Commission staff working document accompanying the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Think small first a small business act for Europe - Impact assessment {COM(2008) 394 final} {SEC(2008) 2102}
Date: 2008-06-25
Institutions: European Commission
Subjects: administrative formalities, aid to undertakings, competitiveness, economic growth, entrepreneurship, financing, impact study, investment aid, market access, public awareness campaign, small and medium-sized enterprises

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 25.6.2008 
SEC(2008) 2101 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Think Small First 
A Small Business Act for Europe  

Impact Assessment 

{COM(2008) 394 final} 
{SEC(2008) 2102} 

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TABLE OF CONTENTS 

1. 

Procedural issues and consultation of Interested Parties ..............................................4 

1.2. 

Background...................................................................................................................4 

1.3 

Consultation and expertise............................................................................................4 

1.3.1 

Studies...........................................................................................................................4 

1.3.2.  Stakeholder consultations and inter-service group .......................................................4 

1.3.3.  Opinion of the Impact Assessment Board ....................................................................5 

2. 

2.1. 

What issue/problem is the policy/proposal expected to tackle? ...................................5 

SMEs - which are crucial for economic growth, job creation and regional and social 
cohesion - are not reaching their full potential in the EU .............................................6 

2.1.1.  Facts and figures ...........................................................................................................6 

2.1.2.  SMEs, job creation and regional and social cohesion ..................................................6 

2.1.3.  The importance of SMEs and entrepreneurship for economic growth .........................7 

2.1.4.  Comparison with the US indicates that EU SMEs are not fulfilling their potential.....8 

2.2. 

Remaining problems holding back EU SMEs, in spite of the existing SME policies 10 

2.2.1.  Existing policies already implemented .......................................................................10 

2.2.2.  Expected developments under the current existing SME policy ................................13 

2.2.3.  Remaining problems for SMEs, in spite of existing policies, which might need further 
public action................................................................................................................14 

2.3. 

Summary of the remaining problems, in spite of the existing policies.......................21 

2.4.  Who is affected? .........................................................................................................21 

3. 

What is the overall policy objective in terms of expected impacts?...........................22 

3.1. 

Has account been taken of any previously established objectives?............................23 

4. 

What are the main policy options available to reach the objective?...........................23 

4.1.  Which policy options have been considered?.............................................................23 

4.1.1.  Options discarded at an early stage.............................................................................24 

4.1.2.  Options selected for further assessment of their impacts ...........................................24 

5. 

5.1. 

5.2. 

Analysis of impacts.....................................................................................................25 

Impacts of option 1: No additional Action (baseline option) .....................................25 

Impacts of option 2 as compared to option 1..............................................................27 

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6. 

Comparison of the options..........................................................................................35 

6.1. 

Justification for action at EU level .............................................................................36 

6.1.1.  Subsidiarity test and impact on budget .......................................................................36 

6.1.2.  Are there especially severe impacts on a particular social group, economic sector 

(including size-class of enterprises) or region? ..........................................................37 

6.2. 

Are there impacts outside the Union (“external impacts”)? .......................................37 

7. 

7.1. 

7.2. 

Implementation and monitoring..................................................................................38 

Implementation ...........................................................................................................38 

Monitoring and evaluation..........................................................................................38 

ANNEX I ..................................................................................................................................39 

ANNEX II .................................................................................................................................44 

ANNEX III................................................................................................................................58 

ANNEX IV ...............................................................................................................................77 

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

This  Impact  Assessment  accompanies  the  Commission’s  proposal  for  a  “Small  Business  Act”  for 
Europe.  This  document  does  not  pre-judge  the  final  form  of  any  decision  to  be  taken  by  the 
Commission.  

It  has  to  be  highlighted  that,  given  that  the  proposal  for  a  “Small  Business  Act”  represents  a 
package of measures in a wide range of areas of a different nature, this impact assessment cannot 
analyse  the  impacts  of  each  individual  action.  Specific  actions  or  legislative  proposals  to  be 
presented together within the “Small Business Act” for Europe and which would normally require 
an Impact Assessment will be accompanied by separate Impact Assessments as needed. 

1.2. 

Background 

In  its  Communication  to  the  October  2007  Meeting  of  Heads  of  State  and  Government:  “The 
European Interest: Succeeding in the age of globalisation” the Commission underlined the need to 
fully unlock the growth and jobs potential of SMEs and make full use of their innovative capacities. 
This  was  reflected  in  the  strategic  report  on  the  renewed  Lisbon  strategy  for  growth  and  jobs 
adopted on 11 December 2007, which substantially increases the emphasis on SMEs in the context 
of the next Lisbon cycle 2008-2010. Lastly, the March 2008 European Council expressed a strong 
support  for  the  “Small  Business  Act”  initiative  and  requested  its  swift  adoption,  to  further 
strengthen SMEs' growth and competitiveness. The Commission has therefore received a mandate 
to go further and to propose a new initiative to fully unlock the growth and jobs potential of SMEs. 

1.3 

Consultation and expertise 

This  impact  assessment  is  based  on:  the  results  of  a  dedicated  stakeholder  consultation; 
consultations on specific actions to be proposed; and a broad range of internal and external studies 
and surveys. This includes: 

1.3.1 

Studies 

The results of a number of studies have been considered for this impact assessment. 

•  Internal studies and surveys from the Commission, including the 2007 Observatory on EU SME; 
•  Previous consultations by the Commission on SME related topics; 
•  External reports have provided further important input. 

More detail in particular about references used by the services responsible for drafting the impact 
assessment is given in annex I. 

1.3.2. 

Stakeholder consultations and inter-service group 

Internally,  an  ad-hoc  inter-service  group  was  set  up  in  November  2007  involving  all  relevant 
Commission services1. This group met on a regular basis and also provided input for the work on 
the impact assessment. 

1 

Including : Secretariat General, Legal Service, Competition DG, Social Affairs and Equal Opportunities DG, 
Agriculture and Rural Development DG, Energy and Transport DG, Environment DG, Research DG, Internal 
Market and Services DG, Regional Policy DG, Taxation and Custom Union DG, Education and Culture DG, 
Health and Consumer Protection DG, External relation DG, Trade DG 

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Externally, DG ENTR launched an internet stakeholder consultation on the “Small Business Act” 
for Europe. The results of the answers (more than 500) were summarized in the report published on 
the Commission’s website and attached in annex II2. 

A stakeholder hearing was organised on 6 February 2008 with Commission President Barroso and 
Vice-President  Verheugen.  More  than  350  stakeholders  from  Member  States,  industry,  NGOs, 
private companies, trade associations, and management consultancies participated. In parallel, DG 
ENTR received a number of position papers from various stakeholders and screened all of them. 

Moreover, regular  information and meetings  with European business organisations chaired by the 
SME  Envoy3  provide  a  forum  for  a  regular  exchange  of  information  on  the  Commission’s  major 
legislative  and  policy  initiatives  and  their  impact  on  SMEs.  In  addition,  several  high-level 
stakeholder conferences have brought together a wide variety of representatives from the European 
Parliament, Member States and business community, furthering the commitment of all key players 
to implement Modern SME policy. 

1.3.3.  Opinion of the Impact Assessment Board 

This  impact  assessment  report  takes  into  account  the  opinion  of  the  Impact  Assessment  Board 
issued on 5 June 2008 on an earlier version of the report. The following improvements have been 
made to address the main recommendations of the Impact Assessment Board: 

•  Improve  the  outline  of  expected  development  under  the  baseline  scenario:  The  problem 
description has been substantially reworked to distinguish more clearly between policies which 
are already in place or planned, and remaining problems. In addition, a better description of the 
expected developments in the SME sector under the existing policies has been carried out. 

•  Strengthen the link between the objectives and the proposed policies: The objectives have been 
revised  accordingly  to  strengthen  the  link  between  the  remaining  problems  and  the  policy 
options and have been made more specific and precise. In particular, a greater emphasis has been 
given to the positive opportunities for SMEs, especially under the environmental objective. 

•  Give an indication of the magnitude of the impact of new policies: Where possible, data on the 
economic, social and environmental incremental impacts of the new action have been provided. 
However, due to the cross-cutting nature of the SBA, no overall quantitative estimation could be 
developed. In the future, we intend to develop a new SME Performance Review to improve the 
situation and have more quantitative data on SME policies. 

2. 

WHAT ISSUE/PROBLEM IS THE POLICY/PROPOSAL EXPECTED TO TACKLE? 

The  general  issue,  analysed  in  detail  hereafter,  is  that  EU  SMEs,  which  are  crucial  for  economic 
growth,  job  creation  and  social  cohesion  are  not  reaching  their  full  potential.  In  particular,  EU 
SMEs  have  lower  productivity  and  grow  more  slowly  than  their  US  counterparts  and  do  not 
innovate sufficiently. 

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http://ec.europa.eu/enterprise/entrepreneurship/sba_en.htm 
http://ec.europa.eu/enterprise/sme/envoy_en.htm 

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2.1. 

SMEs - which are crucial for economic growth, job creation and regional and social 
cohesion - are not reaching their full potential in the EU 

2.1.1.  Facts and figures 

From a statistical point of view, SMEs are by far the dominant form of business organisation in the 
EU economy. There are around 23 million SMEs in the EU 274 and 41000 large companies. SMEs 
represent  99.8  %  of  all  enterprises  and  generate  57.6  %  of  the  EU-27’s  non  financial  business 
economy value added (see EU SME definition in box 1 in annex IV)5. 

2.1.2. 

SMEs, job creation and regional and social cohesion 

SMEs account for almost 70% of total employment (in 2004, 67.1 % of the EU-27’s non-financial 
business economy workforce was employed by an SME6) with micro-businesses providing the bulk 
of  employment  (see  figure  1  in  annex  IV)7.  This  is  particularly  marked  in  the  service  sector  (see 
figure 2 in annex IV).  

In addition, studies have shown  that  SMEs are  responsible  for most of the net job creation in the 
EU8 (see figure 3 in annex IV). In France, for example, where the active population grew by 10% 
between  1985  and  2004,  employment  remained  stable  in  large  companies  (250  employees  and 
more) at around 5.5 million employees, whilst the number of employees in SMEs grew by 35% (+ 
2.3 million jobs) to reach 8.9 million employees in 20049. 

SMEs also play a key role for local, regional and social cohesion. There are SMEs in each region of 
the EU and they contribute to employment and wealth in every part of Europe, including rural and 
peripheral  areas,  urban  areas  and  industrial  redeployment  areas.  Thus  they  contribute  to  the 
development of regions not considered attractive by multinational firms. The 2007 Observatory of 
European SMEs shows that the smaller the firm, the more likely it is to hire local labour: while 89% 
of  an  SME’s  workforce  is  local,  only  77%  of  the  workforce  of  large-scaled  enterprises  (LSEs) 
comes from the same region10. 

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Estimations vary on the exact number of EU-27 SMEs: Eurostat, in European business, Facts and figures 2007, 
mentions  19  million  enterprises  in  the  EU-27’s  non-financial  business  economy  in  2004.  The  2003 
Observatory of EU SMEs: 
(http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/smes_observatory_2003_report8_en.pdf, 
indicates an absolute number of around 24,668 million SMEs for EU 15 (18,698 million, 2003 data) + EU 12 + 
Turkey (5,970 million, 2001 data). These statistical differences stem mainly from a different evaluation of the 
number  of  micro  enterprises  and  from  the  fact  that  Eurostat  data  do  not  take  into  account  personal  services 
where many enterprises are SMEs. However, both Eurostat and the EU Observatory of EU SMEs acknowledge 
that 99.8 % of EU-27 enterprises are SMEs. 
Eurostat, European business, Facts and figures, 2007 
67.1  %  of  the  EU-27’s  non-financial  business  economy  workforce  was  employed  within  SMEs  in  2005: 
Eurostat, Enterprises by size class -overview of SMEs in the EU, 2008 
See: http://ec.europa.eu/enterprise/entrepreneurship/facts_figures.htm 
Eurostat: SMEs and entrepreneurship in the EU 2006: 
http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-NP-06-024/EN/KS-NP-06-024-EN.PDF 
OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 
European Commission, Observatory of European SMEs, 2007 

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2.1.3.  The importance of SMEs and entrepreneurship for economic growth 

An extensive literature review on the theoretical framework linking entrepreneurship and economic 
growth has been developed in the report “SMEs in Europe 2003”11 analysing  the new  theories of 
industry  evolution  (including  Jovanovic,  1982;  Ericson  and  Pakes,  1995;  Audretsch,  1995; 
Hopenhayn,  1992;  Lambson,  1991  and  Klepper,  1996).  The  main  feature  of  these  evolutionary 
theories is to recognise entrepreneurship and SMEs’ role in economic growth as agents of change in 
a knowledge-based globalised and interlinked economy. 

Entrepreneurship direct contribution to growth potential 

Entrepreneurship  generates  economic  output  by  providing  diversity  among  enterprises.  Not  only 
does entrepreneurship generate a greater number of enterprises, but it also increases the variety of 
enterprises in a given location. There has been a series of theoretical arguments12 suggesting that the 
degree of diversity, as opposed to homogeneity, in a location will influence the growth potential. 

SMEs’ indirect contribution to productivity growth 

In this theoretical framework, what is crucial for aggregate productivity growth, and therefore for 
economic growth, is the continuous process of entry, development and exit of new enterprises or the 
process of ‘creative destruction’ usually ascribed to Joseph Schumpeter. Firms’ entry and exit help 
increase  aggregate  productivity  growth  thanks  to  the  continuous  reallocation  of  resources  from 
exiting, less productive, firms to new, more productive, firms (the so called churning process). This 
process  increases  competition  and  therefore  forces  existing  firms  to  innovate,  to  upgrade 
technology,  or  change  work  organization  to  promote  efficiency13.  With  new  entrants  and  exiting 
firms being typically small, SMEs are, almost by definition, at the heart of this process. 

New  complementarities  between  enterprises  in  a  knowledge-based,  globalised  and  interlinked 
economy 

With  the  development  of  a  knowledge-based,  globalised  and  interlinked  economy,  productivity 
growth can now be obtained in a more decentralised way than concentrating capital and labour to 
generate economies of scale within big companies. Now, economies of scale can be generated by 
combining factors through networks on an ad hoc basis. In this context, there is a higher level of 
complementarities between enterprises, notably between small and big players. 

This  can  be  observed  in  the  field  of  innovation  where  “greater  competition  across  enterprises 
facilitates the entry of a new enterprise specializing in some particular new product niche. This is 
because  the  necessary  complementary  inputs  and  services  are  likely  to  be  available  from  small 
specialist niche enterprises but not necessarily from large, vertically integrated producers14”. These 
complementarities come from new business models but also from the inherent nature of knowledge. 
According  to  Baumol  (2002)15  the  most  efficient  innovation  environment  is  in  fact  one  in  which 
most of the breakthrough innovation occurs in small firms while most of the improvement on those 

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European Commission, Observatory on EU SMEs, SMEs in Europe 2003, 
http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/smes_observatory_2003_report7_en.pdf 
European Commission, Observatory on EU SMEs, SMEs in Europe 2003, p.14 
Cotis,  J.  P.  ,OECD  Chief  Economist,  Entrepreneurship  as  an  Engine  for  Growth:  Evidence  and  Policy 
Challenges,  GEM  Forum  Entrepreneurship:  Setting  the  Development  Agenda,  London,  10  and  11  January 
2007 
European Commission, Observatory on EU SMEs, SMEs in Europe 2003, p.12 
Baumol, W.J. , The Free-Market Innovation Machine, Princeton University Press, 2002 

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innovations  and  wide-scale  dissemination  occurs  in  large  oligopoly  firms.  In  line  with  this 
theoretical analysis, Eurostat data16 on the intensity of innovation per size class and country in EU 
27,  show  a  high  level  of  correlation  and  suggest  that  there  are  complementarities  between 
innovative large and small firms (see figure 4 and 5 and 8 in annex VI). 

