plan “Plan  4x4  pour  entreprendre”,  the  Walloon  region  of  Belgium  has  established 
the  “FREE  Foundation”  to  carry  out  entrepreneurship  research  and  to  coordinate  all  the 
actions  in  the  Action  Plan.  Denmark  is  planning  to  set  up  an  Internet  based  portal  for 
entrepreneurship  in  education.  It  will  gather  examples  of  good  practice  and  other  relevant 
material as well as provide a discussion forum for teachers. Denmark is also running a road 
show  consisting  of  multimedia  presentations  and  workshops  to  raise  awareness  at  upper 
secondary  level.  As  part  of  its  one-stop-shops  for  young  people  (Youth  Entrepreneurship 
Counters),  Greece  is  setting  up  a  Young  Entrepreneurs  Observatory  (www.paratiritirio.gr). 
The Observatory will carry out research on entrepreneurship to be able to provide guidance to 
young people interested in starting their own business. 

France  and 
entrepreneurship 

the  Netherlands:  Promoting  good  practices 

in  education 

for 

The consultative Commission on ‘Entrepreneurship and Education’ in the Netherlands, set up 
in 2000, aims to promote pilot projects and to collect good examples that can be easily copied 
by other educational institutions, from primary to university level. Financial support has been 
provided by the Ministry of Economic Affairs for the development of learning methods and 
materials, and for other activities such as seminars and teachers’ training. In the period 2000-
2002,  more  than  130  entrepreneurship  projects  were  subsidised,  at  all  education  levels.  The 
current strategy is focussed on how to spread these pilot projects to other schools. New in this 
approach is that the national authorities work together with the project leaders, since they are 
the ones who know best about the work in practice and the organisation needed, for example 
how to reach concrete integration in the curricula and how to get commitment of other parties, 
including businesses. Practical guides for the schools are being prepared. There will also be a 
‘marketing’ step, so that the projects can be disseminated as ready- or tailor-made modules or 
programmes.  In  the  first  phase,  good  practices are  being  promoted  in  vocational  and  higher 
education. Depending on the results achieved, the same exercise will take place for primary 
and secondary education in 2004. 

In France, the Observatoire des Pratiques Pédagogiques en Entrepreneuriat (Observatory of 
Educational Practices, OPPE) was set up in 2001 on the initiative of the Ministry of National 
Education, Ministry of Research and the Ministry of Economic Affairs, Finance and Industry, 
with the help of the Agency for business creation (APCE). It aims to record and promote the 
measures  carried  out  and  the  main  pedagogical  tools  used  at  all  levels  of  the  educational 
system  in  the  field  of  entrepreneurship  and  to  promote  the  exchange  of  good  practice  and 
create synergies between the various players. The focal point of the Observatory’s work is a 
national database, which in time will include all levels of the education and training system: 
primary,  secondary,  higher  and  continuing  education.  In  April  2002,  an  Internet  site  was 

100 

An  initiative  to  help  13-14  year-olds  design  and  develop  a  product  of  the  future  with  the  support  of 
trained teachers and over 1000 mentors from the business community. 

47 

 
 
  
 
                                                 
launched, http://www.entrepreneuriat.net, providing free access to the database and a number 
of resources concerning training in entrepreneurship. The site, which was visited 41 000 times 
between  April  and  December  2002  is  expected  to  record  150  000  visits  in  2003.  The 
Observatory  has  focused  on  cataloguing  measures  carried  out  in  higher  education  and 
implementing, together with the Ministry of Education, the survey on secondary education. It 
has  further  focused  on  improving  the  Internet  site,  disseminating  the  work  carried  out  and 
drawing up methodologies for the assessment of measures. 

Commission 

A  follow-up  to  the  2001  Best  Procedure  project  on  education  and  training  for 
entrepreneurship101  has  been  implemented  during  2002-2003,  aiming  in  particular  to 
identify a possible methodology for achieving concrete and measurable progress in this area. 
The final report highlights policy measures and strategies that will make it possible to move 
forward  and  proposes  actions  to  be  implemented  at  various  levels  in  a  European  context. 
Conclusions stress that concrete action should start from well structured cooperation between 
different departments in the national administrations, and that measures of active promotion 
and support are needed as schools and teachers have a large degree of autonomy. 

In the meantime, a new Best Procedure project has been launched, focusing on programmes 
in  secondary  school  based  on  students  running  mini-companies.  These  schemes  are  well 
developed in a number of countries and can offer an important contribution to the promotion 
of  entrepreneurial  abilities  in  young  people.  Final  results  of  the  project  will  be  available  in 
early 2005. 

The  work  programme  on  the  future  objectives  for  education  and  training  systems  in 
Europe102  calls  for  education  and  training  to  provide  an  understanding  of  the  value  of 
enterprise as well as models of successful entrepreneurship. A working group has proposed to 
include entrepreneurship in eight domains of key competencies considered necessary for all in 
the  knowledge  based  society.  It  has  adopted  a  broad  definition  of  education  for 
entrepreneurial  attitudes  and  skills,  covering  the  development  of  certain  personal  qualities 
such  as  the  ability  to  manage  one’s  own  learning  and  strong  interpersonal  and  social  skills, 
and has emphasised the need for a growing awareness of entrepreneurship as a possible career 
option. 

The “Entrepreneurship Education Toolkit”, developed by the European Private Equity and 
Venture  Capital  Association  (EVCA)  with  the  support  of  the  Commission’s  Gate2Growth 
Initiative (see heading 2.2.1), continues to be disseminated in institutions for higher education 
and,  with  the  support  of  the  Commission,  is  being  translated  into  Dutch,  Italian,  Spanish, 
French and German. 

The  project  on  management  capacity  building,  launched  in  2002  with  participation  from 
both  Member  States  and  candidate  countries,  is  expected  to  produce  a  final  report  in  early 
2004, taking stock of the situation regarding the degree of take-up of management training by 
SMEs and heads of SMEs. The findings will serve as an input to the policy-making of adult 
training for entrepreneurship. 

101 
102 

http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/training_education/index.htm 
Council document 6365/02, 20 February 2002. The work programme was welcomed by the European 
Council in Barcelona on 15-16 March 2002. 

48 

 
 
  
 
                                                 
In  2003,  the  Gate2Growth  Finance  Academia103  was  launched  with  the  support  of  the 
Commission.  This  network  aims  at  building  and  supporting  a  truly  open  pan-European 
network of academics, researchers and scholars and to become the reference in Europe for the 
support, generation and dissemination of academic research and teaching at the cross-links of 
entrepreneurship, innovation and finance. 

2. 

CHEAPER AND FASTER START-UP 

“The costs of companies’ start-up should evolve towards the most competitive in the world. 
Countries  with  the  longest  delays  and  most  burdensome  procedures  for  approving  new 
companies should be encouraged to catch up with the fastest. Online access for registration 
should be increased.” 

Indicators and targets 

Spain, Ireland and Portugal have set quantitative targets to decrease the time needed to set up 
a company. Spain aims to reduce start-up time by 50% by 2006 to 42 days, Ireland aimed for 
3  days  by  mid  2003  and  Portugal  for  a  50%  reduction  by  2003  to  some  5-12  days.  In 
addition, Portugal wants to decrease the time needed to obtain an industry license by 50%, to 
75 days, by 2004. 

Member States 

To reduce the costs for business start-ups, Germany exempts start-ups from subscriptions to 
the  Chambers  of  Commerce  and  Industry  and  to  the  Chambers  of  Crafts  and  Trade  for  the 
companies’ first four years of existence. 

Since  the  previous  report,  several  countries  have  introduced  measures  to  simplify  the 
procedures  and  reduce  the  time  for  starting  up  a  business.  Belgium  has  created  the 
“Banque-Carrefour des Entreprises” (BCE)/”Kruispuntbank voor Ondernemingen” (KBO), a 
central  business  registration  body,  and  one-stop-shops  for  business  registration.  The 
BCE/KBO receives information from the one-stop-shops and stores it centrally for the use of 
all  services  of  the  public  administration.  It  also  gives  each  company  a  single  identification 
number.  The  creation  of  the  BCE/KBO,  the  one-stop-shops  and  the  single  identification 
number will reduce the time to set-up a company registration and minimise the administrative 
formalities. 

The Danish Central Customs and Tax Administration has announced that as of 1 May 2003 
the  processing  time  regarding  registration  and amendments  should  last  a  maximum  of  three 
working  days.  It  has  also  developed  an  interactive  handbook  containing  information  about 
registering called “Registreringsguide” at www.toldskat.dk. 

Germany has introduced the initiative “Bürokratieabbau” (Bureaucracy Reduction Initiative) 
which among others, aims at shortening the registration time for start-ups. It is also amending 
the Crafts Code so that for “simple activities” the master craftsman’s diploma or certificate is 
no  longer  required104.  Greece  has  introduced  several  improvements  to  facilitate  start-ups. 

103 
104 

http://www.gate2growth.com/FinanceAcademia.asp 
The German Confederation of Skilled Crafts (ZDH) in their written comments expressed strong doubts 
about the effects of the amendment of the Crafts Code. They were also of the view that, although an 
ambitious  proposal  at  the  outset,  in  the  end  the  Small  Business  Act  of  which  the  amendment  of  the 
Crafts Code forms a part, has marginal effects only, affecting a limited proportion of small enterprises. 

49 

 
 
  
 
                                                 
Businesses only need to file one declaration for starting activities and the time for starting-up 
has been reduced from one week or one month depending on the type of business to half an 
hour. 

Spain: Drastic reductions in the time to register a company and online registration 

The  “Nueva  Empresa”  (New  Enterprise)  project,  www.circe.es/portal,  launched  by  the 
Spanish Directorate-General for SME Policy, includes a legal status for a new type of limited 
liability company, specifically adapted to very small enterprises. Available since 1 June 2003, 
it ensures that personal and business assets remain separate. The project includes simplified 
administrative  procedures,  a  simplified  bookkeeping  system,  as  well  as  an  advantageous 
financial  and  tax  framework.  In  addition,  advice  and  services  will  be  provided  to 
entrepreneurs  through  the  Information  Centre  and  Business  Creation  Network  (CIRCE), 
comprising of a network of Advisory and Procedure Initiation Points (PAIT). 

An electronic document, the Single Electronic Document (DUE), includes all the elements for 
setting up companies under the New Enterprise status. DUE allows for new businesses to be 
created in 48 hours and considerably reduces the number of forms to be filled in. Businesses 
can  currently  be  created  electronically,  by  accessing  CIRCE’s  Electronic  Processing 
System105, in the pilot autonomous regions of Madrid, Murcia and Valencia. It is foreseen to 
extend  the  CIRCE  network  to  the  other  autonomous  regions  by  signing  collaboration 
agreements  with  various  organisations  (Development  Agencies,  Business  Associations, 
Chambers of Commerce, etc.). 

According  to  information  from  Spain,  the  average  time  taken  between  the  first  visit  to  the 
PAIT and completion of the electronic process, including prior advice and actual processing, 
has  been  8.53  days  (including  weekends  and  public  holidays)  and  the  processing  time  from 
the  appointment  with  the  Notary  to  registration  in  the  Trade  Register  has  been  57.6  hours 
(excluding weekends and public holidays). Furthermore, through the personal, non-electronic 
procedure available since 2 June 2003, 1 181 company name reservation certificates had been 
issued with 534 companies registering by 23 October 2003. The average time taken between 
the  issue  of  the  company  name  certificate  and  the  registration  of  the  company  in  the 
Provincial Trade Register is 15 days, compared with the 30 to 60 days in the past. 