In  addition,  the  globalisation  of  production  brings  new  forms  of  mutually  beneficial  relationships 
between SMEs and large companies17. This form of globalisation is driven mainly by the search for 
efficiency,  which  includes  inter  alia  subcontracting  inputs  to  more  efficient  producers  and  the 
search  for  complementary  and  strategic  assets.  In  this  context,  large  companies  benefit  from 
efficient SMEs. For SMEs, this reorganisation of production at the international level also provides 
new opportunities and challenges. “New niches for the supply of products and services continuously 
emerge from the fragmentation of production, where small firms can quickly position themselves, 
exploiting  their  flexibility  and  their  ability  to  move  fast18”.  This  can  lead  SMEs  to  substantial 
benefits  in  terms  of  information  flow,  technology  transfer  and  learning  opportunities  but  also 
through enhanced internationalisation and growth. 

2.1.4.  Comparison with the US indicates that EU SMEs are not fulfilling their potential 

In  Europe,  however,  SMEs  do  not  reap  the  full  benefit  of  the  above  mentioned  opportunities  (in 
particular  when  compared  to  their  US  counterparts)  and  thus  do  not  reach  their  full  potential  in 
terms of aggregate economic growth, job creation and social cohesion. 

EU SMEs have lower productivity than large companies and their US counterparts 

Aggregate labour productivity tends to be lower for EU SMEs than for large EU firms since their 
share  in  value  added  is  typically  lower  (45%  in  manufacturing  and  almost  60%  in  services)  than 
their share in employment. This size-class difference is partly due the sectoral distribution of small 
and  large  enterprises.  Larger  companies  are  more  present  in  manufacturing,  which  is  capital 
intensive,  whereas  smaller  companies  are  predominantly  active  in  the  service  sector,  which 
inherently is more labour intensive19 (see figure 2 in annex IV). However, this difference does not 
exist  in  the  US,  where  “small  businesses  employ  about  half  of  the  private  sector  work  force  and 
produce about half of private sector output20”. 

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European Commission, BEPA Monthly Brief - Issue 11, January 2008, The role of SMEs in Innovation in the 
EU, By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
See: OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs 
in Global Value Chains, 2007, p.13 
See: OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs 
in Global Value Chains, 2007, p.13 
See :  Baumol,  W.  J.,  “Macroeconomics  of  unbalanced  growth:  the  anatomy  of  urban  crisis”,  American 
Economic Review, 57 (3), 1967, and “Paradox of the Services: exploding costs, persistent demand”, Chapter 1 
in “The growth of Service Industries – The Paradox of Exploding Costs and Persistent Demand” edited by T. 
ten Raa and R. Schettkat, Edward Elgar Publishing Limited, 2001. According to Baumol (2001), while some 
services (e.g. postal delivery times, rubbish collection) may have benefited from technological advances and 
many in particular from computerisation (particularly in the financial industries), he argues that so far, these 
productivity gains had been modest, whilst in other services no significant sources of productivity gains can be 
identified (e.g. care of the elderly) 
U.S. Small Business Administration, The 2005 Small Business Economy, Report to the President. 

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EU  SMEs  contribute  less  to  the  “creative  destruction”  process  and  have  less  beneficial 
interactions with large firms than US SMEs 

A  comparison  with  the  US  seems  to  indicate  that  the  role  played  by  SMEs  in  the  creative 
destruction process is lower in the EU than in the US21. There is no strong evidence to suggest that 
entry rates are very different between the US and the EU22. In the EU almost 90% of employment in 
newly born firms in 2003 was created by firms of less than 20 employees23. But exit rates and hence 
gross turnover  rates (the  sum of  entry24
 and exit rates) are higher in the US than in the EU. As a 
result, successful SMEs in the US can grow faster, because inefficient firms (SMEs or large) leave 
the market and do not continue to occupy “valuable” market space (see  figure 6  in  annex  IV). In 
addition, lower entry and exit costs in the US allow firms to enter more easily, thus benefiting from 
the experimentation process offered by the market25. 

EU SMEs grow more slowly post-entry than US SMEs 

As  a  condition  for  their  survival,  smaller  firms  should  have  higher  growth  rates  than  their  larger 
counterparts. This is particularly so in manufacturing sectors, especially in high-tech sectors26. The 
links  between  firm  size  and  firm  growth  are  however  more  ambiguous  in  Europe.  In  the  United 
States, surviving firms on average increase their employment by 60% by their seventh year27, while 
employment gains among surviving firms in Europe are in the order of 10 to 20% (see figure 7 in 
annex  IV).  Even  in  highly  dynamic  industries,  surviving  US  firms  show  a  stronger  employment 
expansion, compared with those in most other countries. For instance, post-entry growth at 7 years 
for manufacturing is 6% of the US rate in France, 17% in Finland and 60% in the UK. The same, to 
a lesser degree, applies to the total business sector28 

EU SMEs are not sufficiently innovative 

SMEs have a crucial role to play in the innovation process, in particular by generating more radical 
innovation. This takes place in Europe, especially in the case of young innovative companies. For 
instance,  in  the  German  community  innovation  survey  (CIS29)  sample,  the  share  of  sales  from 

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29 

Aghion, P., R. Blundell, R. Griffith, P. Howitt and S. Prantl: “Entry and Productivity Growth: Evidence from 
micro-level data”, Journal of the European Economic Association, 2003, 265-276 
See:  European  Commission,  BEPA  Monthly  Brief  –  Issue  10,  December  2007,  The  role  of  SMEs  in  EU’s 
growth and jobs , By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
European Commission, SMEs and Innovation, Note for the Economic Policy Committee, Brussels, 26 October 
2007 
Based on data for a sample of nine EU15 countries and the U.S. both entry and exit rates are lower in the EU 
than  in  the  U.S.  though  the differences  in  exit  rates  are  substantially  larger.  Exit  rates  in  EU  range between 
1/10 and 1/3 of US rates, while EU entry rates represent between 0.4 and 0.8 of the U.S. entry rates. See Van 
Reenen,  J.  (2007):  Economic  Performance  of  the  EU  and  the  Structural  Reforms  Agenda:  Firm  Level 
Evidence, GEPA Meeting of 9th July. Cincera, M.,and O. Galgau (2005): “Impact of Market Entry and Exit on 
EU Productivity and Growth Performance,” Economic Papers 222, European Commission 
Aghion, P., R. Blundell, R. Griffith, P. Howitt and S. Prantl: “Entry and Productivity Growth: Evidence from 
micro-level data”, Journal of the European Economic Association, 2003, 265-276 
See Sutton, 1997, Caves, 1998, Geroski, 1995 for surveys. Audretsch, (1995) shows the growth advantage of 
small and new firms vis-à-vis large enterprises to be even greater in high technology industries. See Almus and 
Nerlinger (2000); and Harhoff, Stahl and Woywode (1998) for European results 
In the US, 70% of all the new jobs created by new firms between 1992 and 1996 came from just 3% of the 
fastest growing firms: Birch et.al. (1997) 
Eric Bartelsman, John Haltiwanger and Stefano Scarpetta, Microeconomic evidence of creative destruction in 
industrial and developing countries, 2004, Worldbank 
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136250,0_45572555&_dad=portal&_schema=

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radically new innovations in total sales for young innovative companies is on average 23%, which 
is  three  times  higher  than  the  total  average30.  However,  relative  to  US  SMEs,  EU  SMEs  are  less 
R&D  intensive31.  Moreover,  in  Europe,  a  lower  percentage  of  SMEs  innovate  successfully  (i.e. 
introduce new products or processes) as compared to large firms, both in services and in industry 
sectors (see figure 5 in annex IV). 

2.2. 

Remaining problems holding back EU SMEs, in spite of the existing SME policies 

2.2.1.  Existing policies already implemented  

Existing policies at EU level 

EU  policy  makers,  both  in  the  Member  States  and  at  EU  level,  have  long  recognised  the  need  to 
allow  EU  SMEs  to  fulfil  their  potential.  As  a  consequence,  a  comprehensive  EU  Modern  SME 
policy  was  put  in  place  in  200532  as  an  integral  part  of  the  Lisbon  Partnership  for  Growth  and 
Jobs33, aimed at alleviating SMEs’ specific problems and market and regulatory failures in five key 
areas: 

(1) 
(2) 
(3) 
(4) 
(5) 

cutting red tape; 
improving SMEs’ access to markets; 
promoting entrepreneurship and skills; 
improving SMEs’ growth potential; 
strengthening dialogue and consultation with SME stakeholders. 

A great number of specific policies have already been developed in this framework or have already 
been planned to reinforce it, and a comprehensive list has been included in annex III. The present 
section only singles out some of the key existing measures and does not claim to be exhaustive: 

•  As regards the regulatory and administrative burden, the Commission has taken important steps 
towards  creating  a  more  SME-friendly  regulatory  environment.  In  January  2007,  the 
Commission presented an Action Programme to reduce the administrative burdens on businesses 
in the EU by 25% by 201234. It addresses 13 priority areas covering around 40 legislative acts 
and a list of ten fast-track reduction proposals. A High Level Group was established to provide 
advice  on  the  implementation  of  the  Programme  and  an  on-line  consultation  on  the 
administrative  burden  has  been  launched.  To  date,  the  baseline  measurement  of  administrative 
burdens  has  been  almost  completed  for  one  of  the  13  priority  areas  (company  law/annual 
accounts)  and  the  results  for  the  remaining  12  areas  are  expected  for  the  autumn.  As  regards 
simplification,  the  Commission  has  tabled  100  initiatives  since  the  launch  of  the  rolling 
simplification  programme  in  2005.  20  initiatives  have  been  adopted  so  far,  whilst  47  are 
currently pending for adoption before the co-legislators. The Commission will further strengthen 
its  action,  taking  stock  of  progress  achieved  and  introducing  a  new  set  of  simplification 
initiatives.  Additional  measures  will  contribute  towards  facilitating  the  environment  for  SMEs. 

30 

31 
32 

33 

34 

For sales of new products (incremental as well as radical), the superior performance of YIC is less outspoken: 
while  YICs  have  an  average  of  51.7%  this  is  "only"  twice  the  average  share.  This  superior  performance  of 
YICs is confirmed in multivariate analysis, correcting for other firm and industry characteristics, Veugelers & 
Schneider (reference to be added), Working Paper in progress, 2008 
On average the R&D intensity of SMEs is 0.34% in EU, 0.53% in US, according to DGRTD Key Figures 2007 
Commission  Communication:  Implementing  the  Community  Lisbon  Programme  Modern  SME  policy  for 
Growth and Employment, (COM(2005)551) 
See Annex III. For more detailed information on existing SME policies and measures, see the European portal 
for SMEs: 
http://ec.europa.eu/enterprise/sme/index_en.htm 
COM(2007) 23 

EN 

10 

   EN 

                                                 
 
For instance, State Aid rules traditionally adopt a positive approach towards SMEs. In particular, 
the revision of the Community state aid rules has increased to €200,000 the de minimis threshold 
under which aid need not be reported. Moreover, the Services Directive35, which Member States 
have to implement by the end of 2009, requires Member States to simplify their procedures and 
formalities,  to  abolish  unjustified  requirements  and  to  set  up  single  points  of  contact,  through 
which all relevant procedures and formalities can be completed. Full and timely implementation 
of the Services Directive will help accelerate business start-up times. 

•  Concerning SMEs’ access to markets, many measures also already exist. An integrated business 
and innovation support network (the Enterprise Europe Network) was set up in 2007 and became 
fully operational in 2008 to assist SMEs in benefiting more from the opportunities of the Single 
Market.  It  promotes  match-making  events  between  SMEs,  technology  brokerage  and  partner 
searches, and organises feed-back from SMEs on EU legislation and standards. In addition, the 
new  Services  Directive  will  free  up  the  provision  of  services,  which  account  for  70%  of  EU 
value added and have a considerable potential to stimulate growth and employment. Moreover, 
the  Commission  is  already  providing  co-funding  to  support  the  participation  of  experts 
representing SMEs’ interests in the process that establishes European standards. In addition, the 
Public  Procurement  Directives  provide  a  framework  to  foster  competitive  public  procurement 
markets to the benefit of SMEs, including in particular the use of electronic public procurement. 
Finally, EU actions include the development of trade facilitation provisions in future free-trade 
agreements  (FTAs)  and  in  the  WTO  and  regulatory  and  industrial  policy  dialogues  with  third 
countries to tackle regulatory obstacles to trade. 

•  As regards the promotion of entrepreneurship and skills many measures depend on the Member 
States.  For  its  part,  in  February  2006,  the  Commission  adopted  a  Communication  on  fostering 
entrepreneurial mindsets through education and learning36, providing examples of good practices 
which  were  discussed  at  the  Oslo  conference  on  entrepreneurship  education.  Moreover,  it  is 
estimated that more than 200,000 secondary school students participate in a practically-oriented 
training scheme, launched by the Commission, whereby they run mini-companies to familiarise 
themselves with basic business concepts and skills. These students are four times more likely to 
create their own company than others. To facilitate the take-up of e-skills, not the least by SMEs, 
the  Commission  has  also  proposed  a  new  e-skills  policy  agenda.  In  addition,  to  safeguard  the 
estimated  2.8  million  jobs  which  are  at  stake  through  the  transfer  of  businesses  each  year,  the 
Commission is promoting good practices on how to design services to establish contacts between 
potential  sellers  and  buyers  of 
to  a  Commission 
Communication37,  a  pilot  action  aims  to  promote  mentoring  schemes  in  EU  Member  States  in 
order  to  enhance  the  knowledge  and  core  competences  that  are  essential  for  the  successful 
transfer  of  business  ownership.  Finally,  the  Commission  adopted  a  Communication  on 
“Overcoming the stigma of business failure – for a second chance policy” where areas of action 
for facilitating the fresh start of honestly failed entrepreneurs are put forward38. 

transferable  businesses.  Further 

•  To  improve  SMEs’  growth  potential,  the  Commission  has  already  developed  many  policies. 
Among many other measures, these include programmes to facilitate SMEs’ access to finance. 
The Commission has increased the SME focus within major Community spending programmes 
for the period 2007-2013. SMEs are at the core of Cohesion Policy which is expected to invest 
around  €27  billion  –  the  largest  share  of  EU  funding  –  in  the  area  of  entrepreneurship  and 
business support services. Moreover, €1.1 billion has been earmarked for financial instruments 

35 
36 
37 

38 

Directive 2006/123/EC of 12 December 2006. 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
Implementing  the  Lisbon  Community  Programme  for Growth  and  Jobs:  Transfer of Businesses  -  Continuity 
through a new beginning COM (2006)117 
COM(2007) 584 final 

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within  the  Competitiveness  and  Innovation  Framework  Programme  (CIP)  for  that  period.  In 
addition, to allow efficient use of financial instruments at regional level, the  Commission with 
the  European  Investment  Bank  (EIB)  and  the  European  Investment  Fund  (EIF)  launched  the 
JEREMIE  initiative  of  the  Structural  Funds39.  The  European  Agricultural  Fund  for  Rural 
Development  (EAFRD)40  will  also  spend  up  to  €10  billion  to  support  the  creation  and 
development of non-agricultural enterprises in rural areas, skills acquisition and training, as well 
as SMEs in agriculture, the food industry and forestry. In addition, to foster SMEs’ research and 
innovation, the EU’s 7th Framework programme for research and development (FP7) established 
the target of allocating 15% of the budget of its Co-operation programme to SMEs. The results41 
of the first calls for proposals show that the part allocated to SMEs in the main proposals listed 
(e.g.  after  evaluation)  is  just  below  20%.  Moreover,  the  Commission’s  innovation  policy  and 
specific  support  actions  have  contributed  to  increasing  SMEs’  participation  in  innovation  by 
addressing  market  failures  and  promoting  cooperation  between  stakeholders.  Finally,  the 
ambitious  environmental  goals  of  increasing  energy  efficiency  and  reducing  greenhouse  gas 
emissions  by  at  least  20%  by  2020  and  promoting  renewable  energy  sources  require  the 
emergence  of  a  new  business  paradigm.  The  challenge  is  to  help  SMEs  to  adopt  sustainable 
production  and  business  models  and  thus  make  them  active  players  in  shifting  the  European 
economy towards more environmentally-friendly production and consumption, while in parallel 
allowing  SMEs  to  reap  the  economic  benefits  that  this  presents.  Some  innovative  SMEs  are 
already active in “green markets” and the Commission has proposed a programme to further help 
SMEs to integrate environmental concerns into production processes and products starting with a 
better compliance with environmental legislation42. 

•  Lastly,  regular  information  and  discussion  meetings  with  European  business  organisations 
chaired  by  the  SME  Envoy  provide  a  forum  for  a  regular  exchange  of  information  on  the 
Commission’s major legislative and policy initiatives and their impact on SMEs. 

Existing policies at Member State level 

•  Member States, for their part, have all integrated SME-specific measures in their Lisbon reform 
programmes. They have also made efforts to deliver on the five priority actions requested by the 
2006 Spring European Council43 (establish a one-stop-shop for setting up a company, encourage 
entrepreneurship  through  education,  facilitate  the  recruitment  of  the  first  employee,  make  the 
‘Think Small First’ principle a guiding principle in all relevant legislation and facilitate SMEs’ 
access  to  public  procurement),  thus  contributing  to  the  implementation  of  the  “Think  Small 
First”  principle  throughout  the  European  Union.  In  particular,  the  majority  of  Member  States 
have established a one-stop-shop for setting up a company and most of them have reduced the 
time required to do so. Many of them have taken measures to develop entrepreneurial mindsets 
through  education,  although  the  progress  is  relatively  slow.  Moreover,  Member  States  are 
introducing  measures  to  raise  enterprises’  awareness  of  public  procurement  opportunities, 
although few have put in place a specific strategy to help SMEs participate in public tenders. 
•  Moreover,  the  regular  dialogue  with  Member  States  on  SME-policy  has  led  to  better 
complementarities  between  national  and  EU  measures.  The  Commission  has  supported  this 
process  by  facilitating  mutual  learning  and  exchange  of  best  practice.  It  has  collected  and 
published  on-line,  in  the  framework  of  the  European  Charter  for  Small  Enterprises’  process, 
more  than  250  good  practices  from  the  Member  States,  e.g.  in  the  areas  of  improving  on-line 
access, taxation and better regulation. 

39 
40 
41 
42 
43 

http://ec.europa.eu/regional_policy/funds/2007/jjj/jeremie_en.htm 
Council Regulation (EC) No. 1698/2005 of 20 September 2005 
1st progress report of the FP7 SME inter-services task force 
ECAP Programme: http://ec.europa.eu/environment/sme/programme/programme_en.htm 
For more details, see table 2 in Annex III 

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2.2.2.  Expected developments under the current existing SME policy  

The  existing  measures  described  above  already  address  some  of  the  most  pressing  issues  facing 
SMEs. A mid-term Review of the existing Modern SME policy took place in 200744 and showed 
that a lot of progress had already been made. The main achievements include: 

•  both  Member  States  and  the  Commission  have  made  considerable  progress  in  implementing 
actions to create a better business environment, to mainstream SME issues in major policy areas 
and to encourage more people to become entrepreneurs; 

•  the better regulation “culture” has also begun to take root across the EU. 

Indeed, creating a better business environment for all businesses, including SMEs has already had a 
great  impact  on  economic  growth.  According  to  the  Impact  Assessment  on  the  Action 
Programme45, various studies using different economic models point to potential rises in the level of 
GDP due to a 25% reduction of the administrative burden of between 1.4% and 1.8% of GDP. The 
10  ‘fast  track  actions’  identified  within  the  Action  Programme  alone  are  expected  to  generate 
significant  benefits  (estimated  at  €1.3  billion)  through  requiring  relatively  minor  changes  in  the 
underlying legislation46. This programme will indeed benefit to all businesses, including SMEs. 

Moreover, the mid-term review analysis showed that the implementation of the Modern European 
SME  policy,  which  has  been  carried  out  in  a  context  of  increasing  economic  growth,  has  had  a 
positive impact on job creation. In 2006, EU GDP growth reached 3.0% – almost twice the rate of 
2005  –  and  about  3.5  million  new  jobs  were  created.  Indeed,  SMEs  are  the  main  driver  of 
employment growth, in particular in sectors like construction, transport, communication or tourism. 

However, in spite of the progress of the comprehensive policies that are in place, the 2007 mid-term 
review  of  the  Modern  SME  policy47  concluded  that  there  is  room  for  further  improvement,  since 
some  problems  are  currently  not  or  only  inadequately  dealt  with  and  there  is  a  need  for  better 
coordination  of  existing  policies.  The  mid-term  review  therefore  emphasized  the  need  to  fully 
unlock the growth and jobs potential of SMEs and make full use of their innovative capacities by 
putting  even  more  emphasis  on  SMEs  in  the  context  of  the  next  Lisbon  cycle  2008-2010.  These 
findings are confirmed by the worse performance of EU SMEs compared to their US counterparts, 
analysed in section 2.1.4 above. 

Consequently,  an  analysis  of  the  main  existing  SME  policies  at  EU  and  national  level  has  been 
carried out in the context of this impact assessment, as well as by screening a number of studies and 
surveys (including the public consultation on this initiative), to single out the remaining problems 
that might continue to hamper SMEs’ potential. 

The  details  of  this  screening  exercise  can  be  found  in  Annex  III.  However,  for  proportionality 
reasons,  the  main  text  of  the  present  assessment  will  only  focus  on  the  analysis  of  the  selected 
remaining problems. The following list does not claim to be exhaustive, due to the wide scope and 
inherently interdisciplinary nature of the “Small Business Act” initiative. 

44 

45 
46 

47 

Commission Communication: Small and medium-sized enterprises - Key for delivering more growth and jobs. 
A midterm review of Modern SME policy, COM(2007) 592 final 
SEC(2007) 84 
European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 
final 
Commission  Communication:  Mid-term  Review  on  the  Implementation  of  the  Modern  SME  Policy, 
(COM(2007) 592 final) 

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2.2.3.  Remaining  problems  for  SMEs,  in  spite  of  existing  policies,  which  might  need  further 

public action 

EU SMEs are facing remaining problems in a number of policy areas: 

Remaining problems for SMEs as regards the implementation of the “Think Small First” approach 

•  Implementation of the “Think Small First” principle at EU level 

The results of the stakeholder consultation on this initiative (see Annex II), has confirmed that the 
administrative  burden,  overregulation  and  bureaucracy  are  by  far  the  main  general  concerns  for 
SMEs.  At  EU  level,  as  seen  above,  a  comprehensive  policy  has  already  been  underway  since 
January 2007. This policy is currently being implemented and will take more time to deliver fully. 

In  line  with  the  objective  of  this  programme,  it  is  essential  to  make  sure  that  future  legislation 
developed at EU and national level takes into consideration SMEs’ specific requirements from the 
start.  This  is  crucial  as  smaller  enterprises,  especially  very  small  businesses,  bear  higher  than 
average  regulatory  costs.  Estimates  indicate  that  where  a  big  company  spends  one  Euro  per 
employee because of a regulatory duty, a small business might have to spend on average up to ten 
Euros48. 

However, a remaining difficulty for SMEs comes from the fact that new EU legislation coming into 
force is introduced at many different dates during the year, depending on the negotiation process. In 
the public consultation, the support for common commencement dates reached 68%, although there 
are arguments that the initiative should be implemented only at national level and not at EU level. 

•  Heterogeneity of the implementation of the “Think Small First” principle at national level 

Five priority actions were established at the Spring European Council in 2006 – start-up time/one 
stop  shops,  recruiting  the  first  employee,  entrepreneurship  education,  “Think  Small  first”,  and 
access to public procurement. Overall, the implementation of the five priority actions is going in the 
right direction49. However, policy actions need to be intensified and coordinated at EU level in the 
framework of the Lisbon Partnership. Particular attention is given here to start-ups and bankruptcy 
procedures  at  national  level,  due  to  their  role  in  the  churning  process  identified  before  as  an 
important determinant of productivity growth (more details on each priority action can be found in 
annex III, table 2). 

–  Start ups: 

One of the 2006 Spring European Council priority actions was that start-up times should not exceed 
one  week.  The  latest  evaluation  carried  out  by  the  Commission  states  that  only  13  out  of  27 
Member States comply with this objective. The same source also indicates that although 23 out of 
27  Member  States  comply  with  the  main  objective  concerning  the  costs  involved  in  starting  a 
business, there remain significant differences between Member States. These facts are reciprocated 

48 

49 

European Commission, Report from the Expert Group on “Models to Reduce the Disproportionate Regulatory 
burden on SMEs”, May 2007 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 
The analysis on the Member States’ achievements come from the Communication from the Commission to the 
European  Council:  Strategic  report  on  the  renewed  Lisbon  strategy  for  growth  and  jobs:  launching  the  new 
cycle (2008-2010), COM(2007) 803 final, PART III, available at: 
http://ec.europa.eu/growthandjobs/pdf/european-dimension-200712-annual-progress-report/200712-annual-
report-annex3_en.pdf 

EN 

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   EN 

                                                 
 
 
by the feelings of the main stakeholders. Around 60% of replies to the public consultation indicated 
that there is still a need to reduce the time and costs to set up a business. Some respondents pointed 
out that significant differences exist even  within Member States.  The lack of information and the 
lack  of  appropriate  support  for  newly  created  enterprises  were  identified  as  additional  problems. 
Although the real responsibility for acting in this area clearly rests with the Member States, the fact 
that these huge disparities still exist is also an indication that the coordination role at EU-level has 
not performed as well as intended. 

–  Bankruptcy/stigma of failure  

Lower exit rates have been analysed above as the main explanation for the less dynamic churning 
process in the EU than in the US. Different elements determine the level of exit of companies out of 
the market. Bankruptcy/insolvency law is one crucial element in allowing easier exits, in particular 
by  reducing  the  time  and  costs  incurred.  Bankruptcies  account  for  some  15%  of  all  company 
closures50.  In  the  EU,  the  stigma  of  failure  is  still  present  in  the  business  environment,  the  legal 
framework  and  also  in  cultural  and  societal  behaviour.  This  creates  unnecessary  hurdles  to 
entrepreneurs who wish to restart. 47% of Europeans would be reluctant to order from a previously 
failed business; 51% of them would never invest in businesses in financial difficulties. To correct 
this stigma, one important element is to clearly distinguish between fraudulent and non-fraudulent 
bankruptcy.  In  the  EU,  only  4-6%  of  bankruptcies  are  fraudulent51.  However,  this  policy  area  is 
essentially  in  the  remit  of  Member  States.  Given  its  limited  competencies  in  the  area,  the 
Commission  can  only  flag  up  the  need  to  improve  bankruptcy  procedures52  and  has  recently 
published  a  Communication  on  overcoming  the  stigma  of  business  failure53.  Additional  action  at 
EU level in this domain can therefore only concentrate on a better implementation at Member State 
level. 

Remaining problems affecting entrepreneurial activity 

•  Education system/ entrepreneurship 

All  EU  Member  States  are  well  aware  of  the  need  to  integrate  entrepreneurship  training  into  the 
education  curricula,  but  it  is  still  far  from  universal  in  schools  and  further  and  higher  education 
institutions.  And  whilst  there  are  many  examples  of  initiatives  which  have  had  great  results  in 
encouraging young people to think in a more entrepreneurial way, entrepreneurship is a recognised 
objective of the education systems and is embedded explicitly in framework curricula in only a few 
EU Member States. Even in those Member States, implementing means (teacher training, teaching 
materials)  still  need  to  be  stepped  up54.  In  line  with  this  analysis,  84%  of  the  respondents  to  the 
public  consultation  think  that  the  education  system,  and  in  particular  the  school  curriculum,  does 
not  focus  enough  on  entrepreneurship.  They  therefore  consider  it  important  to  intervene  in  the 
education system with more systematic measures.  

50 

51 
52 

53 
54 

A.C.P.  de  Koning,  Business  failure  and  entrepreneurship  in  international  perspective,  EIM  Small  Business 
Research and Consultancy, 1999 
The percentage would be 3-4% in Italy and the UK and 7% in Austria (2003-2006 national data) 
The  European  Commission  has  limited  itself  to  collecting  data  on  the  legal  and  social  consequences  of 
business failure, facilitating the identification and dissemination of good practices and recently to working on 
early warning tools as a means of reducing the stigma of failure. 
COM(2007) 584 final 
European Commission, Assessment of compliance with the entrepreneurship education objective in the context 
of the 2006 Spring Council conclusions 

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•  Entrepreneurial gap between men and women  

Today  female  entrepreneurs  constitute  only  34.4%  of  self-employed  people  in  the  EU25.  Their 
share in start ups is around 30%. In terms of preferences, only 39.4% of women would choose to be 
self-employed compared to 50.2% of men, which shows that women are more reluctant than men to 
become  entrepreneurs55.  In  addition  to  economic  and  sociological  elements  common  to  both 
genders, the lack of social protection or the reduced level of protection available to self-employed 
women,  notably  in  the  case  of  maternity  protection,  constitutes  an  additional  obstacle  to  the 
participation of women in self-employed activities56. 

Remaining problems affecting SMEs’ access to markets 

•  Standardisation 

SMEs  still  face  difficulties  when  participating  in  and  benefiting  from  European  standardisation, 
which helps them to do business in other Member States57. According to the 2002 Observatory of 
European SMEs, the main problems SMEs face are the lack of information on new standards (26 
%),  the  lack  of  information  on  which  standards  have  to  be  met  (23  %),  difficulties  in  applying 
standards correctly (21 %), difficulties in obtaining certification of compliance with standards (16 
%) and finally the lack of opportunities to participate in the development of new standards (16 %). 

•  SMEs’ access to the public procurement market 

More  than  70%  of  the  stakeholders  answering  the  consultation  on  this  initiative  see  a  need  to 
improve SMEs’ access to public procurement and consider it very useful to increase transparency in 
EU procurement procedures. Indeed public procurement is an important market capable of boosting 
innovation,  stimulating  companies’  growth  and  creating  jobs.  According  to  estimates  from  DG 
Internal Market58, the total value of public procurement in the then 25 Member States amounted to 
some €1,800 billion in 2006, corresponding to 16% of total EU-25 GDP59, of which €370 billion are 
above the thresholds of the EU Directives.  