According to this information, the Spanish target to reduce start-up time by 50% to 42 days by 
2006 seems to have been by far exceeded already. 

In  keeping  with  the  example  set  by  Spain,  Austria  is  developing  an  infrastructure  for 
accelerated registration of business start-ups, enabling this to be carried out within 48 hours 
while maintaining the same high level of legal certainty. 

105 

The STT-CIRCE electronic platform consists of a central computer system which uses the Internet to 
interconnect all the organisations responsible for creating (registration) and launching New Enterprises, 
by sending and receiving the information needed for the corresponding procedures. This is therefore an 
e-government  multi-procedure/multi-administration  computer  application.  The 
security  and 
confidentiality  of  information  are  guaranteed  by  using  electronic  signature  certificates  for  all  data 
transmissions  carried  out  in  this  way.  The  system  also  allows  the  entrepreneur  to  find  out  about  the 
progress of his application in real time through the Internet. Between 14 July and 23 October 2003, a 
total of 46 businesses were created by this electronic procedure in the pilot regions, and another 16 were 
pending in October 2003. 

50 

 
 
  
 
                                                 
Two years after the introduction of one-stop-shops for the manufacturing sector in Italy, there 
has  been  a  noticeable  reduction  in  company  start-up  times  from  22  to  six  weeks,  the 
procedures have been cut from 21 to 12 and the costs involved from €7 700 to €3 516. In the 
case of individuals, the procedures for starting new activities have been cut from 11 to five, 
the  time  required  from  16  weeks  to  only  one  week,  and  the  costs  involved  from  €1 150  to 
€340. 

Following  the  2002  Trade  Law  Amendment,  the  registration  of  businesses  in  Austria  is 
completed in approximately 6 days and the number of documents which need to be submitted 
with an application has been reduced. 

At regional level, following the single contact points for enterprises provided by the Flemish 
Community  and  the  Walloon  region  in  Belgium,  the  Brussels-Capital  region  has  set-up  a 
similar contact point. 

Austria 
(https://nbr.brreg.no) have joined the ranks to offer online registration of companies. 

(www.foretagsregistrering.se) 

(www.help.gv.at), 

Sweden 

and  Norway 

Other  strategies  to  facilitate  start-ups  include  the  German  “Ich-AG”  allowance  which  is 
aimed  at  encouraging  the  unemployed  to  become  self-employed.  It  assists  becoming  self-
employed through social security for those who expect an income of maximum €25 000 in the 
first years. Up to August 2003, approximately 52 000 persons have used the allowance to set 
up a business. Italy has introduced two tax relief schemes for business initiatives by natural 
persons. These consist of reduction in accounting requirements, relief on direct taxes and an 
option  of  benefiting  from  assistance.  It  has  also  introduced  two  new  support  measures  to 
remove difficulties facing small, newly-created firms in searching the market for capital and 
in benefiting from assistance during the start-up phase. The United Kingdom has published an 
action plan for start-ups called “A comprehensive Strategy for Start-ups: Encouraging a more 
dynamic  start-up  market”  within  the  policy  framework  “Small  Business  and  Government  – 
The Way Forward” which identifies seven strategic themes aimed at encouraging enterprise 
and helping small businesses to prosper and grow, and is gradually publishing an action plan 
for each theme. At regional level, Northern Ireland in the United Kingdom has launched its 
“Accelerating  Entrepreneurship  Strategy”.  The  overall  aim  of  the  strategy  is  to  encourage 
those with entrepreneurial flair to become involved in sustainable new business start-ups, by 
providing a supportive environment for entrepreneurs. 

3. 

BETTER LEGISLATION AND REGULATION 

“National  bankruptcy  laws  should  be  assessed  in  the  light  of  good  practice.  The  learning 
from  benchmarking  exercises  should  lead  us  to  the  improvement  of  current  practices  in  the 
EU. 

New regulations at national and Community level should be screened to assess their impact 
on small enterprises and entrepreneurs. Wherever possible, national and EC rules should be 
simplified. Governments should adopt user-friendly administrative documents. 

Small enterprises could be exempted from certain regulatory obligations. In this context, the 
Commission  could  simplify  competition  legislation  to  reduce  the  burden  of  compliance  for 
small business.” 

51 

 
 
  
 
Indicators and targets 

Sweden  and  the  United  Kingdom  have  declared  the  target  of  applying  regulatory  impact 
assessment  in  all  their  proposed  laws  and  Ireland  has  set  the  target  of  applying  it  for  all 
primary  legislation106.  Belgium,  Denmark  and  the  Netherlands  have  all  set  the  target  of 
reducing administrative burdens on businesses by 25%. 

The  2003  Enterprise  Policy  Scoreboard  concluded  that  the  picture  in  the  field  of  regulatory 
and administrative environment is mixed and stressed that problems with data availability and 
comparability remain unresolved. In recent years, modest improvements have been recorded, 
but  SMEs  report  that  administrative  burdens  remain  high.  In  particular,  a  relatively  high 
number of SMEs in France, Belgium, Germany and the Netherlands reported problems with 
administrative burdens in 2003, while fewer SMEs had difficulties in Greece, Portugal and 
Spain. 

Many  countries  now  use  the  tool  of  regulatory  impact  assessment,  the  systems  being 
particularly  well  developed  in Germany,  the  Netherlands,  Austria,  Finland,  Sweden  and 
the United Kingdom107. Based on the information available on this indicator, Sweden and the 
United Kingdom are close to reaching their targets in this field. 

Member States 

Since  the  previous  report,  some  new  measures  have  been  taken  to  revise  bankruptcy 
legislation  in  the  different  countries.  The  new  insolvency  regulation  in  Spain  clarifies  and 
simplifies  access  to  insolvency  procedures.  It  is  innovative  with  regard  to  support  for 
continuing the business, protection of jobs and respect for workers’ rights. Sweden has passed 
a law which places all creditors in an equal position in a bankruptcy situation. The law aims at 
making it easier for insolvent enterprises to reconstruct the business with the creditors rather 
than  having  to  go  bankrupt.  In  the  United  Kingdom,  the  Enterprise  Act  2002,  aimed  at 
facilitating  the  rescue  of  viable  companies  and  at  encouraging  fresh  starts  after  failure,  has 
come into force. As a result of the Best Procedure Project on “Restructuring, bankruptcy and 
a fresh start”, Norway has started a project to benchmark its bankruptcy legislation. 

Finland: Legal rescue – Towards a fair and equitable legal system 

Finland  has  separate  legislation  on  bankruptcy  proceedings  (Bankruptcy  Code)  and 
restructuring  proceedings  (Reorganization  of  Enterprises  Act).  Bankruptcy  is  a  liquidation 
procedure while restructuring aims at rehabilitation of an enterprise. Initiation of restructuring 
proceedings requires, among other things, that the enterprise can be made profitable through 
restructuring. 

106 

107 

Ireland, from 0% in 2001 and 2002 to 100% for all primary legislation by 2006; Sweden, 100% for the 
whole period 2001-2010; United Kingdom 100% by 2005. 
It  should  be  emphasised  that  the  indicator  only  covers  part  of  a  potentially  more  widely  applied 
regulatory  impact  assessment  (RIA).  Comprehensive  RIAs  may  cover  a  wide  range  of  impacts, 
including on the environment, consumers, etc. In this context, however, focus is on the coverage of RIA 
of  impacts  on  businesses,  markets  and  SMEs.  The  indicator  thus  ignores  the  potential  coverage  of 
impacts  on  consumers  or  the  environment,  which  may  be  a  part  of  a  fully-fledged  regulatory  impact 
assessment  system.  In  addition,  it  should  be  emphasised  that  the  distribution  of  points  to  set  up  the 
indicator  does  not  necessarily  reflect  qualitative  differences  in  the  MS’s  RIA  systems,  which  may  be 
important. The interpretation of the indicator should therefore be cautious. 

52 

 
 
  
 
                                                 
A  petition  for  restructuring  supersedes  a  petition  for  bankruptcy.  Thus,  if  an  enterprise  has 
filed  for  restructuring,  it  cannot  be  declared  bankrupt.  A  bankruptcy  petition  is,  therefore, 
suspended.  If  restructuring  proceedings  are  opened,  a  bankruptcy  petition  will  be  dropped. 
However, if restructuring proceedings are not opened, processing of a bankruptcy petition will 
be  continued.  Restructuring  is  no  longer  possible,  if  bankruptcy  proceedings  have  already 
been opened.  

A  law  bill  for  a  total  review  of  the  bankruptcy  legislation  has  been  introduced  to  the 
Parliament. The overall objective is to create more predictive and efficient bankruptcy rules. 
New legislation is expected to enter into force in summer-autumn 2004. 

With  regard  to  regulatory  impact  assessments,  Ireland  and  Italy  will  start  piloting  their 
regulatory  impact  assessment  systems.  The  United  Kingdom  issued  the  “Quick  Guide  to 
Regulatory Impact Assessment” to help policy makers identify whether they need to carry out 
an RIA, and where to go for help and advice. It is also creating a database of small companies 
which  will  be  used  as  a  resource  for  officials  in  Departments  who  need  to  obtain  a  small 
business perspective on policy issues. Norway is developing new guidelines for the use of ex-
ante evaluation of regulation and a proposal for its increased use. 

Several  countries  have  launched  initiatives  to  simplify  legislation.  To  facilitate  hiring 
employees, Denmark is simplifying the legislation regulating the information that businesses 
have  to  report  on  their  employees.  It  has  also  set  up  a  working  group  to  investigate  the 
possibilities  for  exempting  entrepreneurs  from  certain  regulatory  obligations  in  the  start-up 
phase.  Germany  has  launched  the  initiative  “Bürokratieabbau”  (Bureaucracy  Reduction 
Initiative) which contains over 50 projects including the reform of the Crafts Code, trimming 
down public procurement law, modernisation of the Workplaces Decree and reduction of the 
statistical burden on the economy. The list of actions will be added to in the future. Greece 
has  set  up  the  Central  Codification  Committee  to  codify  current  legislation.  In  Ireland,  the 
Revenue  Commissioners  are  implementing  a  restructuring  programme  in  order  to  deliver 
better regulation, including consolidation and modernisation of tax law. A Government White 
Paper on Better Regulation is under preparation. 

The  Netherlands  has  set  up  “a  notification  body 
for  conflicting  regulations” 
(www.tegenstrijdigeregels.nl). Up to 700 complaints have been received so far. Based on the 
assessment  of  the  complaints,  solutions  will  be  formulated  and  applied  nation-wide. 
Following  the  Dutch  example,  Belgium  has  set  up  a  “contact  point  for  contradictory 
regulations  and  administrative  costs”  where  individuals  and  companies  can  report 
contradictory regulations or regulations that cannot be easily applied.  

Portugal  has  modernised  and  simplified  its  labour  legislation  and  the  Industrial  Licensing 
Code  and  is  introducing  a  single  contact  point  for  industrial  licensing  in  the  public 
administration. Portugal has also revised its competition law. Austria is currently preparing a 
reform of the Austrian Commercial Code in order to increase legal clarity and achieve simpler 
application of the law. The reform will introduce new options for the form of business, with 
special regard  being given to the interests of sole proprietorships. Finland is developing  the 
design and management of law drafting, including regulatory alternatives and different means 
of regulation. A proposal for a new more flexible Companies Act has also been made in order 

53 

 
 
  
 
to  allow  enterprises  organise  their  activities  as  efficiently  as  possible.  Sweden  is  starting  to 
review all legislation that has an effect on businesses108. 

The  United  Kingdom  has  published  the  “No-Nonsense  Guide  to  Government  rules  and 
regulations when setting up your business”. This guidance brings together for the first time 
details  of  the  main  regulatory  issues  faced  by  business  start-ups  in  a  user-friendly, 
authoritative and accessible format presented in clear and logical steps, and with sign-posts to 
more detailed information. Norway has set up a “Simplification Forum” which is the central 
contact  point  between  the  business  sector  and  the  Minister  for  Trade  and  Industry  in  the 
Government’s work to reduce administrative burdens for enterprises. 

Commission 

The final report of the Best Procedure project on “Restructuring, bankruptcy and a fresh 
start” was published in autumn 2003109. Discussions within the expert group led to a set of 
indicators and benchmarks on four topics: early warning, legal system, fresh start and stigma 
of  failure.  The  report  aims  at  offering  a  strategy  for  improvement  in  these  areas  by  giving 
examples of best practice and a series of policy conclusions. 

The Better Regulation Action Plan110 of June 2002 is now being implemented. While 2002 
and  early  2003  were  characterised  mainly  by  policy  formulation  on  better  regulation,  the 
Commission has now passed to the implementation phase. Reporting on implementation will 
take place mainly through the revamped annual report on better regulation111. 

The latest policy initiative was the adoption by the Commission in February 2003 of a broad 
initiative  to  up-date  and  simplify  Community  legislation112.  This  is  an  ambitious 
programme to clean up and simplify secondary Community legislation through consolidation, 
codification,  repeals,  simplification  as  well  as  organisation  and  presentation  of  the  acquis. 
Sectors  selected  so  far  for  screening  of  simplification  potential  include  motor  vehicle  type 
approvals  system,  marketing  authorisation  for  medical  products  and  processed  agricultural 
products. The programme will run until the beginning of 2005. The first phase was concluded 
in October 2003 with a report describing achievements and outlining the work programme for 
the second phase113. 

An  important  element  was  the  formal  adoption  in  October  2003  of  the  Inter-Institutional 
Agreement  on  “Better  Regulation”,  proposed  by  the  Commission  in  its  Better  Regulation 
Action  Plan.  The  agreement  between  the  Commission,  the  Parliament  and  the  Council 
confirms  the  objective  of  improving  and  simplifying  Community  legislation.  It  recalls  the 
Commission’s commitments already made in the June 2002 Action Plan. Moreover, it sets out 
the commitments of the Parliament and the Council in favour of better lawmaking as well as 
that  of  Member  States,  which  mainly  concern  a  better  transposition  and  application  of 
Community  legislation,  impact  assessment  of  important  amendments  by  the  legislator  and 

108 

109 
110 
111 
112 
113 

The Confederation of Swedish Enterprise and the Federation of Private Enterprises in Sweden in their 
written comments both stated that there is still very little result of the work of the SimpLex Unit in the 
Swedish  Ministry  of  Industry,  Employment  and  Communications  to  simplify  rules  and  reduce 
administrative burdens, and that clear targets need to be set in this area. 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/failure_bankruptcy/index.htm 
COM(2002) 278 final, 5.6.2002. 
Latest report: “Better lawmaking 2003”, COM(2003) 770 final, 12.12.2003. 
“Updating and simplifying the Community acquis”, COM(2003) 71 final, 11.2.2003. 
“First report on the implementation of the framework action “Updating and simplifying the Community 
aquis”, COM(2003) 623 final, 24.10.2003. 

54 

 
 
  
 
                                                 
adapted  decision-making  procedures  for  proposals  to  simplify  Community  acquis.  A  key 
element of the agreement is the establishment of a framework for use of so called “alternative 
instruments”: co-regulation and self-regulation. 

The Commission is starting to implement the new Impact Assessment procedure, introduced 
as  part  of  the  Better  Regulation  Action  Plan.  It  includes  an  analysis  of  the  likely  impact  of 
Commission  proposals  on  the  environment,  the  employment  and  social  situation  and  the 
economy,  including  on  businesses  and  SMEs.  For  all  major  initiatives  included  in  the 
Commission’s  Annual  Policy  Strategy  and  Work  Programme,  the  responsible  Directorate-
General should prepare a light “preliminary” impact assessment. For those proposals deemed 
to have a significant impact in economic, environmental or social terms, the Commission will 
carry out extended impact assessments. The Commission planned at the time of the adoption 
of  its  work  programme  for  2003  to  carry  out  extended  impact  assessments  for  43  of  its 
initiatives. This being the first year that the new procedure has been implemented, there has 
been  a  slow-down  in  the  calendar  originally  foreseen  for  the  delivery  of  the  impact 
assessments. However, progress is being made and approximately half of the extended impact 
assessments have been completed by December 2003. While some Directorate-Generals have 
extensive  experience  in  carrying  out  impact  type  assessment,  the  integrated  approach  of  the 
new  procedure  is  new  for  most  Directorate-Generals.  Therefore,  the  activities  in  2003  can 
largely be characterised as a learning process. 

Three new projects have been launched in the field of better regulation. A project on “Ex-post 
evaluation  of  EC  legislation  and  its  burden  on  businesses”  aims  to  provide  information 
about the regulatory burdens on businesses, and SMEs in particular, imposed by three selected 
European Community Directives. It will assess the components of the regulatory burdens and 
whether they stem directly from the requirements of the selected Directives, from the standard 
national  provisions  introduced  in  the  transposition  phase  or  from  additional  administrative 
requests  linked  to  the  follow  up  of  other  national  policies.  Results  are  expected  at  the 
beginning  of  2005.  A  project  on  “Indicators  of  Regulatory  Quality”  will  identify 
quantitative and qualitative indicators that could be used to monitor the progress made by the 
EU and by Member States to simplify and improve the regulatory environment. Initial results 
are expected for mid 2004. Finally, a project on “Promoting the involvement of academics 
and think tanks in impact assessment” will identify what role the academic world and other 
research institutes could play to support impact assessment at EU level and in Member States 
and which mechanisms could be put in place to promote discussion, reflection and evaluation 
of developments in this field. A workshop took place in Brussels in December 2003. A report 
of this event is planned for the first quarter of 2004. 

One way of ensuring that legislation does not create additional burdens and costs is to consult 
businesses  on  new  legislative  proposals  and  on  the  application  of  current  rules  in  order  to 
better identify their impact. The European Business Test Panel (EBTP) recently established 
for  this  purpose  is  further  described  under  heading  2.4.1,  together  with  other  initiatives  to 
consult businesses. 

Following  a  Commission  proposal  in  January  2003114,  the  Council  in  May  2003  adopted  a 
Directive  amending  the  existing  Accounting  Directives  to  partially  exempt  more  SMEs 

114 

Proposal  for  a  Council  Directive  amending  Directive  78/660/EEC  as  regards  amounts  expressed  in 
euro, COM(2003) 29 final, 24.1.2003. 

55 

 
 
  
 
                                                 
from  financial  reporting  rules115,  thus  contributing  to  lightening  the  regulatory  burden  on 
thousands of SMEs while maintaining sufficient transparency and protection against fraud.  

The  thresholds  in  the  Accounting  Directives  are  separate  and  distinct  from  the  ones  in  the 
definitions  that  are  used  by  Member  States,  the  Commission  and  the  European  Investment 
Bank,  among  others,  for  defining  SMEs  eligible  for  support  programmes  and  loans.  These 
were  also  recently  modified,  with  the  adoption  by  the  Commission  of  a  new  definition  of 
SMEs  which  will  enter  into  force  on  1 January  2005116.  The  revision  takes  account  of  the 
economic  developments  since  1996  and  the  application  of  the  definition.  It  increases  legal 
certainty,  while  reducing  possibilities  of  its  circumvention,  particularly  with  regard  to  state 
aid, Structural Funds and the Research and Development Framework Programme. 

As to the state aid rules, the new SME definition is currently being implemented, requiring a 
modification  of  the  block  exemption  regulations  on  training  aid117  and  aid  to  SMEs118. 
The  modification  of  the  block  exemption  regulation  on  aid  to  SMEs  furthermore  envisages 
enlarging the scope of this regulation, exempting state aid granted to SMEs for research and 
development purposes from  the  obligation of prior  notification.  This  measure is  intended to 
contribute to the objective set by the Barcelona European Council to increase investment in 
European  research  and  development  to  3%  of  GDP  by  2010  (see  heading  2.3.1).  The 
regulations amending both the regulations on training aid and on aid to SMEs including aid 
for  research  and  development  were  adopted  by  the  Commission  at  the  end  of  2003119, 
following a publication of the draft texts inviting all interested parties to comment120. 

4. 

AVAILABILITY OF SKILLS 

“We shall endeavour to ensure that training institutions, complemented by in-house training 
schemes,  deliver  an  adequate  supply  of  skills  adapted  to  the  needs  of  small  business,  and 
provide lifetime training and consultancy.” 

Indicators and targets 

Five  Member  States  have  declared  quantitative  targets  related  to  availability  of  skills. 
Denmark wants to increase the number of young people completing training and education 
skills  and  Germany  aims  for  40%  of  all  youth  to  begin  studies  in  2010.  The  Netherlands 
wants to be among the top 5 in 2010 when it comes to the share of knowledge workers121 and 
also to be in the leading group in 2010 as to participation in education and training. Sweden 
targeted for the years 2001-2004 a cumulative number of 16 500 graduates in engineering and 

115 

116 

117 

118 

119 
120 
121 

The  thresholds  for  turnover  and  balance  sheet  total  under  which  Member  States  can  apply  the 
exemptions  are  raised  by  about  17%.  Council  Directive  2003/38/EC  of  13  May  2003  amending 
Directive  78/660/EEC  on  the  annual  accounts  of  certain  types  of  companies  as  regards  amounts 
expressed in euro, OJ L 120, 15.5.2003, p. 22. 
Commission Recommendation (2003/361/EC) of 6 May 2003 concerning the definition of micro, small 
and medium-sized enterprises, OJ L 124, 20.5.2003, p. 36. 
http://europa.eu.int/comm/enterprise/enterprise_policy/sme_definition/index_en.htm 
Commission Regulation (EC) No 68/2001 of 12 January 2001 on the Application of Articles 87 and 88 
of the EC Treaty to State aid to training aid, OJ L 10, 13.1.2001, p. 20. 
Commission Regulation (EC) No 70/2001 of 12 January 2001 on the Application of Articles 87 and 88 
of the EC Treaty to State aid to small and medium-sized enterprises, OJ L 10, 13.1.2001, p. 33. 
Press release IP/03/1788, 19.12.2003. 
OJ C 190, 12.8.2003, p. 2. 
As a percentage of population above 15 years. 

56 

 
 
  
 
                                                 
 
architecture and also a cumulative number of teacher graduates of 26 800 for the same period. 
The proportion of 33% of teacher graduates in the fields of mathematics/science/technology122 
also targeted seems, however, beyond reach123. Sweden also aims to increase the number of 
new university graduates with Master’s degrees, reaching a cumulative number of 25 100 for 
the period 2001-2004. The United Kingdom wants to raise the participation of 18-30-year-
olds  in  higher  education  towards  50%  in  2010  and  to  reduce  the  number  of  adults  in  the 
labour force lacking NVQ2 or equivalent qualifications, also by 2010. 

According to the Enterprise Policy Scoreboard, survey evidence indicates that enterprises in 
Europe continue to experience shortages of skilled labour. Compared to 2001 and 2002, the 
proportion of enterprises affected by this constraint has decreased, but it is still higher than in 
1999124.  However,  according  to  the  survey  this  problem  affects  medium-sized  enterprises 
more frequently than micro enterprises125. 