A  2007  study  performed  on  behalf  of  the  European  Commission  estimated  that  in  2005  the 
proportion  of  the  value  of  public  procurement  above  EU  thresholds  secured  by  SMEs  was  42%, 
which  corresponds  to  64%  of  the  number  of  contracts60.  Obviously,  these  figures  relate  only  to 

55 

56 

57 

58 
59 

60 

In line with these data, Reynolds, Bygrave, Autio, Cox and Hay (2002) have shown that men are about twice 
as  likely  involved  in  entrepreneurial  activity  than  women:  Reynolds,  P.D.  Bygrave,  W.D.,  Autio,  E.  Cox, 
L.W.&  Hay,  M.,  2002,  Global  Entrepreneurship  Monitor,  2002,  executive  report,  Babson  College,  London 
Business School and Kauffman Foundation  
European Commission; Good practices on social protection of new entrepreneurs and assisting partners and the 
impact on business creation" EIM Business and Policy Research: 
http://ec.europa.eu/enterprise/entrepreneurship/craft/craft-
studies/documents/social_protection_final_report_en.pdf 
The  Council  Conclusions  on  European  standardisation  of  December  2004,  Document  14790/2/04  REV  2, 
noted  that:  “adequate  participation  in  standardisation  of  all  parties  concerned  (social  partners,  NGOs, 
environmental interest groups, consumers, SMEs, authorities, etc.) is not sufficiently implemented at present 
within  all  Member  States.  European  standardisation  should  be  recognised  as  a  strategic  tool  for 
competitiveness and for the uniform application of technical legislation in the internal market” 
http://ec.europa.eu/internal_market/publicprocurement/index_en.htm 
These  estimates  were  based  on  data  provided  by  National  Statistical  Institutes  to  Eurostat  for  National 
Accounts and from annual reports and other sources for the Utilities sector. 
Evaluation of SME Access to Public Procurement Markets in the EU, Final Report by GHK and Technopolis, 
available at: 

http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 

EN 

16 

   EN 

                                                 
 
public  contracts  above  the  thresholds  set  by  the  EU  Directives  and  do  not  take  account  of 
subcontracts  of  all  sizes  won  by  SMEs.  However,  while  the  share  of  medium-sized  companies  in 
the  total  value  of  public  procurement  contracts  above  the  EU  thresholds  is  quite  positive  as 
compared  to  their  importance  in  the  economy,  the  analysis  suggests  that  situations  differ  greatly 
from one Member State to the other: SMEs’ share of public procurement above the EU thresholds 
ranges from 78% and 77 % in Slovenia and Slovakia to 35% and 31% in France and the UK. While 
such discrepancies might be partly explained by the relatively high share of large enterprises in the 
economy  of  certain  Member  States,  the  comparison  between  the  respective  combined  company 
turnovers  generated  by  SMEs  and  the  value  of  the  public  contracts  won  by  SMEs  would  suggest 
that there is still room for improvement and more coordination at EU level. 

In  addition,  SMEs  continue  to  face  difficulties  in  accessing  public  procurement  due  to  the 
administrative burden61. This means that to reach the share of public procurement they have, SMEs 
have to bear high transaction costs. The EU Public Procurement Directives include a set of flexible 
rules which leave a certain discretion to tendering authorities. However, the procurement culture in 
many Member States is focused on short-term cost savings which often means in practice lumping 
together smaller lots into a big tender often not accessible to SMEs, as well as weighting too heavily 
the  price  criteria  at  the  expense  of,  for  example,  innovative,  environmentally-friendly  and  more 
sustainable  products.  Therefore  the  promotion  of  principles  and  best  practices  and  a  tighter 
monitoring at EU level of the implementation of rules reducing the administrative burden could be 
needed. 

Remaining problems affecting SMEs when undertaking research and development as well as putting 
innovative ideas into practice 

According to the 2007 Observatory of European SMEs, only around 3 out of 10 SMEs in the EU 
indicated that they have new products or have income from new products. In addition, EU SMEs 
are less R&D intensive than US SMEs62. In Europe, more than 60% of the overall turnover is made 
by  SMEs  while  these  companies  only  account  for  25%  of  the  business  financed  research 
expenditure63. Moreover, R&D expenditure as a proportion of turnover is, on average, lower in EU 
SMEs than in their larger counterparts. 

The  EU  SMEs’  lack  of  innovation  and  their  lower  level  of  R&D  intensity  compared  to  larger 
companies is partly due to a limited access to finance, which is crucial for developing R&D, and is 
limited  by  market  risk  aversion,  as  seen  in  the  previous  section.  In  addition,  part  of  SMEs’ 
remaining  difficulties  in  this  field  stems  from  the  fact  that  SMEs  face  higher  relative  costs  for 
patenting and maintaining a patent than large companies or their US counterparts. In Europe, SMEs 
are approximately five times less likely to apply for a patent than large companies and are estimated 
to account for less than 20% of patent applications from EU firms at the European Patent Office64. 

61 

62 

63 

64 

This includes: difficulties in obtaining information (as they cannot allocate sufficient resources to information 
collection); lack of knowledge about tender procedures; the large size of the contracts; too short time span to 
prepare the proposal; cost of preparing the proposal (since many costs are fixed, SMEs face disproportionately 
high costs in comparison with larger enterprises); high qualification levels and required certification; financial 
guarantees  required,  discrimination  against foreign  tenderers  /favouring local  or  national  enterprises;  finding 
collaboration partners abroad. 
The average R&D intensity of SMEs in Europe is 0.34% versus 0.53% in the US. This compares to an overall 
average R&D intensity in Europe of 1.17% versus 1.57% in the US. Source: DGRTD Key Figures 2007 
OECD,  SME  and  Entrepreneurship  Outlook  2005,  Data  for  2001.  The  same  result  is  found  in  respect  to 
innovation activities. See: Eurostat (2004) Innovation in Europe, p. 40 
For example, a company of 50 employees with a turnover of 5 million euro would need to spend over 300,000 
euro a year to maintain a portfolio of 50 patents, amounting to nearly 7% of turnover. Source: 2006 Trendchart 

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Moreover, EU SMEs do not access patent protection under the same economic conditions as their 
competitors on the global market and face higher patenting costs in procedural fees, external service 
costs  and  translation  costs65.  In  addition,  European  SMEs  have  difficulties  in  managing  their 
intellectual property abroad. They are usually not aware of the rules that can help them protect their 
inventions and are ignorant of the ways to fight piracy and counterfeiting. 

This  problem  was  identified  many  years  ago  and  a  Community  Patent  and  an  EU-wide  Patent 
Jurisdiction would be a major improvement of which in particular SMEs would benefit most. The 
remaining problem here is the delay in the adoption of these improvements. 

Remaining problems affecting SMEs’ access to specific segments of financing 

First, the European venture capital market is still fragmented and hence inefficient. Because of the 
cost,  time  and  effort  needed  to  invest  across  borders  in  Europe,  many  funds  cannot  become 
sufficiently specialised and their management teams cannot develop the sectoral expertise required 
for  long-term  profitability.  Although  the  European  venture  capital  industry  has  shown  an  upward 
trend  since  200466  and  the  number  of  venture-backed  firms  is  higher  in  the  EU,  the  volume  of 
capital such European firms receive is much lower than in the US. 

Secondly,  EU  SMEs  have  insufficient  access  to  mezzanine  finance  (combining  features  of  equity 
and debt). SMEs face a situation where they do not have access to (further) debt financing, yet they 
do not wish to share ownership and are thus unwilling to consider equity finance as an alternative – 
or they do not have the potential for rapid growth required by venture capitalists. The discussions 
from  the  Fifth  Round  Table  between  bankers  and  SMEs  demonstrated  that  there  is  practically  no 
supply of mezzanine finance between €100 000 and €1 million. 

Third,  the  lack  of  microcredit  can  specifically  hinder  the  expansion  of  SMEs,  especially  micro-
enterprises. For European SMEs, borrowing small amounts for business purposes is also difficult as 
the overhead costs are high for banks and there are not enough non-bank microfinance institutions. 
This makes self employment and the development of micro enterprises difficult. 

SMEs’  insufficient  access  to  finance  is  partially  intrinsic  because  of  the  larger  volatility  of  their 
profitability  and  growth  compared  to  large  firms,  but  it  is  partially  due  to  market  imperfections 
caused by principal/agent problems and asymmetric information. Such imperfections are worsened 

65 

66 

report  "Patent  applications  by  SMEs".  Data  from  the  3rd  Community  Innovation  Survey  for  16  European 
countries and from 2000 EPO data for six EU countries 
According  to  a  ULB-Solvay  study  (WP_CEB  06-002,  2006),  the  direct  cost  to  patent  and  maintain  a  patent 
including translation and external service costs in only 13 Member States for 10 years (corresponding to the 
average approximate lifetime of a patent), amounted to 56292 Euros for an SME, as opposed to 10062 Euros in 
the  USA.  For  the  European  patent  in  13  Member  States,  33100  Euros  are  translation  and  external  services 
costs, and 23172 Euros are processing and renewal fees. Therefore, the application of a reduction of 50% of 
the taxes to SMEs for application and maintenance fees would represent an advantage of 11585 Euros for 13 
Member States only corresponding to a reduction of about 20% on the overall costs for a 10 year patent. This 
advantage is less than the total of the translation costs (13600 Euros). It is to be noted that these calculations 
are limited to 13 Member States and do not take into account the additional cost of defending a patent in 27 
Member States. The US Patent Office and the Japanese Patent Office apply a 50% reduction in fees for SMEs. 
At an EU conference on IPR Policy in Berlin in 2007, it was calculated that the total cost of application and 
maintenance of a patent for 20 years per million inhabitants is 30 times lower in the USA than in the EU 27.  
European venture capital industry has shown an upward trend since 2004. In 2006, out of €71 billion of total 
equity capital invested, venture capital investments amounted to €17.2 billion and more than 30% of the equity 
investment volume has flowed into the small enterprises. In figures this means nothing less than more of 70% 
of  all  investment  decisions  had  been  taken  to  finance  companies  with  less  than  100  employees.  EVCA 
Yearbook 2007; BVK Special “Private Equity in Europa 2006, 17.07.2007, page7. 

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by  structural  rigidities  like  low  national  savings,  an  inappropriate  regulatory  framework  and  the 
structure of the financial system67. Consequently, for many finance providers financing SMEs is an 
unattractive activity. This is particularly problematic for innovative firms that need large amounts of 
investment in an untested idea. The due diligence costs are considerable and the mortality rate of 
such  firms  is  high,  lowering  the  overall  return  on  portfolios  of  investment  in  such  firms.  This 
problem concerns more specifically young, fast growing, and innovative enterprises68. 

New problems stemming from globalisation 

•  SMEs and the environment: persistent lack of information and awareness 

SMEs still lack information and expertise as regards their own environmental impact, and they are 
not always well informed about their obligations under environmental legislation69. This persisting 
difficulty  prevents  SMEs  from  fully  exploiting  the  opportunities  for  increased  efficiency, 
competitiveness, innovation and growth offered by a sound environmental management. Indeed, the 
current SME uptake of environmental management schemes (EMS) or simple measures to preserve 
environmental  resources  and  energy  is  low70.  The  2007  Observatory  of  EU  SMEs  indicates  that 
only 6% of SMEs have an Environmental Management System (EMS) in place and that only 29% 
of  SMEs  have  instituted  some  measures  for  preserving  energy  and  resources  (46%  in  the  case  of 
large  enterprises).  Only  4%  of  EU  SMEs  have  a  comprehensive  system  in  place  for  energy 
efficiency,  which  is  much  lower  than  for  large  enterprises  (19%).  Half  of  the  respondents  to  the 
consultation on this initiative found that easier access to the European Environmental Management 
and Audit system (EMAS) would be potentially useful. 

This problem particularly affects SMEs. The bigger the company, the more likely it is to have a pro-
active environmental policy71, which is linked to the scarcity of dedicated human resources in the 
smallest  firms.  Data  shows  that  “93%  of  firms  with  more  than  500  employees  usually  have  an 
employee  to  deal  with  environmental  matters.  Among  smaller  firms  with  50-99  employees,  only 
55% have a designated person to deal with environmental affairs72”. 

•  Barriers still hinder SMEs’ access to international markets 

Many  European  SMEs  still  remain  focused  on  their  national  markets:  the  2007  Observatory  of 
European SMEs indicates that only 8% of EU SMEs reported turnover from exports (7% of micro-
enterprises  reported  exports),  which  is  significantly  lower  than  the  respective  share  of  large 
enterprises (28%). Moreover, only 12% of the inputs of an average SME are purchased abroad. This 
average  percentage  includes,  however,  a  high  level  of  disparities  amongst  Member  States. 
According 
the 
internationalisation  of  SMEs73”,  this  lack  of  knowledge  of  foreign  markets  is  mostly  the 

the  Commission’s  Expert  Group  “Supporting 

report  of 

final 

the 

to 

67 
68 

69 

70 

71 
72 
73 

OECD, The SME Financing Gap: Volume I, Theory and Evidence, 2006 
According  to  the  European  Investment  Bank’s  SME  consultation  of  2007/2008,  there  is  a  “lack  of  adequate 
financing  tools  for  a  variety  of  SME  segments,  e.g.  micro-enterprises  without  business  or  personal  assets  to 
offer as security, young, fast growing, innovative enterprises or those facing the challenge of transmission.”  
Idem. See also European commission, Impact Assessment on the ECAP programme: 
http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf 
European Commission: Public Policy Initiatives to promote the uptake of environmental management systems 
in small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004 
See for instance: NUTEK, Environmental Work in small enterprises – a pure gain?, R 2003:7, page 9-10 
http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf 
European  Commission,  Supporting  the  internationalisation  of  SMEs,  Final  Report  of  the  Expert  Group, 
December 2007:   
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/internationalisation/report_internat.pdf 

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two  elements: 

consequence  of 
time  and/or  skills  required  for 
insufficient  managerial 
internationalisation  and  the  lack  of  financial  resources.  This  is  the  reason  why,  indeed,  many 
national  and  local  actors  have  already  created  many  services  to  help  SMEs  go  international,  i.e. 
traditional  business  incubator  services  and  a  broad  range  of  other  services  (going  from 
dissemination of information, legal assistance, cultural education to activities in the field of science 
and technology)74. 

The remaining problem however is that these services are very heterogeneous and therefore not all 
service  providers  provide  all  services  and  not  all  provided  services  are  accessible  to  SMEs, 
regardless  of  their  home  country.  In  China,  for  example,  only  43%  of  the  service  providers  offer 
cultural education and networking activities. In addition, only 37% of them provide activities in the 
area  of  science  and  technology  compared  to  80%  that  provide  dissemination  of  information 
activities75.  Moreover,  access  to  these  services  is  traditionally  based  on  nationality.  Only  in  the 
recent past has there been an opening of services to non-national SMEs. Therefore some SMEs do 
not  have  access  to  special  services.  Others  must  rely  on  specific  service  providers  and  therefore 
cannot benefit from competition.  

The nature of the problem is therefore not a lack of existing services for EU SMEs wanting to go 
international,  but  the  lack  of  existing  schemes’  accessibility  and  also  the  suboptimal  level  of 
services  due  to  the  lack  of  competition.  This  analysis  is  confirmed  by  the  answers  to  the  public 
consultation  on  this  initiative  in  which  coordination  and  synergies  with  all  the  actors  involved 
(Member  States,  business  organisations,  Chambers)  and  existing  centres/networks  is  considered  a 
key element for the success of the EU centres (and crucial to avoid duplication with market based 
service providers). 

74 

75 

See :  Feasibility  study  on  setting-up  of  a  European  Centre  in  China  for  European  SMEs  and  other  activities 
(TRADE07/B2/B0) April 2008 
Idem 

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2.3. 

Summary of the remaining problems, in spite of the existing policies 

The major remaining problems EU SMEs are still facing can be divided into two groups: 

•  coordination and/or implementation issues of existing policies; 
•  remaining market or regulatory gaps not addressed at all by existing policies. 

The  remaining  problems  can  therefore  be  summarized  in  the  table  below,  by  policy  area  and  by 
category  of  problems.  Depending  on  the  category  into  which  a  particular  problem  falls,  it  may 
determine  whether  a  harder  or  softer  policy  response  is  required  and  whether  the  use  of  existing 
instruments or new ones is appropriate. 

Remaining problems 

Implementation 
/coordination problems  

Remaining  market  or 
regulatory gaps 

Impact of future EU legislation on SMEs 
Heterogeneity  of  the  implementation  of  the  “Think  Small 
First” principle at national level, including:  
–  Start-ups 
–  Stigma of failure + bankruptcy procedures. 
Entrepreneurship  is  still  not  sufficiently  reflected  in 
educational and training policies 
Insufficient level of women’s entrepreneurship  
SMEs’ difficult access to markets 
SMEs’  access  to  public  procurement  and  culture  of 
tendering authorities 
SMEs’  difficulty  in  accessing,  using  and  participating  in 
the development of standards 
Insufficient access to finance 
•  Availability of mezzanine finance 
•  Availability of micro-credit 
•  Fragmentation of venture capital 

Difficulty  taking  advantage  of  the  opportunities  linked  to 
the environment 
SMEs’  difficulties  in  accessing  international  markets  and 
especially fast growing markets  

2.4.  Who is affected?  

•  The target population of this initiative is both Community and Member States’ administrations 

and other public administrations at regional and local level; 

•  through  concrete  new  actions,  this  initiative  will  also  affect  all  types  of  SME  from  micro- 
enterprises to medium sized enterprises operating throughout the European Union. These SMEs 
cover  an  enormous  variety  of  sectors,  legal  forms  and  organisational  structure,  including  craft 
businesses. 

•  however, certain specific actions described below could be particularly beneficial to micro and 
small  enterprises,  such  as  the  General  Block  Exemption  Regulation  for  State  Aid,  mobility 
schemes  for  apprentices  and  young  entrepreneurs,  actions to  develop  the  availability  of  micro-
funds or reduced VAT rates principally for locally supplied services. 

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3. 

WHAT IS THE OVERALL POLICY OBJECTIVE IN TERMS OF EXPECTED IMPACTS? 

General objective: 

The overall objective of this proposal is to fully unlock the growth and jobs potential of European 
SMEs and make full use of their innovative capacities, in order to contribute to the objective of the 
renewed Lisbon Partnership for Growth and Jobs decided in 2005. 

Specific objectives: 

To reach this general objective, two different types of specific objectives have to be fulfilled: 

Improve the implementation of the “Think Small First” principle and the coordination 

1) 
of existing policies, by: 

•  increasing  the  partnership  with  Member  States  to  better  implement  and  coordinate 

existing policies: 

–  create  synergies  and  spillovers  between  Member  States  (e.g.  by  giving  SMEs  better 
access  to  existing  national  and  local  service  providers  which  help  SMEs  to  access 
international markets); 

–  reinforce the monitoring of the implementation of existing policies at EU and national 
level, 
the 
implementation  of  the  conclusions  of  the  2006  Spring  European  Council  at  Member 
State level); 

the  Lisbon  Partnership  (e.g.  strengthening 

the  framework  of 

in 

–  encourage  the  exchange  of  experiences  at  EU  level,  e.g.  to  promote  the  teaching  of 

entrepreneurship in education systems. 

•  anchoring the “Think Small First” in policy making at EU and national level: 

–  develop  a  set  of  common  principles  to  be  applied  at  EU  and  national  level  when 
conceiving and implementing policies, in order to generate political commitment to act 
in favour of SMEs; 

–  propose concrete initiatives to make SMEs’ life easier; 
–  avoid overlaps between policies; 
–  simplify State Aid rules by proposing a new General Block Exemption Regulation; 
–  reducing  cross-border  difficulties  in  the  Single  Market  by  proposing  a  European 

Company Statute. 

2) 

Address the remaining regulatory and market gaps 

•  fostering entrepreneurship, by: 

–  promoting entrepreneurship and the image of entrepreneurs in education curricula; 
–  encouraging new entrepreneurs, in particular female entrepreneurs ; 

•  further improve SMEs’ access to finance, by:  

–  increasing the availability of micro-credit and mezzanine finance for SMEs; 
–  reducing venture capital market fragmentation at EU level ; 

•  increasing SMEs’ access to markets, by: 

–  fostering a more SME-friendly culture among tendering authorities; 
•  improving SMEs’ access to, use of and participation in the development of standards; 
•  increasing  SMEs’  awareness  of  the  opportunities  of  sustainable  products  and  processes  by 

developing on-the-ground environmental and energy advice; 

•  improving  SMEs’  access  to  international  markets  and  especially  fast  growing  markets  such  as 

China and India. 

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3.1. 

Has account been taken of any previously established objectives?  

The present initiative from the Commission takes into account: 

•  The  Lisbon  objective  of  the  EU  becoming  the  world’s  most  competitive  and  dynamic 
knowledge-based economy capable of sustainable economic growth with more and better jobs, 
greater  social  cohesion  and  respect  for  the  environment.  To  reach  this  goal,  the  coordinated 
European  reform  agenda  put  in  place  under  the  renewed  Lisbon  Partnership  for  Growth  and 
Jobs76  has,  inter  alia,  encouraged  an  increasing  number  of  Member  States  to  integrate  the 
interests of SMEs into their policy-making processes. 

•  The EU’s Better Regulation Agenda in which the reduction of the administrative burden by 25% 
by  2012  and  the  simplification  of  existing  legislation  are  main  priorities.  The  existing  164 
simplification  initiatives  selected  by  the  Commission  for  the  period  2005-2009  aim  at  making 
rules  clear,  easy  to  understand  and  user-friendly  without  watering  down  essential  regulatory 
protection.  Effort  is  being  focussed  on  projects  bringing  significant  benefits  to  business  and 
citizens, in particular small and medium sized enterprises. 

•  The Single Market review77 announced that the Commission will examine a range of initiatives 

to back SMEs, in the form of a Small Business Act for Europe in 2008. 

•  In  the  Commission’s  Communication  to  the  October  2007  Meeting  of  Heads  of  State  and 
Government:  “The  European  Interest: Succeeding  in  the  age  of  globalisation”  the  Commission 
underlined the need to fully unlock the growth and jobs potential of SMEs and make full use of 
their innovative capacities. 

•  The existing EU Modern SME policy (see annex III, table 3, for a detailed analysis). 

4. 

WHAT ARE THE MAIN POLICY OPTIONS AVAILABLE TO REACH THE OBJECTIVE? 

4.1.  Which policy options have been considered? 

The previous sections of this document have mapped the existing problems in different policy fields 
which  explain  the  lack  of  sustainable  growth  of  EU  SMEs,  and  analysed  the  EU’s  entitlement  to 
address these problems. The present section focuses on how these problems could most efficiently 
be tackled, by comparing different options. However, while the problems identified above cover a 
broad range of areas, the analysis hereafter will not scrutinise every specific option to tackle each 
specific problem but instead will establish the best approach to achieve the general policy objective. 
In  addition,  each  individual  action  covered  in  this  initiative  which  normally  requires  an  impact 
assessment will either be subject to an individual impact assessment or has already been subject to 
such an assessment. 

There are 4 possible basic options for how the EU may address the problems identified above: i.e. 
the  insufficient  implementation  of  the  “Think  Small  First”  principle,  the  insufficient  coordination 
and  coherence  of  certain  SME  policies  at  national  and  EU  level  and  the  persistence  of  certain 
market and regulatory gaps facing EU SMEs: 

•  Option  0:  to  withdraw  existing  SME  policy  measures  at  EU  level  and  let  Member  States  and 
local  authorities  develop  their  own  policies  depending  on  their  specific  needs  and  particular 
remaining market or regulatory gaps; 

•  Option 1: no additional action (baseline scenario); 

76 

77 

Commission  Communication:  Working  together  for  growth  and  jobs.  A  new  start  of  the  Lisbon  strategy, 
COM(2005)24 
Commission Communication: A single market for 21st century Europe, COM(2007) 724 final  

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•  Option 2: stepping up EU SME policy through a political partnership approach with the Member 
States,  aimed  at  enhancing  framework  conditions  for  SMEs  and  entrepreneurship  including 
specific additional policies to address remaining market and regulatory gaps; 

•  Option  3:  developing  and  implementing  a  fully-fledged  Community  approach  to  SME  policy 
with legally binding objectives and principles to be implemented at EU and Member State level 
and far-reaching Community programmes to address the remaining market and regulatory gaps 
EU SMEs are facing. 

4.1.1.  Options discarded at an early stage 

•  Option  0:  the  option  to  withdraw  existing  SME  policy  measures  at  EU  level  and  let  Member 
States and local authorities develop their own policies would deny the positive experience with 
SME policy introduced as part of the renewed Lisbon Strategy as evidenced by the assessment of 
the results of the first 2005-2007 cycle (and analysed in detail in Annex III, table 3). Moreover, 
this option would not be credible from a political point of view. Indeed the stakeholders’ answers 
to  the  public  consultation  on  this  initiative  revealed  an  apparent  clash  between  a  number  of 
opinions  arguing  for  less  EU-level  action  and  those  favouring  more  EU  intervention  and 
universality in the field of SME policy. However, the latter view prevails, as an overwhelming 
majority of business organisations argue for a legally binding SBA. The “cut back” option is not 
a  credible  option  from  both  an  economic  and  a  political  perspective  and  will  therefore  not  be 
analysed further. 

•  Option  3:  Developing  and  implementing  a  fully-fledged  Community  approach  to  SME  policy 
with legally binding objectives and principles to be implemented at EU and Member State level 
and  far-reaching  Community  programmes  will  not  be  further  analysed  either.  This  option  was 
seriously considered at the beginning of this exercise, as many business organisations argue for a 
legally  binding  SBA.  However,  as  many  of  the  areas  relevant  to  SMEs’  growth  potential  are 
mainly or partly in the remit of Member States (e.g. education, start-up, insolvency law), setting 
legally  binding  objectives  is  clearly  in  contradiction  with  the  subsidiarity  principle,  which  is  a 
requirement and presupposition for Community action. This was confirmed by the answers to the 
public  consultation  where  the  systematic  application  of  the  subsidiarity  and  proportionality 
principles was considered helpful by 70% of the respondents. Moreover, this option would not 
differ  fundamentally  from  option  2  in  terms  of  its  potential  impacts  (economic,  social  and 
environmental), as its main incremental benefits as compared to the baseline option would be the 
same as those of option 2, i.e. the development of synergies between policy areas and spillovers 
between  local  and  EU  level.  In  fact  the  effect  of  an  increased  level  of  implementation  of  the 
“think small first” principle as compared to the baseline scenario would be almost impossible to 
assess due to the reason that the non-respect of the subsidiarity principle could to a large extent 
increase the resistance to implementation on the ground. For these reasons, option 3 has not been 
selected for further assessment. 

4.1.2.  Options selected for further assessment of their impacts 

•  Option  1  (no  additional  action  or  baseline  option):  This  option  consists  of  the  existing  EU 
SME policy, which is mainly composed of the existing Modern SME policy as endorsed by the 
Council and specific targeted EU support programmes, as well as a number of measures already 
planned or in implementation phase, as described in the table 3 in annex III. The “no additional 
action”  option  will  serve  as  the  baseline  against  which  option  2,  which  is  the  only  credible 
option, will be assessed. 

•  Option  2: This  option  consists  of  stepping  up  the  existing  EU  SME  policy  through  a  political 
partnership  approach  with  the  Member  States,  aiming  at  enhancing  framework  conditions  for 

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SMEs and entrepreneurship and including targeted policies to address the remaining market and 
regulatory gaps facing EU SMEs, as analysed in the problem definition. It aims at establishing a 
true political dynamic between the EU and Member State level to put SMEs at the forefront of 
economic policies as part of a long-term vision. In substance, this requires an improvement in the 
policy  approach  towards  SMEs  both  at  Community  and  national  levels  by  making  sure  that 
legislation  and  programmes  are  conceived  from  the  start  and  then  implemented  in  a  way  that 
respects the needs and specific characteristics of SMEs (the “Think Small First” principle). A set 
of new actions, compared with the existing EU policy, could be developed – in partnership – into 
a coherent framework in the policy areas where a justification to act has been ascertained in the 
problem definition. The content of these new actions will be described in the next section, on a 
case by case basis, when comparing the impact of this option with the baseline. 

5. 

ANALYSIS OF IMPACTS 

5.1. 

Impacts of option 1: No additional Action (baseline option) 

The problem definition has singled out two types of remaining problems SMEs are facing, in spite 
of existing polices: 

•  problems of implementation and coordination of existing policies and; 
•  remaining market or regulatory gaps, not covered by established or planned policies. 

Therefore, the main negative impact of option 1, i.e. keeping EU SME policy as it is, would be not 
to address the remaining gaps and would therefore maintain some barriers to EU SMEs’ growth. As 
regards coordination and implementation issues, it is difficult to foresee what type of progress could 
be achieved over the long run at EU and Member State level, but the main impact of option 1 in this 
respect would be a lower pace of reforms favourable to SMEs. However, the current SME policy 
would  continue  to  produce  its  beneficial  effects.  The  following  type  of  economic,  social  and 
environmental impacts might consequently arise: 

Economic impacts 

Even  if  it  is  very  difficult  to  give  a  quantitative  estimation  of  the  impact  of  the  current  EU  SME 
policy  on  economic  growth,  what  is  clear  is  that  this  policy  delivers  and  will  continue  to  deliver 
several key actions focussed on some main determinants of growth including R&D and innovation, 
investment and access to finance. To give just some examples, the Structural Funds could remain 
the  largest  Community  funding  instruments  benefiting  SMEs78.  Around  16-18%  of  the  total 
allocation  for  Cohesion  Policy  of  €347.4  billion  is  planned  to  be  spent  in  relation  to  SMEs. 
Moreover, the Seventh Framework Programme for Research and Technological Development (FP 
7)  includes  a  number  of  incentives  for  SME  participation,  including  an  increased  upper  rate  of 
reimbursement  for  research  and  technological  development  activities  from  50%  to  70%.  The 
results79  of  the  first  calls  for  proposals  show  that  the  proportion  allocated  to  SMEs  in  the  main 
proposals  listed  (e.g.  after  evaluation)  is  just  below  20%80.  Moreover,  the  Competitiveness  and 
Innovation Framework Programme (CIP)81, with a budget of approximately €3.6 billion, provides 
better access to finance for SMEs and support for entrepreneurship, innovation, ICT as well as to a 

78 
79 
80 

81 

http://ec.europa.eu/regional_policy/index_en.htm 
1st progress report of the FP7 SME inter-services task force 
Data show that this result can have a positive correlation with GDP. For example, a 1-euro increase in public 
spending on research and development (in EU countries) results in an additional 0.93-euro of expenditure on 
research and development in the private sector, , Competitiveness Report, 2004 
http://ec.europa.eu/enterprise/enterprise_policy/cip/index_en.htm 

EN 

25 

   EN 

                                                 
wider uptake of new and renewable energies and improving energy efficiency. Lastly, the European 
Agricultural  Fund  for  Rural  Development  (EAFRD)82  will  spend  up  to  €10  billion  during  the 
programming  period  2007-2013  to  support  the  creation  and  development  of  non-agricultural 
enterprises  in  rural  areas,  skills  acquisition  and  training,  as  well  as  SMEs  in  agriculture,  food 
industry and forestry. 