Data for 2000 and 2001 show that the number of tertiary graduates per 1000 persons in the 
typical  age  group  (20-29  year  olds)  has  been  slowly  increasing  in  most  Member  States, 
Ireland,  the  United  Kingdom  and  France  being  in  the  lead.  However  the  gap  versus  the 
United States remains substantial. Although the share of science and technology graduates, as 
a percentage of all graduates, in the EU is significantly greater than in the United States, their 
number is somewhat lower when compared to the population of 20-29 year olds, because of 
the overall smaller proportion of tertiary graduates. Again, Ireland, France and the United 
Kingdom, closely followed by Finland, are the best performers. 

As to the Swedish target for graduates in engineering and architecture, 47% of the target had 
been reached by 2002 and the annual number has been increasing since 2001126. As regards 
teacher  graduates  in  Sweden,  figures  for  2001  and  2002  indicate  that  this  target  can  be 
achieved as well, Sweden having reached 48% of the target after these two years. 

Little  progress  has  been  recorded  in  raising  participation  in  life-long  learning  activities.  In 
2002,  only  8.5%  of  the  population  surveyed  aged  25-64  had  participated  in  some  form  of 
training  in  the  four  weeks  prior  to  the  survey  in  the  EU.  Only  in  the  United  Kingdom, 
Finland, Denmark, Sweden and the Netherlands life-long learning exceeds the EU target 
of  12.5%  since  at  least  2000.  In  all  other  countries  participation  rates  lie  well  below  this 
threshold  and  recent  developments  show  little  progress,  in  the  lowest  ranking  countries 
Greece, France, and Portugal the participation rate stagnated or even declined in 2002. 

Member States 

Some  new  training  measures  have  been  introduced  since  the  previous  report.  Germany  is 
reforming its Vocational Training Act. The reform will include the introduction of new forms 
of  examination  and  acquisition  of 
linguistic  and  professional  skills  abroad.  The 
“Europäischer Wirtschaftsführerschein” (European Business Driving Licence) is an Austro-
German initiative consisting of an examination and certification system which guarantees that 

122 
123 
124 

125 

126 

As a percentage of all teacher graduates. 
2001: 23%, 2002: 22%. 
Note  that  the  data  1999,  2001  and  2002  are  not  100%  comparable  to  2003  because  a  new  answer 
category  had  been  added  in  the  2003  survey  (“low  purchasing  power  of  customers”).  Thus,  the  2003 
figure underestimates the constraint relative to previous years. 
20% of medium-sized enterprises mentioned lack of skilled labour as a constraint compared to 13% of 
small enterprises. 
Sweden’s target is based on data from the National Agency for Higher Education. 

57 

 
 
  
 
                                                 
those completing the course have a basic knowledge of business economics. Expansion of the 
scheme,  initially  to  a  further  eight  European  countries,  will  start  in  2004.  In  Finland,  the 
“Noste”  programme  aims  to  prevent  early  retirement  and  improve  career  development  of 
adults that have only received basic education, to mend the labour deficit due to demographic 
development and to contribute to the employment rate. 

Concerning specific training for SMEs, Ireland has launched the new “In-Company Training 
Measure”  to  promote  the  training  and  up-skilling  of  people  in  employment.  It  includes 
training in management and entrepreneurial skills. Another new programme in Ireland is the 
“Company  Development  Cluster  Programme”  which  is  targeted  at  small  businesses  in  their 
early years of development. Focused training is provided by clustering ten companies in each 
region  who  will  have  available  to  them  the  services  of  a  panel  of  trainers  covering  finance, 
marketing, production and quality control (www.fas.ie). In the United Kingdom, the Learning 
and  Skills  Council  has  been  piloting  a  new  “employer  training  scheme”,  designed  to  help 
improve  the  skills  of  up  to  16,000  low-skilled  employees,  and  linked  to  incentives  and 
financial support for employers whose staff take time off to study.  

At  regional  level,  the  Flemish  Government  in  Belgium  approved  the  Decree  on  Further 
Training  which,  inter  alia,  stipulates  that  an  entrepreneur’s  training  has  to  be  guaranteed 
throughout  his  or  her  lifetime.  The  region  of  Flanders  in  Belgium  has  launched  a  strategic 
plan  “VOLT  2010”  to  give  new  impetus  to  the  image  and  substance  of  apprenticeships. 
Furthermore,  the  Walloon  Government  in  Belgium  approved  a  draft  Decree  setting  up  an 
organisation  for  dual  training,  targeted  primarily  at  SMEs  and  the  self-employed.  The  new 
body  will  provide  training  programmes  which  alternate  between  theoretical  courses  and 
practical work experience. 

To address skills gaps in the areas of technology and ICT, Greece has launched several ICT 
learning  programmes  for  private  sector  companies,  the  self-employed  and  the  unemployed 
and  e-business  programmes  for  companies,  research  consortia  and  non-profit  educational 
institutions.  France  has  set  up  a  team  of  experts  to  improve  the  digital  competitiveness  of 
SMEs.  A  specific  internet  website  dedicated  for  this  has  already  been  set  up  at 
www.competitivite-numerique.com. 
the  “INSPRINT  master's 
qualification”, a course of study designed to supplement and complete university training by 
providing  specialist  legal  and  economic  skills  in  the  field  of  intellectual  property.  The 
Netherlands  is  launching  an  Action Plan  to  address  the  shortage  of  science  and  engineering 
graduates  and  researchers,  and  Portugal  has  launched  the  “QUADROS”  programme  to 
support  SMEs  in  the  recruitment  of  technical  staff.  As  part  of  the  “Strategy  for  raising  the 
competence  level  in  mathematics,  science  and  technology”,  Norway  is  offering  teachers  in 
primary and secondary schools an educational scholarship in mathematics. 

Italy  has 

introduced 

Commission 

The work programme on the future objectives of education and training systems127 calls 
for  the  creation  of  an  open  learning  environment.  As  a  follow-up,  a  working  group  has 
proposed open and flexible access to lifelong learning for persons in micro-enterprises and in 
SMEs  as  a  priority.  Guidance  and  counselling  services  should  also  be  improved  for  these 
businesses, and other tools proposed include job rotation and co-funding schemes. Improving 
possibilities  for  lifelong  learning  for  the  local  community  and  local  enterprises  in  a 

127 

Council document 6365/02, 20 February 2002. The work programme was welcomed by the European 
Council in Barcelona on 15-16 March 2002. 

58 

 
 
  
 
                                                 
comprehensive  networking  approach  was  considered  a  good  preparation  for  participation  in 
civil society and the economy. 

In  November  2002,  a  ministerial  declaration  on  the  Promotion  of  Enhanced  European 
Cooperation  in  Vocational  Education  and  Training  was  adopted,  the  Copenhagen 
declaration.  The  declaration  foresees  eight  priority  action  fields  for  voluntary  bottom-up 
cooperation  between  the  Member  States,  the  social  partners,  the  EFTA-EEA  countries,  the 
acceding and candidate countries and the Commission. The most relevant priorities for SMEs 
include  increased  support  to  the  development  of  competences  and  qualifications  at  sectoral 
level,  the  development  of  a  set  of  common  principles  for  validation  of  non-formal  and 
informal  learning and  the  creation  of  a  single  framework  for  transparency  of  qualifications 
and competences. 

Each year, several projects relating to skills development in and for enterprises are financed 
by the Leonardo da Vinci programme. Involvement of SMEs is a priority. In 2003, thematic 
monitoring  included  the  area  “Development  of  skills  within  companies,  in  particular 
SMEs”128. A  brochure presenting  Leonardo  da  Vinci good  practices on  “Building skills and 
qualifications  among  SME  employees”  was  published  in  May  2003,  a  study  on  the 
contribution of the Leonardo da Vinci programme to skills development within companies in 
particular  SMEs  was  published  in  September  2003  and  a  thematic  seminar  with  project 
promoters,  experts  and  representatives  from  enterprises  and  social  partners  took  place  in 
October 2003. In addition, the MEDIA Training programme aims at encouraging European 
training initiatives allowing professionals of the audio-visual industry, largely constituted by 
SMEs,  to  increase  their  competence  and  the  competitiveness  of  their  businesses  on  the 
international market129. 

In  July  2003,  the  Commission  adopted  its  Action  Plan  for  2004-2006  “Promoting 
Language  learning  and  Linguistic  Diversity”130,  stressing  the  importance  of  language 
learning  for  the  implementation  of  the  Lisbon  strategy.  Particular  attention  is  given  to 
language  learning  as  one  of  the  instruments  for  developing  the  entrepreneurial  spirit  in 
Europe. Of direct relevance to enterprise is the realisation of studies, foreseen for 2005, on the 
costs of non-multilingualism and on the effects on the European economy of business lost due 
to a lack of foreign language skills. 

A  revised  European  Employment  Strategy  was  adopted  in  July  2003131  to  ensure  that  it 
accounts  for  an  enlarged  European  Union,  reacts  to  the  challenges  facing  a  modern  labour 
market and better contributes to the Lisbon strategy. The Guidelines have become simpler and 
more  results  oriented,  and  targets  are  a  crucial  element  of  the  new  approach.  Stronger 
emphasis is placed on a number of areas. The priorities on entrepreneurship are reiterated in 
the  different  specific  guidelines,  whereas  the  specific  guideline  on  job  creation  and 
entrepreneurship  gives  a  stronger  focus  on  the  job  creation  capacity  of  enterprises.  Other 
examples  of  interest  for  the  small  business  community  include  the  specific  guidelines  with 
regard  to  improving  access  to  skilled  labour  through  the  development  of  human  capital, 
increasing  the  labour  supply  and  promoting  active  ageing,  combating  undeclared  work, 
reducing  regional  disparities  and  promoting  adaptability  in  the  labour  market  among  other 
things  by  reforming  overly  restrictive  elements  in  legislation.  In  line  with  the  principle  of 

128 
129 
130 
131 

http://www3.socleoyouth.be/static/en/leonardo/theme2.htm 
http://europa.eu.int/comm/avpolicy/media/forma_en.html 
COM(2003) 449, final, 24.7.2003. 
Council  Decision  (2003/578EC)  of  22  July  2003  on  guidelines  for  the  employment  policies  of  the 
Member States. 

59 

 
 
  
 
                                                 
streamlining  policy  processes,  the  guideline  on  job  creation  and  entrepreneurship  will  be 
supported  by  the  enterprise  policy  benchmarking  process  and  the  Member  States’ 
implementation of the European Charter for Small Enterprises. 

The Commission  is  preparing  its  mid-term report on Skills and Mobility for submission to 
the 2004 Spring European Council. It will highlight the progress made in implementing the 
2002  Action  Plan  for  Skills  and  Mobility132.  Among  actions  of  particular  interest  to  small 
enterprises  is  the  opening  up  of  the  European  Job  Portal133,  which  enables  enterprises  to 
recruit skilled labour across the EU and to access online CVs using the EURES network. By 
2005,  information  on  all  job  vacancies  advertised  by  public  employment  services  will  be 
accessible to job seekers throughout the EU. 

In 2002, the European Social Partners at intersectoral level adopted a framework of actions 
for  the  lifelong  development  of  competencies  and  qualifications.  A  first  implementation 
report was submitted to the Spring European Council in 2003134, and a second report is to be 
submitted at the Tripartite  Social  Summit for growth and  employment preceding  the Spring 
European Council in March 2004. The reports cover the activities of the social partners in the 
area  of  lifelong  learning  and  thus  offer  a  useful  tool  for  dissemination  of  good  practices  in 
skills development. 

Further to the eSkills Summit 2002 Declaration135 and the Council Conclusions on ICT and e-
business skills in Europe136, the Commission established the European eSkills Forum (eSF) 
in  March  2003.  The  objectives  of  the  eSF  are  to  agree  on  a  common  methodological 
framework  for  the  measurement  and  forecast  of  the  e-skills  supply  and  demand,  to  identify 
examples of good practice in support of e-skills and to propose recommendations for further 
actions  at  European  level.  The  Forum  will  publish  a  final  report  with  recommendations  in 
June 2004. As a follow-up and in response to the Council’s Conclusions, the Commission will 
prepare an Action Plan in support of e-skills for European competitiveness. 

The initiative on ICT (information and communication technologies) and e-business skills 
for  user  industries  and  SMEs  launched  in  November  2002  to  identify  ICT  and  e-business 
skills  profiles  in  various  industry  sectors  resulted  in  minor  descriptive  amendments  to  the 
existing  set  of  generic  ICT  skills  profiles  developed  by  the  industry-led  Career  Space 
initiative. A workshop took place in April 2003137 based on these ICT skills profiles and the 
relating ICT curriculum guidelines in order to foster consensus and promote them at European 
level.  This  workshop  will  be  extended  in  2004  to  cover  sub-degree  levels  and  vocational 
levels. 

132 
133 
134 

135 
136 
137 

COM(2002) 72, 13.2.2002. 
http://europa.eu.int/eures/index.jsp 
“Framework of actions for the lifelong development of competencies and qualifications”, First follow-
up report, 14.3.2003. 
Copenhagen, 18 October 2002. 
Adopted on 5 December 2002. 
Organised by the European Standardisation Centre (CEN) and the Information Society Standardisation 
System  (ISSS)  in  cooperation  with  the  European  Centre  for  the  Development  of  Vocational  Training 
(CEDEFOP) and the Council of European Professional Informatics Societies (CEPIS). 

60 

 
 
  
 
                                                 
5. 

IMPROVING ONLINE ACCESS 

“Public authorities should be urged to increase their electronic communication with the small 
business  sector.  Thus,  companies  will  be  able  to  receive  advice,  make  applications,  file  tax 
returns  or  obtain  simple  information  online,  therefore  faster  and  more  cheaply.  The 
Commission must lead by example in this area.” 

Indicators and targets 

A  number  of  countries  have  announced  quantitative  targets  in  the  area  of  public  services 
online. In Germany, Ireland, Portugal and the United Kingdom, the share of government 
services138  online  will  reach  100%  in  2005.  In  addition,  Portugal  aims  to  ensure  access  to 
broadband Internet for 100% of public services by 2005. 

The Enterprise Policy Scoreboard concluded that visible progress has been made in the area 
of  e-government.  Denmark  already  offers  100%  of  services  online,  nine  additional  Member 
States offer 87% or more and no Member State less than 68% of services online. It does not 
seem difficult  for  Germany and the United Kingdom to achieve their 100% target since, on 
the  basis  of  this  data,  Germany  already  has  98%  and  the  United  Kingdom  already  97%  of 
their services online. Ireland should also be able to achieve its target, already having 91% of 
services online, and Portugal is approaching the target as well, having reached 78%. 

Member States 

Several new web portals by the public authorities have been launched or are in the pipeline. 
Among  those  already  operational,  the  Belgian  portal,  www.belgium.be,  provides  a  specific 
section  for  enterprises  where  new  companies  will  also  be  able  to  complete  a  series  of 
administrative  formalities  through  a  “Starters”  single  electronic  declaration.  The  Danish 
Enterprise  Portal  “Virk.dk”  is  a  single  access  point  website,  created  through  public-private 
partnership, providing the necessary information and public services that businesses need. The 
French  Ministry  of  Economic  Affairs,  Finance  and  Industry  has  set  up  a  website  called 
“Minefi  au  service  d’entreprises”,  www.entreprises.minefi.gouv.fr,  which  provides 
information for businesses.  

In  the  pipeline  is  the  first  version  of  the  Dutch  online  one-stop-shop  for  enterprises, 
www.bedrijvenloket.nl,  which  will  be  available  by  the  end  of  2003.  It  will  be  operational 
nationwide  in  2006,  allowing,  among  others,  a  complete  online  registration  of  companies. 
Electronic services offered by the public administration will soon also be available in Austria 
via  a  single  access  point  at  www.help.gv.at.  Organisation  of  the  services  will  be  offered 
according  to  the  life-stages  principle.  Austria  has  also  set  up  an  “Enterprises  in  distress” 
Internet  platform  to  raise  the  problem-solving  skills  of  enterprises  and  entrepreneurs  and 
providing them with an extensive range of information. Portugal has adopted the Action Plan 
for  the  Information  Society  which  includes  an  Action  Plan  for  E-Government  to  improve 
online  government  services  provided  to  both  individuals  and  enterprises.  Work  is  currently 
underway in the United Kingdom on a cross–departmental “Business.gov Programme” which 
will  provide  SMEs  access  to  packages  of  information  and  services  according  to  business 
issues rather government responsibilities (www.businesslink.gov.uk). 

138 

Federal government services in the case of Germany. 

61 

 
 
  
 
                                                 
At regional level, the Walloon region of Belgium has set-up the “Wall-online” project which 
sets out the region’s plans for e-government. It is designed to help the public administration to 
move towards the creation of one-stop-shops. 

Belgium has launched the project “FINPROF” which enables an electronic submission of the 
pay-as-you  earn  tax  declarations  via  the  Federal  Public  Finance  Service’s  portal.  A  fully 
electronic  tax  inspectorate  allowing  the  completion  of  all  tax  formalities  online  is  under 
development  in  Greece.  In  Ireland,  annual  returns  can  be  filed  wholly  electronically  using 
electronic signatures. To encourage the take-up of online services by employers with less than 
50 employees, incentive payments will be available to them in the United Kingdom for filing 
their  end  of  year  returns  online  from  2004/2005.  In  Norway,  the  “AltInn  project”  has 
established  an  internet  based  solution  that  uses  common  data  definitions  for  reporting 
financial data from businesses to the tax authority. 

Regarding company registration, several forms required under the Companies Acts can now 
be filed online in Ireland and it is intended to make all the forms available by the end of 2003. 
It  is  also  now  possible  to  obtain  duplicate  certificates  of  incorporation  online.  The  United 
Kingdom intends to increase incrementally the range of forms that may be filed electronically. 

The Danish “Project eGovernment” was set up to promote digitalisation of public services 
and their data sharing. The project has also been involved in the “eDay”, which marks the 
launch of electronic dissemination of information between different public authorities, and in 
the  development  and  distribution  of  digital  signature.  Austria  is  currently  drafting  a  Federal 
Act  on  regulations  to  facilitate  electronic  communications  with  public  offices.  This  act  will 
contain provisions on the introduction of an electronic official seal to accelerate the creation 
of official documents. 

Among other online services reported, Germany is designing facilities for online submission 
of applications for its research cooperation programmes and Ireland is developing an online 
receipt  of  public  procurement  tenders  as  a  further  tool  to  the  existing  eTenders  facility 
(www.etenders.gov.ie). Ireland is also developing an electronic payment system throughout 
the  economy  and  it  has  launched  the  “eBIT  programme”  on  the  www.openup.ie  website, 
which allows enterprises in the manufacturing and internationally traded services sectors with 
10  employees  or  more  to  apply  for  assistance  to  assess  their  eBusiness/IT  strategy 
requirements. Finally, as of January 2004, it will be possible to file patents online in Italy. 

Commission 

The  Information  Society  Technologies  (IST)  Priority139  is  part  of  the  Sixth  Framework 
Programme for RTD (FP6). Following the first call for proposals in 2003, SME participation 
will correspond to some 16% of funding awarded, which is satisfactory compared to the 15% 
requested  by  the  Framework  Programme  but  remains  below  the  25%  target  of  the  work 
programme. For certain areas of particular interest to SMEs, such as “Networked businesses 
and  governments”,  “eHealth”  and  “Networked  audiovisual  systems  and  home  platforms”, 
more than 20% of EU funding will be awarded to SMEs. Corrective actions can be envisaged 
in  2004  if  the  SME  participation  does  not  prove  to  be  higher  in  the  second  call,  closed  in 
October  2003.  The  study  “Monitoring  Strategy  and  requirements  for  IST-RTD  in  the  6th 

139 

www.cordis.lu/ist 

62 

 
 
  
 
                                                 
FP”140, launched by the Commission in autumn 2003, will include quantitative and qualitative 
analysis of SME participation in the new FP6 instruments. 

The  Portal  of  the  EU  Administration141,  to  be  launched  in  summer  2004  under  the  name 
“Your Europe” by the IDA programme (Interchange of Data between Administrations), will 
provide information and services to assist Europe’s enterprises and citizens to carry out cross-
border  activities,  for  example  enterprises  wanting  to  establish  a  subsidiary  in  another 
European country. The major action started in 2003 is the integration with the already existing 
sites  “Dialogue  with  Business”142  and  “Dialogue  with  Citizens”143  and  with  the  SOLVIT 
initiative (see heading 6 of the Annex). The resulting portal will be positioned as the main EU 
portal in support of cross-border users. 

Also in the framework of the IDA programme, the eGovernment Observatory144 provides a 
valuable  insight  on  e-Government  strategies,  initiatives  and  projects  in  Europe  and  beyond. 
On  the  basis  of  a  consultation  document  for  future  policy  on  pan-European  e-government 
services145  and  the  results  of  the  open  consultation,  the  document  “Linking  up  Europe:  the 
importance  of  interoperability  for  e-government  services”146  was  prepared  and  presented  at 
the  Ministerial  Conference  on  e-Government  co-organised  by  Italian  Presidency  and  the 
Commission in July 2003. 

6. 

MORE OUT OF THE SINGLE MARKET 

“The  Commission  and  Member  States  must  pursue  the  reforms  underway  aiming  at  the 
completion in the Union of a true internal market, user-friendly for small business, in critical 
areas 
commerce, 
telecommunications, utilities, public procurement and cross-border payment systems. 

development 

businesses 

electronic 

including 

small 

for 

of 

European  and  national  competition  rules  should  be  vigorously  applied  to  make  sure  that 
small businesses have every chance to enter new markets and compete on fair terms.” 

Indicators and targets 

Member States are still failing to implement many Internal Market laws correctly and on time. 
In November 2003, around 8.5% of Internal Market Directives (131 Directives) have still not 
been implemented into national law in every Member State, though the deadlines agreed by 
the Member States themselves when they adopted the Directives have passed. Some Member 
States,  notably  Denmark,  Spain,  Finland  and  the  United  Kingdom,  have  again  achieved 
the  Stockholm  European  Council’s  target  of  keeping  implementation  deficits  for  Internal 
Market Directives below 1.5%. Ireland now also meets the target after more than halving its 
deficit  since  May  2003.  Sweden  has  slipped  to  1.6%.  Others,  such  as  France,  Germany, 
Luxembourg, Greece and Italy, have persistently had a deficit of more than double the target. 
Belgium, whose implementation deficit has almost doubled since May 2003, has joined this 
group of Member States which is lagging behind. 

140 
141 
142 
143 
144
145 
146 

OJ 13.8.03, 2003/S 154-139799. 
Based on the pilot portal “public-services.eu,” http://europa.eu.int/public-services/. 
http://europa.eu.int/business/ 
http://europa.eu.int/citizens/ 
http://europa.eu.int/ISPO/ida/jsps/index.jsp?fuseAction=showChapter&chapterID=140&preChapterID=0 
http://europa.eu.int/comm/enterprise/consultations/government_e-services/index.htm 
SEC(2003) 801, 3.7.2003. 