Social impacts 

From a social point of view, one impact of keeping the EU SME policy as it is would be to maintain 
the  contribution  of  EU  SMEs’  growth  to  job  creation  and  regional  cohesion.  Of  course,  “the 
implementation of the Modern European SME policy has been carried out in a context of increasing 
economic growth:  in  2006, EU GDP growth reached 3.0% – almost twice the rate of 2005 – and 
about 3.5 million new jobs were created” and it is difficult to establish a clear causal link between 
the EU SME policy and these results at aggregate level. However, SMEs being the main driver of 
employment  growth  (see  problem  definition),  particularly  in  sectors  like  construction,  transport, 
communication  or  tourism,  this  option  would  continue  to  influence  job  creation  positively.  In 
addition, current actions under the EU SME policy may have a positive impact on employment in 
the future by fostering entrepreneurial mindsets and by making education and training more broadly 
available  through  the  existing  Life  Long  Learning  programme.  For  instance,  it  is  estimated  that 
more than 200,000 secondary school students already participated in a practically-oriented training 
scheme, launched by the Commission, whereby they run mini-companies to familiarise themselves 
with basic business concepts and skills. However, option 1 will not sufficiently address the gender 
gap  which  would  have  a  negative  impact  on  a  specific  category  of  entrepreneurs,  particularly 
important for local development. Neither would this option address in the short run the insufficient 
extent to which entrepreneurship is embedded in national framework curricula. 

Environmental impacts 

Part of SMEs’ difficulty in complying with environmental legislation is their relatively high fixed 
costs.  The  Commission  has  therefore  developed  a  programme  to  help  SMEs  to  integrate 
environmental  concerns  into  production  processes  and  products  starting  with  a  better  compliance 
with  environmental  legislation83.  The  environmental  benefit  of  such  an  approach  can  be  very 
significant as the collective impact of SMEs on the environment is high. Although precise data are 
scarce, a frequently quoted estimate is that SMEs, taken together, could be responsible for up to 70 
per cent of all industrial pollution84 and 60% of total carbon emissions85. However, in the current 
situation, a remaining problem is SMEs’ lack of awareness of their own impact on the environment 
and of the opportunities stemming from more sustainable products and processes. Existing policies 
as  summarized  in  table  3  in  annex  III  already  provide  many  opportunities.  Some  room  for 
improvement seems to exist in the area of increasing awareness of the environmental challenge and 
existing  opportunities.  For  instance,  half  of  the  respondents  to  the  consultation  on  this  initiative 
found Community support for energy audits potentially useful. 

82 
83 
84 

85 

Council Regulation (EC) No. 1698/2005 of 20 September 2005 
http://ec.europa.eu/environment/sme/programme/programme_en.htm 
See:  European  Commission:  Public  Policy  Initiatives  to  promote  the  uptake  of  environmental  management 
systems in small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004, 
p. 15. See also: Smith, M.A., Kemp, R., Small firms and the Environment 1998: A Grounded Report, 1998, 
Groundwork, Birmingham 
Marshall: Economic Instruments and the Business Use of Energy, 1998, Stationery Office, London 

EN 

26 

   EN 

                                                 
5.2. 

Impacts of option 2 as compared to option 1 

Economic impact of option 2 as compared to option 1 

•  Policy areas  
•  Improving 

the 

administrative 
and 
regulatory 
burden on SMEs 

•  Baseline (option 1) 
• 

In  January  2007,  the  Commission  presented  an 
Action  Programme  to  reduce  administrative 
burdens  on  businesses  in  the  EU  by  25%  by 
201286. According to the Impact Assessment on 
the  Action  Programme87,  various  studies  using 
different  economic  models  point  to  potential 
rises in the level of GDP from a 25% reduction 
of  the  administrative  burden  of  between  1.4% 
and  1.8%  of  GDP.  The  10  ‘fast  track  actions’ 
identified  within  the  Action  Programme  alone 
are  expected  to  generate  significant  benefits 
(estimated  at  €  1.3  billion)  through  relatively 
minor  changes  in  the  underlying  legislation88. 
This  would  benefit  all  businesses  including 
SMEs. 

•  New  EU  legislation  coming  into  force  is 
introduced  at  many  different  dates  along  the 
year, depending on the negotiation process. 

•  Entrepreneurship  • 

In  the  current  situation,  entrepreneurship  is  a 
recognised  objective  of  the  education  systems 
and 
in  national 
framework curricula in only a few EU Member 

is  embedded  explicitly 

Incremental economic effect as compared to option 1: 

•  Option 2 
•  Potential new actions: 
•  Further guidance in IA guidelines to measure SME impacts 
•  Examine the possibility to establish common commencement dates at EU level 
• 
•  SMEs  have  specific  cost  sensitivity89:  where  a  big  company  spends  one  Euro  per  employee 
because of a regulatory duty, a small business might have to spend on average up to ten Euros.  
•  Usually  three  explanations  are  offered  for  the  disproportionate  regulatory  burden  on  smaller 
businesses,  i.e.  the  fixed-cost  nature  of  regulation,  the  lower  efficiency  of  smaller  businesses  in 
dealing  with  regulation  and  the  fact  that  in  small  businesses  the  most  important  resource,  the 
entrepreneur himself, has to deal with regulation. 

•  Therefore  option  2,  by  increasing  the  focus  on  SMEs’  specific  needs  in  future  legislation  would 

bring a additional particular benefit to SMEs.  

•  According to the Small Business Research Trust survey (2001) in the UK, a small business with 
10-14 employees spends 31 hours a month complying with government regulation and paperwork, 
while an owner of a business with 50 or more workers needs 43.4 hours a month to comply, with 
business indicating that introducing common commencement dates would lead to an estimated10% 
reduction of costs overall.  

•  Data from the US illustrate, ceteri paribus, the potential magnitude of the benefit resulting from 
administrative  burden  reduction  for  SMEs.  In  fiscal  year  2003  alone,  the  US  Small  Business 
Administration  Office  of  Advocacy  documented  more  than  USD  $6.3  billion  in  regulatory  cost 
savings and more than $5.7 billion in recurring annual savings on behalf of small business90. 

•  Potential new actions: 
•  Promote  teaching  of  entrepreneurship  in  national  curricula  and  improve  the  image  of 

entrepreneurs. 

•  Promote  women’s  entrepreneurship  by  establishing  an  EU  network  of  female  entrepreneur 

86 
87 
88 
89 
90 

COM(2007) 23 
SEC(2007) 84 
European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 final 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 
Office of Advocacy of the U.S. Small Business Administration, The Small Business Economy: A Report to the President, 2004 

EN 

27 

EN 

 
  
                                                 
in 

States.  Even 
these  Member  States, 
implementing means (teacher training, teaching 
materials) still need to be stepped up. 
in 

remaining  a  gap 
entrepreneurship between men and women. 

terms  of 

is 

•  There 

•  Innovation 
R&D 

and 

•  The  EU’s  7th  Framework  programme  for 
research and development (FP7) established the 
target of allocating 15% of the budget of its Co-
operation programme to SMEs.  

•  The results95 of the first calls for proposals show 
that  the  proportion  allocated  to  SMEs  in  the 
main  proposals  listed  (e.g.  after  evaluation)  is 
just below 20%. 

ambassadors and promoting mentoring schemes to inspire women to set up their own business and 
promote entrepreneurship to women graduates 
Incremental economic effect as compared to option 1: 

• 
•  Promoting entrepreneurship in education system thanks to an increased partnership with Member 

• 

States in the framework of the Lisbon Strategy could increase implementation of this policy.  
In turn, this could increase the entrepreneurial mindset in Europe, which is largely determined by 
cultural  and  societal  determinants.  For  instance,  the  Commission  has  estimated  that  students 
having  participated  in  mini-companies  projects  to  familiarise  themselves  with  basic  business 
concepts and skills are four times more likely to create their own company than others91. 

•  Higher level entrepreneurship has a correlation with economic growth, particularly in high-income 
countries92,  although  GDP  growth  is  influenced  by  many  other  factors.  In  particular,  countries 
exhibiting a greater increase in entrepreneurship rates tend to exhibit greater subsequent decreases 
in unemployment rates93. 
Increased women’s entrepreneurship could contribute to higher economic growth. As shown by the 
OECD LEED programmes, countries with low rates of enterprise creation are also those in which 
business  creation  is  significantly  lower  among  women  than  men.  In  contrast,  in  countries  that 
experienced robust growth in the late 1990s, such as the United States, Australia, Canada, Korea, 
Spain and Norway, levels of women’s entrepreneurship were highest94. 

• 

•  Potential new actions: 
•  Continue efforts over time to ensure a relevant level of participation of SMEs to FP7. 
•  Adapt  FP7  participation  rules  to  encourage  the  growth  of  SMEs,  by  ensuring  that  an  SME 
participating in a FP7 project can keep the benefit of SME treatment for the whole duration of that 
project, even if it exceeds the SME ceilings during that period. 
Incremental economic effect as compared to option 1: 

• 
•  An  increased  partnership  between  the  EU  and  Member  States  to  increase  the  level  of  R&D  in 
SMEs,  including  through  research  programmes  could  generate  spillovers,  whose  mechanism  can 
be exemplified by what happened in the framework of the existing Lisbon Partnership. Looking at 
EU R&D in general (not SME-specific), it has been estimated that if Member States achieve the 
R&D  intensity  targets  announced  in  their  Lisbon  National  Reform  Programmes,  R&D 
expenditures in the EU will increase from 1.9% of GDP in 2004 to around 2.7% in 2010, whereas 

91 

92 
93 
94 
95 

Commission Communication: Fostering entrepreneurial mindsets through education and learning: 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
Global Entrepreneurship Monitor 2004 
D. Audretsch, Entrepreneurship: A survey of the literature, October 2002 
See: OECD, Entrepreneurship and Local Economic Development, Programme and Policy Recommendation, Paris, 2003 
1st progress report of the FP7 SME inter-services task force 

EN 

28 

EN 

 
  
                                                                                                                                                                                                                                                    
 
•  Access to finance 

•  The current policy has already improved SMEs’ 
access  to  finance.  The  Competitiveness  and 
Innovation  Framework  Programme  (CIP)97, 
with  a  budget  of  approximately  €3.6  billion, 
provides  for  improving  access  to  finance  for 
SMEs. 

•  However,  the  following  remaining  problems 

would not be solved: 

•  Availability of micro-credits 
•  Option 1 already provides support for increasing 
the  availability  of  micro-credit.  For  example, 
the  financial  guarantees  of  the  Multiannual 
and 
Programme 
Entrepreneurship 
over 
have 
177 000 micro-enterprises. 

Enterprises 

benefited 

for 

•  However, if no additional action is developed to 
institutions,  many 
support  microfinance 
potential  entrepreneurs  will  still  not  get  access 
to microcredit because banks consider them too 
risky.  

•  Availability of mezzanine finance 
• 

In  the  basic  alternative,  the  mezzanine  finance 
market would develop slowly due to the limited 
number  of  private  finance  providers  (mostly 
public institutions for the promotion of SMEs).  

this  could  lead  to  an  increase  in  output  of  3.3%  for  the  European Union  as  whole.  Cross-border 
knowledge spillovers would account for roughly half of these gains96. 

•  Potential new actions: 
• 
• 
• 

Increase SMEs’ access to finance (see below) 
Incremental economic effect as compared to option 1: 
In  general,  option  1  would  keep  the  benefits  of  the  baseline  and,  in  addition,  push  for  better 
Member State framework conditions in order to overcome the barriers that restrict the development 
of a Single Market for financing, especially risk capital financing, within Europe.  

•  Long  term  impacts  could  include  an  improved  financing  structure  of  European  firms  (more 
equity), more efficient financial markets; and better matching of supply and demand of finance. 
•  This option would provide impetus to the further development of European markets for financing 
SMEs,  acting  as  a  catalyst  for  private  funding  and  complementing  in  areas  where  market 
imperfections are still large and private investors scarce. 

•  Potential new actions/option 1 
•  Support  microfinance  institutions  through  a  new  "Microfund"  providing  additional  support  for 

non-bank microfinance institutions, with an initial capital of about €40 million. 

•  Ensure  that  accompanying  business  support  services  are  available  for  entrepreneurs  getting 

microcredit. 

•  Ensure that microfinance institutions benefit from appropriate regulation 
• 
•  Option 1 would encourage the further emergence of microcredit institutions that could also attract 

Incremental economic effect as compared to option 1: 

private investments, thus benefiting riskier entrepreneurs and microenterprises.  

•  Potential new actions/option 1: 
•  Developing  markets  for  mezzanine  financing  in  cooperation  with  the  EIB,  including  for  High 

Growth SMEs or SMEs that wish to internationalise. 

•  Member  States  should  develop  financing  programmes  that  address  the  availability  of  mezzanine 

funding between €100 000 and €1 million. 
Incremental economic effect as compared to option 1: 

• 

96 

97 

EN 

European  commission,  Spillovers  and  complementarities  in  the  context  of  the  Lisbon  Growth  and  Jobs  Strategy  including  economic  effects  of  the  Community  Lisbon 
Programme 
http://ec.europa.eu/enterprise/enterprise_policy/cip/index_en.htm 

29 

EN 

 
  
 
                                                                                                                                                                                                                                                    
•  Venture capital 
• 

In  the  current  situation,  many  Member  States 
are too small to develop a market where venture 
capital  funds  can  have  a  sufficient  volume  of 
deals  that  would  allow  them  to  specialise  and 
specific 
develop  world-class  expertise 
industries.  

in 

•  The drawback in the current situation is that the 
growth  potential  of  innovative  firms  is  limited 
by the small amount of venture investments per 
deal98,  which  can  slow  down  the  growth  of 
those  firms  that  have  the  highest  potential  to 
grow  into  big  ones  and  give  an  edge  to 
competitors  from  elsewhere  with  comparable 
technology  or  service.  In  the  end,  this  shortage 
also  leads  to  a  higher  probability  of  failure  of 
those investments in Europe. 
In  the  current  situation  the  Commission  is 
already increasing its co-funding to support the 
participation  of  experts  representing  SMEs’ 
interests 
that  establishes 
European standards. 

the  process 

in 

• 

•  However, in practice SMEs still face difficulties 
when  participating  in,  and  benefiting  from 
European  standardisation  which  helps  them  to 
do business in other Member States. 

•  The  availability  of  attractive  instruments  would  help  to  develop  the  mezzanine  finance  market 
more quickly, especially in countries that have no tradition in such instruments. The goal is also to 
attract private investors.  

•  Potential new actions: 
•  Member  States  to  review  tax  systems  so  that  private  investors  (like  business  angels)  have 

incentives to invest in SMEs either directly or indirectly through investment funds.  

•  The  Commission  to  define  a  set  of  benchmarks  for  the  content  of  investment  readiness 

programmes; and establish easily accessible quality criteria. 

•  Establish  a  standing  network  linking  the  Commission,  the  EIF  and  Member  States  and  regions 

implementing JEREMIE 
Incremental economic effect as compared to option 1: 

• 
•  Option 1, in comparison, would increase the efficiency of the venture capital market in Europe by 
allowing easier operations across Europe. This would expand the benefits of the Single Market to 
venture capital. 

•  This  would  help  venture  capital  funds  to  specialise  and  grow,  would  raise  the  profitability  of 

venture capital, and increase its attractiveness for private institutional investors. 

•  Potential new actions: 
• 

Increasing  EU  financial  support  to  promote  SMEs’  access  to  standards  and  the  standardisation 
process. 

•  Promoting  the  publication  of  abstracts  of  European  Standards  with  unrestricted  access  in  all 

languages. 

Incremental economic effect as compared to option 1: 

•  Create an “SME Help Desk” in the European Standard Organisations. 
• 
•  An  increased  use  of  standards  could  help  SMEs  benefit  more  from  interoperability  and 
complementary  products/services  within  the  Single  Market,  in  particular  as  regards  the 
introduction of complex systems, such as the expansion of the Internet. Facilitating interoperability 
would  increase  competition  between  new  and  already  existing  products,  services  and  processes 
among all businesses, including SMEs. 

•  Standardisation  

98 

EN 

The average deal size for European early-stage investment is just €0.4 million against €2.2 million in the US. Source: Recent Developments in the European private equity 
markets, ECFIN/REP/55145/07-EN, 12 November 2007 

30 

EN 

 
  
 
                                                 
•  Public 

procurement  

•  SMEs,  in  particular  medium  size  companies, 
have  reached  a  proportional  share  of  public 
procurement  as  compared  to  their  weigh  in  the 
economy. In 2005 the proportion of the value of 
public  procurement  above  EU 
thresholds 
secured  by  SMEs  was  42%  which  corresponds 
to 64% of the number of contracts. 

•  Situations differ greatly from one Member State 
to  the  other  and  more  coordination  at  EU  level 
would be useful. 

to 

•  Moreover,  SMEs  face  higher  costs  to  access 
the  remaining 
public  procurement,  due 
levels  and 
administrative  burden  at  all 
culturally-related 
regards 
as 
awarding  authorities.  This  reduces  SMEs’ 
overall  competitiveness  as 
to 
reallocate comparatively more resources to gain 
their share in public procurement. 

they  have 

difficulties 

•  From  an  economic  point  of  view,  this  means 
that their productivity is hampered compared to 
big companies. 

•  SMEs  difficulty 
to take advantage 
from 
the 
opportunities 
linked 

the 

to 

to 

•  Policies  already  exist 

increase  SMEs’ 
environmental up-take. This includes the ECAP 
Programme,  which  already  helps  SMEs  to 
into 
integrate 
production processes and products starting with 

environmental 

concerns 

• 

Increased SMEs’ participation in the standardisation process could foster their innovation capacity. 
Indeed, the use of standards contributes to diffusing knowledge and facilitating the application of 
technology;  this  may  then  trigger  innovation,  in  particular  non  technological  innovation  in  the 
service sector where SMEs are the dominant form of business. 

•  Standards provide customers with trust in the safety and performance of new products and allow 
differentiation  of  products  through  reference  to  standardised  methods  and  are  therefore  key  for 
SMEs to enter niche markets. 

•  Potential new actions: 
•  Option 2 would improve transparency and SMEs’ access to public procurement through exchange 
of  best  practices  and  the  development  of  a  code  of  conduct  to  awarding  authorities,  in  order  to 
reach a proportion of the value of public procurement above EU thresholds secured by SMEs that 
would reflect even better their share in the total added value (57.6 % of the EU-27’s non financial 
business economy value added). 

Incremental economic effect as compared to option 1: 

•  An additional action at EU level would be to encourage the development of e-procurement. 
• 
•  As the main problem faced by SMEs is the transaction cost to access public tenders, option 2 as 
compared  to  the  baseline  scenario  would  help  SMEs  to  reallocate  resources  to  other  activities 
(R&D, innovation) and increase their productivity. 

•  Even an incremental increase of SME participation in public procurement could have an important 
multiplication effect, due to the volume of the market at stake. According to estimates from DG 
Internal Market99, the total value of public procurement in the then 25 Member States amounted to 
some €1,800 billion in 2006, corresponding to 16% of total EU-25 GDP100, of which €370 billion 
is above the thresholds of the EU Directives. 

•  Another indirect positive effect could be, by changing the tendering authorities’ culture, to create 
positive  social  and  environmental  impacts  by  weighting  less  heavily  the  price  criteria  at  the 
expense of, for example, innovative, environmentally-friendly and more sustainable products. 

•  Potential new actions: 
•  Establish  a  network  of  environment  and  energy  efficiency  experts  in  the  new  Enterprise  Europe 

business and innovation support Network, financed by the CIP programme. 
Incremental economic effect as compared to option 1: 

• 
•  This approach could help SMEs to understand the economic benefit of sustainable production. 

99 
100 

EN 

http://ec.europa.eu/internal_market/publicprocurement/index_en.htm 
These estimates were based on data provided by National Statistical Institutes to Eurostat for National Accounts and from annual reports and other sources for the Utilities 
sector. 

31 

EN 

 
  
                                                 
environment 

•  Access 

to 

international 
market  

a  better  compliance  with  environmental 
legislation101. 

•  However,  SMEs  still  lack  awareness  of  the 
opportunities  linked  to  sustainability  and  of 
their own impact on the environment. 

•  A certain number of SMEs, especially from the 
old Member States, have at least, by a restricted 
number of service providers, access to nearly all 
relevant  services  to  go  international  and  to  do 
business in China. 

•  However,  under  the  current  situation,  many 
other  SMEs  are  excluded  from  services/service 
providers  who  would  help 
to  go 
international. 

them 

•  Service  providers  do  not 

competition 
suboptimal. 

and 

services 

face 
are 

serious 
therefore 

•  Once  their  lack  of  awareness  has  been  tackled,  SMEs  would  be  well  placed  to  devise  and 
implement  effective  environmental  strategies,  due  to  shorter  lines  of  communication,  close 
personal links, less bureaucracy and the ability to initiate change quickly102. 

•  Potential new actions: 
•  Establish  European  Business  Centres  in  selected  markets,  starting  with  fast  growing  economies 

such as India and China. 

•  Member States to encourage coaching from of SMEs by large companies in order to bring them to 

international markets. 
Incremental economic effect as compared to option 1: 

• 
•  EU Centres will not be a genuine service provider. SMEs themselves will benefit more from this 
information than big companies as they do not have sufficient resources to gather such information 
by themselves. 

•  Moreover,  the  EU  Centres  could  compensate  for  the  potentially  higher  transaction  costs  for  EU 
non-national  SMEs  using  the  services  of  another  EU  national  service  provider  by  establishing  a 
kind of voucher support scheme. 

•  Therefore all groups of SMEs would benefit from these EU Centres. SMEs that do not have access 
at the moment will get it. SMEs that do already have it could expect higher quality services related 
to increased competition. Lastly, existing centres could gain more customers. 

•  This option would most likely be very cost efficient because it takes stock of the already existing 

• 

expertise on the ground. 
In addition, encouraging coaching of SMEs by large companies could provide SME suppliers with 
access to global markets at lower costs than those faced by individual small-scale producers, due to 
the intermediation function assured by the larger contractor103. 

•  By the fact that this option is more likely to attract more SMEs abroad than the baseline scenario, it 
could  lead  to  higher  competitiveness  and  economic  growth.  Effectively,  the  2002  OECD  study 
“High-Growth  SMEs  and  Employment”  demonstrates  that  exporting  is  a  precursor  of  strong 
growth. The link between exports and enhanced productivity/competitiveness is clearly established 
by  numerous  studies104and,  specifically,  firms  with  international  sales  have  higher  sales  growth 
than firms that sell only domestically 

101 
102 

103 
104 

EN 

http://ec.europa.eu/environment/sme/programme/programme_en.htm 
Correa,  JA,  Hurtado-Torres,  N,  Sharma,  S  and  García-Morales,  VJ  -  Environmental  strategy  and  performance  in  small  firms:  A  resource-based  perspective,  Journal  of 
Environmental Management, vol. 86, Issue 1, 2008, pp. 88-103 
Idem 
As an example: Establishment level empirical study of links between exporting, innovation and productivity-CIS4” Richard Harris and Q Cher Li, September 2006 

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Social impacts of option 2 as compared to option 1 

Overall, option 2 could foster SMEs’ growth potential more than option 1. As seen in the problem 
definition,  SMEs  have  a  particular  capacity  to  generate  net  job  creation.  Therefore  the  main 
incremental  social  impact  of  option  2  would  be  to  foster  employment.  To  give  one  example, 
providing  easier  access  to  even  small  amounts  of  finance  can  have  a  large  job  creation  effect  by 
facilitating  self-employment.  However,  no  aggregate  quantitative  estimation  of  this  effect  is 
available as it would require complex modelling beyond of the remit of this exercise.  

In  addition,  the  partnership  approach  of  option  2  could  be  particularly  efficient  in  influencing 
entrepreneurship  preferences.  These  preferences  are  based  on  cultural  determinants  and  are 
therefore difficult to change. Against this background, option 2 proposes a new action to promote 
teaching  of  entrepreneurship  in  national  curricula  and  improve  the  image  of  entrepreneurs.  This 
action  would  typically  be  based  on  increased  cooperation  between  EU  and  Member  Sates,  as 
education  is  a  national  competence.  Exchanges  of  best  practices  at  EU  level  could  increase  the 
knowledge of how to teach entrepreneurship. In addition, synergies between EU policies could help 
develop a favourable regulatory and societal environment, multiplying the effect of a new action in 
the  field  of  education105.  By  the  same  logic,  another  complementary  action  of  option  2  could 
promote  women’s  entrepreneurship  by  establishing  an  EU  network  of  female  entrepreneur 
ambassadors and by promoting mentoring schemes to inspire women to set up their own business 
and  promote  entrepreneurship  to  women  graduates.  This  would  have  a  positive  effect  on  female 
entrepreneurs  but  also  bring  additional  opportunities  for  economic  growth  and  therefore 
employment. Increased women entrepreneurship could contribute to higher economic growth and at 
the same time favour the inclusion of women in the labour market.  

Lastly, the creation of political momentum in favour of SMEs, through increased cooperation at EU 
and  national  level  could  create  political  spillovers  in  the  social  field,  e.g.  the  SME  focus  may 
facilitate  accompanying  measures 
the  respective  policy  domains  or  facilitate  other 
complementary reforms. The effects stemming from such political economy complementarities can 
be potentially powerful. For instance, Community action directed at improving SME performance 
can generate political momentum for nationally-driven labour market reforms. 

in 

Environmental impacts of option 2 as compared to option 1 

Overall, option 2, as compared to option 1, could have a more positive environmental impact. As 
seen above in the problem definition, one difficulty SMEs are facing in this field is complying with 
environmental  legislation.  A  partnership  approach  between  the  EU  and  Member  States  could 
improve this situation for SMEs, on the one hand by making sure that legislation is conceived from 
the start in a way that ensures a high level  of protection of the  environment but  also respects the 
specific  needs  of  SMEs,  and  on  the  other  hand  by  avoiding  a  situation  whereby  the  terms  of 
Community directives are exceeded significantly when implemented in national law (so called gold 
plating  issue).  This  approach  could  therefore  help  to  prevent  negative  cross  border  externalities 
(such as pollution), while ensuring a reduction of the administrative burden for SMEs. In addition, 
in the environmental field, the increased synergy effect between policy areas will again play a role. 
Option 2, however, would consist of a series of measures with different levels of relevance for the 
environment. Some of them would have a direct positive impact; others would have an indirect or 
an insignificant impact on the environment. 

•  Potential new actions with direct positive environmental impacts 

105 

See: European Commission, Green paper, entrepreneurship in Europe, COM(2003) 27 final 

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As seen in the problem definition, SMEs lack awareness of their own impact on the environment 
and  of  the  economic  opportunities  associated  with  sustainable  production.  Option  2  therefore 
proposes establishing a network of environment and energy efficiency experts in the new Enterprise 
Europe business and innovation support Network, financed by the CIP programme. This new action 
could  increase  SMEs’  awareness  through  direct  contact  at  local  level,  environmental  advice  and 
sharing  of  best  practices.  As  a  consequence,  SMEs  could  better  seize  the  opportunity  linked  to 
sustainability through savings stemming from energy and environmental efficiency and new market 
opportunities. 

As regards savings, few aggregate data are available at EU level, but national estimates can give an 
order of magnitude of their potential impacts. To give one example “Stimular”, a Dutch initiative to 
stimulate environmental innovation, estimates that €1 spent on this programme can save €13.50 in 
costs for the SMEs, e.g. energy savings, waste and emissions reductions, etc106. Another example 
comes from the UK Carbon Trust and concerns the potential benefit of a more widespread adoption 
of advanced metering systems in the UK SME community. According to the Carbon Trust study107, 
a total of 5.1 MtCO2 savings could be identified and 2.5 MtCO2 savings could be implemented per 
year.  This  level  of  identified  savings  is  equivalent  to  over  2%  of  all  carbon  emissions  from  UK 
businesses. Scaling up the results in financial terms indicates that total cost savings of £650 million 
could be identified and £300 million implemented per year across the UK SME community. 

As  regards  market  opportunities,  SMEs  are  well  placed  to  devise  and  implement  effective 
environmental  strategies,  due  to  shorter  lines  of  communication,  close  personal  links,  less 
bureaucracy and the ability to initiate change quickly108. In addition, SMEs (as analysed in section 
2.1.3)  already  play  a  key  role  in  creating  radically  new  innovations  that  open  up  entirely  new 
markets  or  revolutionise  them.  The  environmental  and  energy  efficiency  field  provides  new 
opportunities.  Examples  include  the  extraction,  supply,  distribution  and  conversion  of  renewable 
energy, but there is also fertile ground in the delivery of services through low-carbon means, the re-
design  of  existing  products,  the  management  of  energy  demand,  changing  behaviour  and  the 
adaptation  of  existing  infrastructure.  UK  estimates109  indicate  that  on  the  basis  of  the  UK 
Government’s  plans  to  tackle  climate  change  and  the  emerging  voluntary  market,  the  UK  market 
opportunity alone will be worth £4 billion a year by 2010. The compliance market resulting from 
the UK Government’s climate change programme over the next 10 years will be worth around £30 
billion or more. 

Moreover,  option  2,  by  increasing  partnership  between  EU  and  Member  States  could  generate 
political momentum, and reaching out at local level would help to spread information and examples 
of the opportunities offered by sustainable products and processes. 

•  Potential new actions with indirect positive environmental impacts (synergy effect) 

Option 2 would aim at developing a proper Single Market for venture capital in Europe. This in turn 
could bring synergies in the environmental field, since it has been estimated that venture capital is 
becoming  increasingly  important  for  environmental  sustainability  (€1.25  billion  was  raised  in 

106 

107 
108 

109 

EIM,  Stimular  naar  het  jaar  2000,  een  evaluatie  van  5  jaar  Stimular,  1996.  For  more  examples,  see: 
http://www.environmental-savings.com/. For additional example see: http://www.environmental-savings.com/ 
Carbon Trust, Advanced metering for SMEs, Carbon and cost savings, 2007. 
Correa, JA, Hurtado-Torres, N, Sharma, S and García-Morales, VJ - Environmental strategy and performance 
in small firms: A resource-based perspective, Journal of Environmental Management, vol. 86, Issue 1, 2008, 
pp. 88-103 
Opportunities  for  innovation,  the  business  opportunities  for  SMEs  in  tackling  the  causes  of  climate  change, 
Shell Springboard, October 2006 

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2006). Sustainable venture capital funds invest in the range of €1-5 million with a focus on early-
stage  and  typical  investments  in  renewable  energies  and  clean  technologies110  which  could  be 
particularly beneficial to SMEs focusing on niche markets. 