63 

 
 
  
 
                                                 
 
Only three Member States, Denmark, Portugal and Finland meet the “zero tolerance” target 
for implementing Directives more than two years overdue. Lengthy delays cause significant 
harm to businesses who are deprived of their rights to benefit in full from the Internal Market. 

The number of infringement procedures against Member States for misapplication of Internal 
Market rules also grows. At the end of October 2003, Italy alone had 146 open infringement 
cases, more than Denmark (21 cases), Finland (25 cases) and Sweden (26 cases) combined. 
France had 135 cases and Spain 102. Again, this makes it difficult for business, particularly 
small businesses, to operate.147 

Member States 

Austria  is  establishing  a  new  coordinating  function  to  work  towards  timely  and  complete 
transposition  of  the  Directives  of  the  European  Community.  A  transposition  committee  is 
also  to  be  set  up  in  future  to  deal  with  content  related  and  organisational  issues  as  well  as 
special problems arising in connection with the transposition of EC Directives. 

In June 2003, the process of opening European electricity and gas markets was finalised. The 
directives  on  market  opening  allow  all  European  commercial  energy  users  free  access  to 
electricity and gas markets by latest in July 2004. By July 2007 all consumers will be able to 
choose their energy supplier. A number of Member States have already opened their markets.  

Concerning public procurement, Belgium has developed an information package containing 
information  about  public  procurement  opportunities  for  enterprises.  Denmark  has  played  an 
essential part in the setting up of the “Public Procurement Network”, a permanent informal 
network  of  public  procurement  authorities  in  Europe.  The  network  aims  at  providing  rapid 
and  effective  problem-solving  solutions  already  at  the  pre-contract  stage  to  enterprises  that 
encounter  public  procurement  problems  in  other  countries  and  at  encouraging  exchanges  of 
best  practices  in  the  field.  Greece  has  carried  out  three  pilot  programmes  to  develop  a 
National  Electronic  Public  Procurement  System.  A  call  for  tender  to  set  up  the  system  has 
now been published. 

The  new  Austrian  Federal  Contracts  Act  implements  the  framework  conditions  for 
exploitation  of  electronic  media  and  use  of  new  technologies  in  the  area  of  public 
procurement.  Many  initiatives  have  been  launched  in  Finland  to  train  both  buyers  and 
suppliers  in  applying  public  procurement  legislation.  Moreover,  several  ministries,  the 
Association of Local and Regional Authorities, the municipalities, business organisations and 
some enterprises have launched the “Kilpanet” project. Its aim is to provide electronic tools 
for the municipalities for service provision and for launching calls for tenders for services. 

With regard to competition rules, Denmark has launched several case studies to analyse its 
existing or earlier state aid schemes. It also aims at assessing all new state aid schemes at an 
early  stage  in  the  decision  process  in  order  to  reduce  the  detrimental  effects.  Denmark  is 
continuously working to increase transparency in the state aid field in order to improve both 
the monitoring and to make it easier for companies to complain about possible irregularities. 

Several countries report on the operation of the SOLVIT programme (see below) at national 
level, namely Germany, Italy, Portugal, Sweden, the United Kingdom and Norway. 

147 

Press release IP/04/33, 12.1.2004. 

64 

 
 
  
 
                                                 
Sweden organised an information campaign on the CE mark in order to raise awareness on 
what it means to consumers, business and trade. Sweden has also launched an investigation on 
voluntary marking schemes to understand the scope of the barriers they create to trade. 

Commission 

The Internal Market continues to provide the framework whereby business, particularly small 
businesses, can grow and create the jobs needed in the European Union. Clearly the Internal 
Market works. The Commission estimates that the Internal Market has delivered 2.5 million 
extra  jobs  and  nearly  €900  billion  in  extra  wealth  since  the  barriers  came  down  at  the 
beginning  of  1993148.  But  this  analysis  also  demonstrated  that  while  there  were  significant 
benefits  from  a  properly  functioning  Internal  Market,  the  Internal  Market  did  not  currently 
function optimally, especially in the area of services, and opportunities were being missed.  

A fresh impetus was required to eliminate weaknesses so that the Internal Market can deliver 
its  full  potential  in  terms  of  competitiveness,  growth  and  employment,  including  for  small 
businesses. The Commission’s new Internal Market Strategy 2003-2006 of May 2003 is a 
ten point plan to make the Internal Market work better. It aims to respond to the challenges of 
enlargement and an ageing population and to help keep on course progress towards the Lisbon 
goal.  Particular  priorities,  aimed  at  business,  include  improving  the  implementation  and 
enforcement of Internal Market law, making the free movement of services across borders a 
practical reality, removing the remaining obstacles to trading in goods and building genuinely 
open and competitive public procurement markets allowing small businesses to get involved 
in  these  markets  and  help  give  better  value  for  money  to  tax  payers.  The  onus  will 
increasingly be on the Member States to actually make the Internal Market work on a day to 
day basis for entrepreneurs. 

There are nevertheless some Internal Market measures in particular where the EU must act to 
help  business.  For  example,  the  adoption  by  the  Council  and  the  Parliament  of  the 
Community  Patent  (COMPAT)149  and  the  proposed  Directives  on  the  Patentability  of 
computer-implemented inventions (SOFTPAT)150 and on the Enforcement of Intellectual 
Property  Rights151  will  contribute  to  improvements.  The  Commission’s  Action  Plans  on 
Company Law152 and Statutory Audit153 will help to ensure that businesses produce reliable 
accounts which in turn give potential investors confidence to invest. 

The Commission in its May 2003 Communication  “Enhancing  the  implementation  of  the 
New  Approach  Directives”154  stated  its  determination  to  strengthen  the  foundations  of  the 
system of free movement of goods in anticipation of an enlarged EU. After nearly 15 year of 
practical  experience  with  the  implementation  of  more  than  20  directives  based  on  the  New 
Approach,  it  is  demonstrated  that  this  approach  has  been  very  successful  but  that  directives 

148 
149 

150 

151 

152 

153 
154 

http://europa.eu.int/comm/internal_market/10years/workingdoc_en.htm 
Commission  proposal  of  1.8.2000  for  a  Regulation  of  the  Council  on  the  Community  patent,  COM 
(2000) 412 final, CNS 2000/0177, OJ C 337 E/45, 28.11.2000, p. E/278.  
Proposal  for  a  “Directive  on  the  patentability  of  computer-implemented  inventions”,  COM(2002)  92 
final, 20.2.2002. 
Proposal for a directive of the European Parliament and of the Council on measures and procedures to 
ensure  the  enforcement  of  intellectual  property  rights,  COM(2003)  46  final,  30.1.2003,  2003/0024 
(COD). 
“Modernising Company Law and Enhancing Corporate Governance in the European Union - A Plan to 
Move Forward”, COM(2003) 284 final, 21.5.2003. 
“Reinforcing the statutory audit in the EU”, COM(2003) 286 final, 21.5.2003. 
COM(2003) 240 final, 7.5.2003 

65 

 
 
  
 
                                                 
based  on  it  can  be  further  improved  in  a  number  of  ways.  The  need  for  a  simple  and 
transparent legal framework is particularly important for small businesses. On the basis of the 
Commission proposals, the Council has invited the Commission to take appropriate steps to 
enhance  the  operational  efficiency  of  the  New  Approach  Directives155.  In  particular,  the 
Council recognises the need for a clearer framework for conformity assessment, accreditation 
and market surveillance. 

Small enterprises are predominant in the services sector, but their prospects for cross-border 
growth  are  severely  hampered  by  existing  legal  barriers  and  disproportionate  administrative 
burdens. The proposal for a Directive on services in the Internal Market156, adopted by the 
Commission in January 2004, addresses these barriers and aims to reduce the burdens both on 
service providers wanting to establish in another Member State and on those providing cross-
border  services.  The  December  2003  Communication  on  business-related  services157  sets 
out measures complementing the proposed Directive. The measures, which include promoting 
service  quality  indicators,  voluntary  standards  for  the  cross-border  supply  of  services,  and 
rules on reporting intangible assets such as training and software investment, aim to promote 
competition among service suppliers and help customers to compare prices and the nature of 
services offered. This, combined with better statistics to inform decision-taking, will help to 
make  the  markets  more  transparent.  Business-related  services  are  inextricably  linked  to 
manufacturing industry and are crucial to its competitiveness. 

The  new  legislative  package  on  public  procurement  to  be  adopted  early  2004  will  be 
essential for modernising Europe’s public procurement systems. In parallel, the Commission 
launched  in  2003  a  study  to  measure  SMEs’  access  to  public  contracts  above  the  EU 
thresholds158. The study, to be completed early 2004, will identify the main concerns of small 
businesses.  It  will  also  provide  Member  States,  awarding  authorities  and  small  businesses 
with  cases  of  good  practice.  In  addition,  the  Commission  has  started  preparatory  work  to 
present, in 2004, an Action Plan on electronic public procurement. 

Small businesses, as well as citizens and consumers, need to be much better informed of their 
rights.  Member  States  are  actively  encouraged  through  projects  such  as  the  SOLVIT 
Network159 to solve problems about the misapplication of Internal Market laws, and mistakes 
by  public  administrations,  so  that  business  and  citizens  can  do  the  things  that  the  Internal 
Market provides for in practice and not just in theory. 

Further  to  the  consultation  on  “Co-operatives  in  Enterprise  Europe”  launched  in  December 
2001, the Commission is preparing a Communication on co-operative societies in an enlarged 
Europe.  The  Communication,  foreseen  for  early  2004,  will  outline  the  future  orientation  of 
policies  and  activities  in  favour  of  co-operatives  at  Member  State  and  European  level.  The 
Statute for a European Co-operative Society160 was adopted by the Council in July 2003. 
This  statute  draws  parallels  with  the  Statute  for  a  European  Company,  but  is  specifically 

155 
156 
157 

158 
159 

160 

Resolution of 10 November 2003, OJEU No C 282 of 25.11.2003, p. 3. 
COM(2004) 2 (COD), 13.1.2004; Press release IP/04/37, 13.1.2003. 
“The  competitiveness  of  business-related  services  and  their  contribution  to  the  performance  of 
European enterprises”, COM(2003) 747, 4.12.2003. 
http://europa.eu.int/comm/enterprise/entrepreneurship/craft/craft-studies/craft-publicprocurement.htm 
Commission  Communication  on  “Effective  Problem  Solving  in  the  Internal  market  (“SOLVIT”)”, 
COM (2001) 702, 27.11.2001. Commission Recommendation on “Principles for using “SOLVIT” – the 
Internal  Market  Problem  Solving  Network”,  7.12.2001,  OJ  L  331,  15.12.2001,  p.  79; 
http://europa.eu.int/comm/internal_market/solvit/index_en.htm 
Amended proposal COM(93) 252 final, 6.7.1993, OJ C236 of 31.8.1993. 

66 

 
 
  
 
                                                 
tailored  to  the  co-operative  form  of  enterprise.  The  Commission  is  currently  working  on  a 
proposal for a Statute for a European Association. 

As  regards  mutual  societies,  the  Commission  published  in  October  2003  the  consultation 
document “Mutuals in an Enlarged Europe”161. The document  aims to  improve European 
and national authorities’ understanding of the sector in order to ensure appropriate regulation, 
to assess the potential of the proposed European Mutual Society Statute to facilitate mutuals’ 
cross-border  activities  and  foster  the  creation  of  new  mutuals,  and  to  see  how  mutuals  can 
help enhance enterprise competitiveness and meet enlargement challenges. 

7. 

TAXATION 

“Tax  systems  should  be  adapted  to  reward  success,  encourage  start-ups,  favour  small 
business expansion and job creation, and facilitate the creation and the succession in small 
enterprises.  Member  States  should  apply  best  practice  to  taxation  and  to  personal 
performance incentives.” 

Member States 

Several new tax measures to alleviate the burden of SMEs have been reported. Germany is 
raising  the  threshold  of  turnover  up  to  which  enterprises  are  exempted  from  turnover  tax  to 
€17 000.  Greece  has  simplified  tax  procedures  for  SMEs  in  its  tax  reform  by  e.g.  raising 
exemption thresholds and by rationalising various requirements. Spain has extended its 10% 
reduction in  total company  tax to all taxpayers that have made investments in new  tangible 
assets.  In  addition,  the  existing  company  tax  benefits  to  assist  the  self-employed  and 
encourage  business  investment  have  been  improved.  Italy  has  adopted  a  law  that  further 
increases  deductions  for  businesses  whose  taxable  base  does  not  exceed  certain  limits.  The 
2004  Austrian  tax  reform  provides  tax  incentives  for  equity  capital  for  sole  proprietorships 
and  partnerships  whose  retained  earnings  will  be  taxed  at  half  the  average  tax  rate  up  to  a 
limit  of  EUR 100 000.  The  general  deductible  amount  has  also  been  raised  and  the 
incremental  tax  regulations  have  been  changed.  Sweden  has  introduced  a  tax  exemption  of 
both  capital  gains  and  dividends  on  shares  held  by  companies  for  business  purposes  to 
prevent  business  income  from  being  subject  to  cumulative  taxation162.  In  addition,  new 
enterprises are granted a three-month respite with the payment of withholding taxes. 

To  facilitate  business  succession,  Spain  has  modified  the  law  on  inheritance  and  gift  taxes 
which provides for a 95% reduction in the value of the taxable amount to extend its scope to 
usufruct. The Netherlands is streamlining fiscal policy for business transfers. 

Other tax measures reported include the Danish change of tax rules for investment funds in 
order to encourage professional investors such as insurance companies and pension funds to 
invest in SMEs, especially in smaller innovative enterprises. Denmark has also introduced a 
new  employee  stock  options  scheme  to  provide  an  opportunity  for  smaller  enterprises  to 

161 

162 

http://europa.eu.int/comm/enterprise/entrepreneurship/coop/social-cmaf_agenda/social-cmaf-
mutuals.htm 
The Confederation of Swedish Enterprise and the Federation of Private Enterprises in Sweden in their 
written comments both criticised the fact that the so called 3:12 tax, making a private investor investing 
in a small start-up project being more heavily taxed than if s/he were to invest the money in the public 
stock  market,  had  not  yet  been  changed,  despite  the  fact  that  discussions  and  preparatory  legislative 
work has been going on for quite some time. 

67 

 
 
  
 
                                                 
reduce their salary expenses in the start-up phase. When specific conditions are fulfilled, the 
company and the employee can agree to have the salary paid in shares, options and warrants 
without  them  being  taxable  income  when  the  employee  receives  the  shares  or  exercises  a 
warrant or option. 

France  has  improved  several  of  its  tax  incentives  to  attract  investments  in  businesses  and 
Portugal has introduced some tax measures for Risk Capital Companies (FCR) to make them 
more competitive in the international market. 

Commission 

As  described  in  last  year’s  report,  the  current  Commission  work  in  the  area  of  taxation  is 
based on the Company Tax Study and Communication of October 2001163, which provide for 
a two-pronged strategy for tackling tax obstacles and inefficiencies in the company tax field. 
Progress includes the creation of a “Joint Transfer Pricing Forum”, a proposal for revising 
the  Parent-Subsidiary  Directive164,  which  is  designed  to  tackle  the  taxation  of  intra-
groupdividend payments, and a proposal for revising the Merger Directive165, which aims 
at  facilitating  cross-border  restructuring.  Both  proposals  aim  at  widening  the  scope  of  the 
directives and relaxing the conditions. 

Work on possible ‘comprehensive approaches’ continues. These would consist in providing, 
in  the  longer  term,  companies  with  a  consolidated  corporate  tax  base  for  their  EU  wide 
activities.  Research  currently  concentrates  on  the  International  Accounting  Standards  to  be 
used  from  2005  as  a  starting  point  for  developing  a  common  EU  tax  base,  on  a  ‘Formula 
Apportionment’  for  dividing  the  tax  base  between  the  Member  States  concerned  and  on 
developing the idea of “Home State Taxation” into a pilot project for SMEs166. 

The  Commission  services  also  launched,  in  September  2003,  a  very  comprehensive 
compliance cost survey for 3 000 EU companies. The survey aims to provide new insights 
into the costs for companies resulting from the need to cope with 15 separate tax systems and 
on the main drivers of this cost – an issue of major importance to SMEs. The survey, which 
also covers VAT, made use of the Business Test Panel tool (see heading 2.4.1). 

The November 2003 Commission Communication “An Internal Market without company tax 
obstacles – achievements, ongoing initiatives and remaining challenges”167 reported in detail 
on the outcome of these initiatives and presented the Commission’s conclusions and priorities 
for coming years. This was followed by a high level conference on the subject in December 
2003, organised jointly by the Italian Presidency and the Commission. 

163 

164 

165 

166 
167 

Communication from the Commission, “Towards an Internal Market without tax obstacles: A strategy 
for  providing  companies  with  a  consolidated  corporate  tax  base  for  their  EU-wide  activities”, 
COM(2001) 582 final, 23.10.2001, Commission Staff working paper, Company Taxation in the Internal 
Market, SEC(2001) 1681, 23.10.2001, 
http://europa.eu.int/comm/taxation_customs/taxation/company_tax/index.htm. 
Proposal  for  a  Council  Directive  amending  Directive 90/435/EEC on  the  common  system  of  taxation 
applicable  in  the  case  of  parent  companies  and  subsidiaries  of  different  Member  States,  COM(2003) 
462 final, 29.7.2003, 2003/0197 (CNS). 
Proposal  for  a  Council  Directive  amending  Directive  90/434/EEC  of  23  July  1990  on  the  common 
system  of  taxation  applicable  to  mergers,  divisions,  transfers  of  assets  and  exchanges  of  shares 
concerning  companies  of  different  Member  States,  COM(2003)  613  final,  17.10.2003,  2003/0239 
(CNS). 
http://europa.eu.int/comm/taxation_customs/taxation/consultations/home_state_sme.htm 
COM(2003) 726, 24.11.2003. 

68 

 
 
  
 
                                                 
 
Based  on  a  study  undertaken  in  2002,  a  group  of  experts  in  2003  drafted  a  report  which 
analysed the use of employee stock options in the EU and made recommendations on how 
the legal and administrative environment for this instrument of employee participation could 
be improved168. In particular they described at what time and on what basis employee stock 
options  should,  in  general,  be  taxed  and  how  double  taxation  in  cross-border  cases  can  be 
prevented. 

To  help  the  Member  States  make  further  progress  in  implementing  the  1994  Commission 
Recommendation on the transfer of small and medium-sized enterprises169 and to respond 
to the proposals for action made in the Best Procedure project on transfer of businesses170, the 
Commission  launched  a  new  project  in  October  2002.  The  final  report,  published  in 
September  2003171,  lists  benchmarks  for  six  selected  key  areas  of  the  Commission 
Recommendation and describes the measures already taken or being planned by the Member 
States,  Norway  and  the  EU  accession  countries  in  these  areas  and  in  response  to  the  six 
recommendations of the Best project. 

8. 

SUCCESSFUL E-BUSINESS MODELS AND TOP-CLASS SMALL BUSINESS SUPPORT 

“The  Commission  and  Member  States  should  encourage  small  enterprises  to  apply  best 
practice and adopt successful business models that enable them to truly flourish  in the  new 
economy. 

We will coordinate Member States and EU activity to create information and business support 
systems, networks and services which are easy to access and understand, and relevant to the 
needs  of  business;  ensure  EU-wide  access  to  guidance  and  support  from  mentors  and 
business  angels,  including  through  websites,  and  exploit  the  European  Observatory  on 
SMEs.” 

Indicators and targets 

Six Member States have set up quantitative targets linked to e-business. Germany wants 20% 
of its SMEs to have an e-strategy by 2005 and the Netherlands wants 66% of its SMEs to 
carry out online transactions by 2005. France and Ireland want respectively 90% and 95% 
of their SMEs172 to have Internet access by 2006 and Spain wants 97% of its enterprises with 
over 10 employees to have Internet access by 2006 and 99% by 2010. Portugal wants 50% of 
its enterprises to have access to broadband Internet for by 2005. 

As  to  support  services,  France  aims  to  have  865  new  enterprises  created  through  public 
incubators in 2006. 

In the  Enterprise  Policy Scoreboard, latest  data indicate that the EU is catching up with the 
United States in terms of ICT expenditure. With ICT expenditures of 5.4% of GDP Sweden 

168 
169 

170
171 

172 

http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/stock_options/final_report.htm 
OJ L 385, 31.12.1994, p. 14 and the accompanying Communication containing the motivations of the 
Recommendation, OJ C 400, 31.12.1994, p. 1. 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/transfer_business/best_project.htm 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/transfer_business/follow-
up.htm 
95% of all enterprises in the case of Ireland. 

69 

 
 
  
 
                                                 
 
has  taken  the  lead,  followed  by  the  United  Kingdom,  the  Netherlands,  Denmark  and 
Finland, while Greece, Spain, Ireland, Italy and Portugal all invest less than 3%. 

Rates of Internet use by enterprises have risen markedly across the Member States, although 
differences  remain.  Enterprises  in  Finland,  Sweden  and  Denmark  are  in  the  lead,  while 
there is scope for improvements among enterprises in the United Kingdom, Greece, Portugal 
and Italy.  

Electronic commerce continues to be a practice of secondary importance for enterprises with 
many businesses buying rather than selling online, Sweden and Finland being in the lead for 
enterprises  having  purchased  via  Internet  in  2002  and  the  Netherlands  and  Denmark  for 
enterprises  having  received  orders  via  Internet  in  the  same  year.  Enterprises  in  Spain,  Italy, 
Greece and Portugal are lagging behind in this field. Despite its frontline position in selling 
via  Internet,  the  Netherlands  seems  quite  far  from  its  target  of  66%  of  SMEs  carrying  out 
online  transactions  by  2005,  since  they  are  currently  only  at  34%  for  receiving  orders  and 
32%  for  purchases  via  the  Internet,  including  enterprises  of  all  sizes.  The  primary  business 
use  of  Internet  continues  to  be  the  distribution  of  information  on  products  and  services  on 
sale. Banking transactions are also being carried out to a large extent via the Internet. 

Rates of broadband penetration have risen considerably in recent years but remain lower than 
internationally  comparable  rates.  Denmark,  Belgium  and  Sweden  are  all  at  around  100 
broadband lines per 1000 inhabitants, while Greece and Ireland are far behind, with 0.2 and 
2.4 lines per 1000 inhabitants, respectively. 

Member States 

As part of the Danish E-business Action Plan, an initiative to help SMEs get started with e-
commerce has been launched. The initiative focuses on SMEs in their role as suppliers to the 
public sector and private companies and aims at helping them to realise the first easy benefits 
and  savings  from  e-commerce  and  to  get  their  systems  ready.  Germany  has  launched  the 
“PROZEUS” (processes and standards) project which should enable SMEs to learn about the 
potential  of  e-business  and  to  learn  how  to  do  e-business.  It  has  also  founded  an  expert 
network  to  exchange  experiences  among  training  providers,  entrepreneurs  and  scientists  in 
order to promote information and knowledge management in SMEs and to make enterprises 
aware of the specific technical solutions developed for processing information. Furthermore, 
through  the  “WissensMedia”  (Knowledge  Media)  project,  Germany  promotes  innovative 
solutions for knowledge management in SMEs and public administration. 

Italy  is  providing  funds  to  promote  the  development  of  electronic  business  practices  among 
SMEs  in  every  economic  sector,  especially  in  depressed  areas.  Furthermore,  an  E-Business 
Committee has been set up to bring together the ministries involved in innovation, the main 
trade unions, consumer organisations and representatives of leading firms in various sectors. 
The  task  of  the  Committee  is  to  identify  and  propose  regulatory  and  financial  measures  in 
support of generalising e-business among SMEs. 

Finland has launched a free information service of e-business for SMEs, “the NetMate”, on 
the Internet (www.verkkokaveri.fi). It will later be complemented by a practical guide on how 
to start using e-business. In the nursing sector, a national nursing service network “HOPE” 
has been introduced. It contains a national database of the private companies engaged in the 
nursing  sector  and  is  a  marketing  channel  for  these  enterprises  (www.hoivayrittajat.com). 
Sweden has launched the SFTI project (Single Face to Industry) in order to develop a standard 
and tools for easy electronic invoicing. 

70 

 
 
  
 
At local level in Ireland, a number of County Enterprise Boards are continuing with a range of 
initiatives to promote e-learning activities. In addition, the recently launched “CCI PRISM III 
e-Business  Programme”  will  focus  on  e-procurement  as  the  main  impetus  to  use  of  ICTs 
among SMEs. 

Several actions are taking place in the area of business support. 

Denmark  is  reforming  its  public  advisory  services  in  order  to  provide  smaller  companies 
easier access to these services and to strengthen their quality. The new structure will use the 
web  portal  for  entrepreneurs,  www.startguiden.dk,  as  a  tool  for  providing  online  assistance. 
Denmark is also promoting a network of private advisers who offer free or low cost advisory 
services 
finance, 
www.finansieringsguiden.dk,  which  provides  entrepreneurs  an  overview  of  possible  sources 
of finance. 

a  web  guide  on 

it  has  developed 

counselling 

and 

and 

The action “GründerService Deutschland” (Founder Service for Germany) is being piloted in 
some German regions. It aims at training expert teams at central call-in points in the regions 
and  organising  “founder  days”  in  order  to  provide  advice  and  coaching  for  start-ups.  Spain 
has  launched  the  “España.es  plan”  to  promote  information  society  by  developing  sectoral 
services and solutions. In France, the “Business Creation Train”, with the participation of the 
Secretary  of  State  for  SMEs,  stopped  in  13  towns  providing  over  14  000  people  with  the 
opportunity to learn about the new opportunities offered by business creation. 

In  Finland,  a  new  expert  service,  “NetworkRating”  that  evaluates  and  develops  the 
networking capacity of SMEs, has been launched. Furthermore, a survey on the current status 
of advisory services provided for micro enterprises that have been in operation for less than 
three  years  is  currently  being  carried  out.  In  the  United  Kingdom,  “Small  Business  and 
Government  –  The  Way  Forward”,  is  the  new  policy  framework  for  a  government-wide 
approach  to  helping  small  firms.  Norway  is  reforming  its  public  support  system  for 
innovation. Four existing institutions will be merged into one in order to create synergies and 
to provide a single entry point to the full spectrum of public support measures for business. 

At  regional  level  in  the  United  Kingdom,  the  business  support  service  in  Wales  was  re-
launched under the brand name “Business Eye”. It provides an easily accessible entry point 
for all business support enquiries in Wales and a free information and signposting service for 
existing  and  potential  businesses  (www.businesseye.org.uk).  In  Scotland,  the  “Business 
Gateway”  was  launched  as  a  first  stop  access  to  consistent  support  and  advice  to  start-ups, 
existing and growing businesses of all size. 

Commission 

The future challenges in support of e-business for SMEs are further analysed and described in 
the  Commission’s  March  2003  communication  on  “Adapting  e-business  policies  in  a 
changing  environment:  The  lessons  of  the  Go  Digital  initiative  and  the  challenges 
ahead”173.  The  European  e-Business  Support  Network  (eBSN)174,  which  brings  together 
governmental e-business experts from different fields, including representatives from regional 
and national e-business support initiatives and public-private partnerships,  aims  to  stimulate 

173 
174 

COM(2003)148 of 27.3.2003. 
Established in 2002 under the umbrella of the Europe 2005 Action Plan and building on the results of 
the  Best  Procedure  project  on  national  and  regional  policies  in  support  of  e-business  for  SMEs; 
http://europa.eu.int/comm/enterprise/ict/policy/e-bus-snfsme.htm. 

71 

 
 
  
 
                                                 
the exchange of experiences. To facilitate this process, an eBSN portal will be established in 
early 2004, providing information about existing e-business initiatives and best practise cases. 

The Commission’s e-business w@tch function175 has studied the e-business diffusion among 
enterprises  for  15  manufacturing  and  service  sectors  across  Europe.  As  a  result,  the 
“European e-Business Report 2003”176 was published in August 2003. The report confirms 
that European enterprises have made good progress in using ICT and e-business tools but that 
major differences exist, which call for specific e-business policies, notably in favour of SMEs, 
to  avoid  the  risk  of  a  digital  divide  between  Member  States,  sectors  and  enterprise  size 
classes. 

To  promote  a  favourable  e-business  environment  for  SMEs,  the  Commission  has  also 
launched the European E-business Legal Portal177, which became operational in April 2003. 
This  portal  provides  SMEs  with  relevant  and  user-friendly  information  on  legal  and 
regulatory issues of e-commerce. The information services, such as an overview of relevant 
legislation,  personalised  questions  and  answers  service,  frequently  asked  questions,  articles, 
glossary, e-trust related information, are available in 12 languages178 and will be extended to 
the languages of the acceding and candidate countries.  

Following  the  open  consultation  on  trust-related  issues  in  business-to-business  (B2B)  e-
marketplaces,  the  Commission  Staff  Working  Paper  on  “B2B  Internet  trading  platforms: 
Opportunities and barriers for SMEs – A first assessment”179 was presented in November 
2002.  To  further  advance  the  issue,  an  expert  group  with  representatives  of  business  and 
industrial associations and e-marketplace operators was set up to identify actual and potential 
barriers and to propose possible actions to facilitate the use of B2B Internet trading platforms 
by SMEs. As a result, a European portal to provide better information will be set up in early 
2004. 

The  MEDIA  pilot  projects180  (mentioned  above,  see  heading  2.3.1)  also  include  projects 
aiming  at  developing  e-business  models  that  can  be  used  by  the  SMEs  in  the  audiovisual 
sector. 

Following the work on support services for micro, small and sole proprietor businesses181 and 
on top class business support services182, the Commission, through the Community Initiative 
EQUAL  funded  by  the  European  Social  Fund  (ESF),  has  also  supported  the  testing  of 
inclusive business support services for disadvantaged groups in Europe183. 

Through the Best Procedure project “Promoting Entrepreneurship amongst Women”184, 
the Commission identified 132 national or regional measures  and actions supporting female 
entrepreneurs  who  create  or  wish  to  expand  their  firms.  A  number  of  good  practices  were 
identified185.  The  project  highlighted  the  value  of  tailored-made  support  services  for  female 

175 
176 
177 
178 
179 
180 
181 
182 
183 
184 
185 

http://www.ebusiness-watch.org/marketwatch/ 
Available at http://www.ebusiness-watch.org/marketwatch/resources/resources.htm. 
http://www.ebusinesslex.net/ 
The 11 official Community languages and Norwegian. 
SEC(2002) 1217, 11.11.2002; see http://europa.eu.int/comm/enterprise/ict/policy/b2b/index.htm. 
http://europa.eu.int/comm/avpolicy/media/pilot_en.html 
http://europa.eu.int/comm/enterprise/entrepreneurship/craft/craft-studies/craft-supportserv.htm 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/top-class/index.htm 
http://europa.eu.int/comm/employment_social/equal/index.cfm 
http://europa.eu.int/comm/enterprise/entrepreneurship/craft/craft-women/bestproject-women.htm 
Including practices from the USA, Canada, Australia, Japan and New Zealand. 

72 

 
 
  
 
                                                 
entrepreneurs and the need for further work focused on the issues of information, networking 
and  access  to  finance.  The  European  Forum  “Female  Entrepreneurship”,  organised  in 
Brussels  in  March  2003  and  attended  by  400  representatives  from  30  countries  and 
international organisations, debated the findings of the project and the necessary follow-up. 

In  June  2003,  the  Commission  organised  a  European  conference  on  Ethnic  Minority 
Entrepreneurs.  The  conference  highlighted  the  important  economic  potential  of  ethnic 
minority entrepreneurs, but also focussed on the specific problems facing these entrepreneurs 
when starting and expanding their businesses. A number of good practices were presented in 
response  to  these  problems,  and  the  conference  concluded  that  there  is  a  need  for  a  more 
systematic  networking,  examination  and  exchange  of  good  practices.  To  this  effect,  a  study 
will be carried out, with final results expected in 2005. 

Two projects concerning support for innovative start-ups were launched in January 2003, in 
the  framework  of  the  Pilot  Action  of  Excellence  on  Innovative  Start-ups,  PAXIS186.  The 
Biolink  project  aims  to  identify  successful  experiences  gained  from  an  international 
consortium  of  five  bio-technology  incubators,  thus  enabling  the  design  of  a  toolkit  for  best 
incubation  practice  that  will  subsequently  be  applicable  to  incubators  in  other  fields  of 
technology. The Tractor project, to be implemented in regions in Spain, Sweden, France and 
Slovenia, aims to assist the creation and consolidation of innovative start-ups by integrating 
and formalising new practices, supplying support services and providing training. 

The Gate2Growth (see heading 2.2.1) Incubator Forum network187, launched in 2003 with 
the  support  of  the  Commission,  is  a  pan-European  network  of  professional  managers  of 
technology  incubators  and  incubators  linked  to  research  institutes  and  universities,  with  the 
aim  to  exchange  experience  and  good  practices,  develop  the  professional  capacity  of  those 
working  in  technology  incubation  and  to  cooperate  closely  with  national  incubation 
associations.  The  Commission  also  continues  to  run  and  update  the  Business  Incubators 
database188. The number of registrations has been steadily growing189 and visits to the site are 
in  the  range  of  2 500  per  month.  The  top  ten  sectors  represented  among  the  registered 
business  incubators  are  software  development,  generalist  business  incubators,  e-business, 
computer  technology,  biotechnology,  information  and  communications  technology  (ICT),  e-
commerce, communication, informatics and engineering. 

The regularly updated and expanded SMIE database190 contains over 2 500 business support 
measures and 120 good practices from 25 countries (EU, EEA and six candidate countries)191. 
The  most  recent  addition  to  the  database  are  public  measures  to  support  and  promote 
corporate  social  responsibility.  The  database  is  a  unique  reference  and  information  tool  that 
facilitates  comparative  analysis,  benchmarking  and  evaluation  of  support  measures  across 
Europe. 

186 
187 
188 

189 
190 
191 

http://www.cordis.lu/paxis/ 
http://www.gate2growth.com/IncubatorForum.asp 
http://europa.eu.int/comm/enterprise/bi/index.htm. The database was created following the Best 
Procedure project on business incubators, 
http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/incubators/index.htm, 
http:/europa.eu.int/comm/enterprise/bi/index.htm. 
734 as of the last count. 
http://europa.eu.int/comm/enterprise/smie 
All measures are available in English as well as the language of their country of origin with a total of 20 
European languages used in the database. 

73