The same type of benefit could stem from an increased participation of SMEs in the standardisation 
process and the use of standards. Indeed, standards are essential to improve the energy and resource 
efficiency  of  products,  processes  and  services  and  the  competitiveness  of  European  industry, 
including  SMEs.  Standardisation  is  important  in  enabling  the  uptake  of  eco-innovation  and 
environmental  technologies,  facilitating  their  dissemination  in  the  Single  Market,  and  accessing 
global  markets111.  In  addition,  advanced  performance  benchmarks  and  wider  use  of  labelling  are 
key  to  informing  consumers  about  product  performance  and  rewarding  frontrunners.  This  could 
enable SMEs to increase the return on investment in environmental and energy efficiency. 

Option 2 would also strive to change the culture of awarding authorities in the public procurement 
field. This  also could have  a positive effect on SMEs’ uptake of environmental practices. Indeed, 
the  procurement  culture  in  many  Member  States  is  focused  on  short-term  cost,  weighting  too 
heavily the price criteria at the expense of, for example, innovative, environmentally-friendly and 
more  sustainable  products.  A  more  sustainable  culture  could  help  SMEs  market  sustainable, 
innovative products, for instance in the field of energy efficiency equipment, where many producers 
are SMEs. 

•  Potential new actions with no relation to the environment 

Potential  measures  proposed  in  option  2  focusing  on  direct  determinants  of  SME  growth  (start-
up/bankruptcy  policy  implementation)  would  not  have  any  direct  impact  on  the  environment. 
However, by fostering SMEs’ growth, they could lead to more production and therefore to a more 
extensive use of natural resources. However, this side effect would be offset by the accompanying 
use of the above mentioned measures. 

6. 

COMPARISON OF THE OPTIONS 

The  proposal  for  a  “Small  Business  Act”  is  a  package  of  different  measures  of  various  natures. 
Therefore,  the  impacts  of  options  1  and  2  are  compared  on  a  qualitative  basis  only,  since  a 
comprehensive  quantitative  assessment  would  require  complex  modelling  that  goes  beyond  the 
scope of proportionality for this impact assessment. 

Two main categories of problems were singled out in the problem setting section: 

•  implementation/coordination of existing policies 
•  remaining regulatory or market gaps not addressed by existing policies. 

As regards the second category of issues, option 2 evidently has a clear benefit, as the continuation 
of option 1 would not address spontaneously the remaining problems.  

Looking at the first category of issues, option 1 and 2 would differ in terms of timescale. One can 
argue that option 1, business as usual, could solve the implementation problem over the long run in 
the  framework  of  the  Lisbon  Partnership.  In  contrast,  option  2  would  bring  the  benefit  of 

110 
111 

Meyer, T., Venture Capital in Europe: Spice for European Economies, Deutsche Bank Research, Oct. 2006 
See : Commission Communication : Towards an increased contribution from standardisation to innovation in 
Europe, COM(2008) 133 final 

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35 

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accelerating the pace of reforms at EU and national level to set the right framework conditions for 
SMEs. 

However,  option  2,  by  increasing  the  level  of  coordination  at  EU  and  national  level  and  by 
widening the scope of the current SME policy would bring a specific added value for Community 
action, including: 

•  The cross border dimension  of the remaining  specific  problems  of  EU  SMEs: Section 2 above 
has highlighted a number of remaining problems that hamper the development of EU SMEs and 
which  clearly  have  a  major  cross-border  EU  dimension.  One  example  relates  to  the 
fragmentation of the European venture capital market along national borders that contributes to 
small  funds,  small  invested  amounts  and  low  profitability  of  venture  capital  in  Europe.  The 
environmental challenge facing SMEs clearly also has, by definition, a cross-border dimension. 
In  these  fields,  the  EU  level,  by  virtue  of  its  scale  and  scope,  is  best  suited  to  fostering  the 
compatibility  of  systems,  ensuring  a  minimum  level  of  harmonisation  and  tackling  negative 
cross-border externalities such as pollution. 

•  Spillovers and synergies For most of the issues mentioned above, the EU and the Member States 
each appear to have an important complementary role to play. There is therefore a strong case, in 
line  with  the  Lisbon  strategy  for  Growth  and  Jobs,  to  develop  inter-linkages  between  national 
policies and to coordinate their approach to generate spillovers and complementarities. Actions 
taken  by  one  national  government  for  its  own  SMEs  and  for  its  economy  in  general  have  an 
impact  on  the  performance  of  other  countries’  SMEs  and  affect  EU  markets.  In  such  cases, 
purely national, uncoordinated, action would be suboptimal because the important cross-border 
externalities or economies of scale would be left unexploited. For example, the creation of an EU 
Business  Centre  in  China  could  take  stock  of  the  already  existing  expertise  on  the  ground  and 
multiply  its  efficiency  through  networking  and  enhanced  competition.  SME  policy  being 
essentially  interdisciplinary,  there  are  also  important  complementarities  between  reform 
measures  within  or  across  policy  domains  which  give  rise  to  potentially  strong  synergies  from 
their coordinated implementation. For instance, better access to finance and innovation and skills 
as well as a reduced administrative burden and increased entrepreneurship are also intrinsically 
interrelated. 

•  Increased monitoring: Some issues seem more clearly in the remit of Member States than others. 
This is typically the case of start-up procedures and insolvency laws which have a major role in 
the  churning  process  and  therefore  on  SMEs’  growth  potential.  These  problems,  however, 
depend  essentially  on  national  legislation  and  are mainly  or  partly  outside  EU  competence.  At 
Community  level,  however,  useful  actions  can  consist  of  mutual  learning  and  an  increased 
monitoring  of  the  implementation  of  SME-friendly  reforms  in  the  framework  of  the  Lisbon 
Partnership. 

Against this background, it appears that option 2 does not bring negative impacts as compared to 
option 1 but does address gaps that option 1 does not address and adds value to the current SME 
policy framework. 

Therefore option 2 should be the preferred option. 

6.1. 

Justification for action at EU level 

6.1.1. 

Subsidiarity test and impact on budget 

It  has  to  be  underlined  once  more  that  the  proposal  for  a  “Small  Business  Act”  is  a  package  of 
different measures. This impact assessment will therefore not check the subsidiarity case for each of 
the specific possible action. In fact, under option 2, the Commission would announce a number of 

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new  initiatives  (both  legislative  and  non  legislative)  to  support  SMEs’  growth.  While  some 
initiatives will be adopted at the same time as the main document, others will be adopted at a later 
stage. Where appropriate, the Commission will carry out detailed impact assessments of the specific 
initiatives in accordance with the impact assessment guidelines112. 

Currently an overall subsidiarity check can be provided for the following list of measures: 

(1) 

Initiatives to be included in option 2, of legislative nature that have already been subject to 
an impact assessment: 

•  Proposal for a European Private Company (SPE) 

(2) 

Initiatives to be included in option 2 that do not need an impact assessment: 

•  Proposal for a General Block Exemption Regulation 
•  A Code of Practice (public procurement) 

(3) 

Initiatives of non legislative nature that have a substantial budgetary impact: 

The  initiatives  falling  under  this  category  will  be  developed  within  the  current  EU  budget  (CIP, 
FP7,  Structural  funds,  Cohesion  fund).  They  would  correspond  to  marginal  relocation  of  public 
funds within certain programmes taking into consideration remaining problems. 

• 

Increased EU financial support to SMEs’ information on, 
and use of European standards. 

•  No EU or MS budgetary implication 
•  Support  increased  to  €1  million  in  2008  and  €2.1  million 

•  New  micro-fund  to  be  set  up  and  managed  by  the  EIF, 
providing  additional  support  for  non-bank  micro-finance 
institutions  through  capital  and  technical  assistance  to 
such  institutions  and  with  an  initial  capital  of  40  million 
euro. 

•  Financing  a  network  of  environmental  and  energy 

efficiency experts. 

•  European Business Centres 

from 2009 onwards  

•  CIP budget 
•  No EU or MS budgetary implication 
•  No EU or MS budgetary implication 
•  €40  million:  €20  million  will  come  from  the  EIB,  the  rest 

will come from private sources 

•  No EU or MS budgetary implication 
•  €4 million earmarked for 2009, CIP budget 
European Business Centres 
•  €5 million in 2008 (DG RELEX) 
•  Final decision to establish a Centre in China by end of 2008 

(after presentation of feasibility study) 

European Business and Technology Centre in India 
•  Budget  for  preparatory  action:  €7  million  in  2007and  €5 

million in 2008. (DG RELEX) 

•  Call for Proposal closed end May 2008 
•  Contract signature in August 2008 and start of the Centre by 

spring 2009 

6.1.2.  Are  there  especially  severe  impacts  on  a  particular  social  group,  economic  sector 

(including size-class of enterprises) or region? 

This  initiative  intends  to  bring  positive  impacts  to  all  SMEs,  but  also  to  address  specific  target 
groups (e.g. young  innovative  firms,  women entrepreneurs).  However,  if this  objective is reached 
through a balanced approach, it will foster economic growth and therefore benefit other players, e.g. 
large companies. 

6.2. 

Are there impacts outside the Union (“external impacts”)?  

•  Should  this  initiative  contain  legally  binding  elements,  it  will  have  some  impacts  on  non  EU 
the  “acquis 
Member  States.  For 
the  Candidates  Countries  which  have 
communautaire” in their national legislation (Croatia, Turkey and the Former Yugoslav Republic 
of Macedonia), it will have the positive impacts described above. 

integrate 

to 

112 

SEC(2005)791 

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37 

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•  Moreover,  any  provisions  of  this  initiative  concerning  the  Single  Market  will  apply  to  the 

EEA/EFTA countries (Norway, Iceland and Liechtenstein). 

•  Support measures in this initiative to increase environmental sustainability and energy efficiency 
in  SMEs  will  also  help  with  tackling  global  challenges  such  as  climate  change  and  would 
therefore have a potentially positive international impact. The development and transfer of eco-
efficient technologies would therefore also help developing countries and economies in transition 
to use resources more efficiently and thus save financial resources for their development needs. 
•  The  SBA  could  be  a  source  of  inspiration  and  guidance  for  neighbouring  countries  when 

developing their SME policy. 

7. 

IMPLEMENTATION AND MONITORING 

7.1. 

Implementation 

Option  2  is  the  preferred  option.  This  option  aims  at  ensuring  a  balanced  approach  between  the 
ownership of the SME policy needed at all levels and a necessary degree of peer pressure through a 
regular  monitoring  of  a  high  level  political  commitment.  Therefore,  this  option  needs 
implementation  measures  that  combine  the  respect  of  the  subsidiarity  principle  but  also  a  higher 
level  of  enforceability  of  the  SME  focus,  to  bring  an  added  value  as  compared  to  the  current 
situation.  Taking  these  elements  into  consideration,  this  option  could  best  be  implemented  as 
follows: 

The initiative could take the form of a Communication from the Commission containing common 
principles for EU and national level and defining specific actions targeted at SMEs in a wide range 
of  policy  areas.  An  eventual  endorsement  of  these  principles  and  objectives  by  the  European 
Council would secure the highest degree of Member States’ political commitment.  

In  addition,  the  European  Council  could  establish  a  mechanism  of  regular  review  of  the  progress 
made  in  relation  to  SMEs’  framework  conditions  and  monitoring  of  progress  in  achieving  the 
agreed objectives. 

7.2.  Monitoring and evaluation 

A thorough implementation of the SBA is of primary importance and requires the full commitment 
of  both  the  Community  and  the  Member  States.  The  Commission  therefore  expects  the  European 
Council to endorse the SBA in order to demonstrate its recognition of the role played by SMEs and 
the need to unlock their growth and jobs potential.  

The Small Business Act for Europe being a key component of the Lisbon Strategy for Growth and 
Jobs, the monitoring of its implementation needs to take place within this framework. In practice, 
Member  States  could  be  invited  to  integrate  the  SBA  in  their  National  Reform  plans,  taking 
advantage of the update of the Lisbon cycle which is foreseen for the end of 2008 and which will 
influence  the  setting-up  of  national  SME  policies  for  the  next  three  years.  Subsequently,  the 
progress  made  in  implementing  these  SBA  principles  and  actions  would  have  to  be  reported  in 
Members  States’  annual  implementation  reports.  As  for  the  Commission,  it  would  assess  the 
progress made in implementing the SBA, in the framework of its Community Lisbon Programme 
(CLP). Progress made both at national and community level would be presented as a result in the 
annual  Lisbon  strategic  report  prepared  by  the  Commission.  That  would  allow  the  European 
Council to review progress made in the field of SME policy in its spring meeting and may adopt 
where appropriate policy targets based on the SBA objectives. 

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ANNEX I 

References 

SMEs, economic and social performances 

General studies: 
•  European  Commission,  Observatory  of  EU  SMEs,  SMEs  in  Europe  2003.  This  report  coordinated  by  David  B. 
Audretsch  (Max  Planck  Institute), A.  Roy  Thurik  (Erasmus  University  Rotterdam),  Ton  Kwaak  and  Niels  Bosma 
(both  EIM  Business  &  Policy  Research)  has  developed  inter  alia  a  comprehensive  literature  review  on  the 
theoretical framework linking entrepreneurship and economic growth 

•  Handbook of research on Entrepreneurship Policy, edited by David B. Audretsch, Isabel Grilo and A. Roy Thurik, 

Max Plank Institute of economics and EIM Business and policy research, Edward Elgar publishing, 2007 

•  OECD, SME and Entrepreneurship Outlook, 2005 

Commission’s documents: 
•  Commission  Communication:  Implementing  the  Community  Lisbon  Programme  Modern  SME  policy  for  Growth 

and Employment, (COM(2005)551) 

•  Commission Communication: Mid-term  Review on the Implementation of the Modern SME Policy, (COM(2007) 

592 final) 

•  Commission  Communication:  Working  together  for  growth  and  jobs.  A  new  start  of  the  Lisbon  strategy, 

Communication to the European Spring Council, COM(2005)24 

•  Commission Communication: The European Interest: Succeeding in the age of globalisation (COM(2007) 581 final) 
•  European Commission, Community Innovation Surveys 
•  European Commission, Lisbon Strategy for Growth and Jobs: 2007 Strategic Report Country – Assessment of the 

National Reform Programmes, 11 December 2007 

•  European Commission, BEPA Monthly Brief – Issue 10, December 2007, The role of SMEs in EU’s growth and 

jobs , By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 

•  European Commission, BEPA Monthly Brief - Issue 11, January 2008, The role of SMEs in Innovation in the EU, 

By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 

•  European  commission,  Spillovers  and  complementarities  in  the  context  of  the  Lisbon  Growth  and  Jobs  Strategy 

including economic effects of the Community Lisbon Programme 

•  Observatory of European SMEs, 2007 
•  Eurostat: SMEs and entrepreneurship in the EU 2006: 

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-NP-06-024/EN/KS-NP-06-024-EN.PDF 

•  Eurostat, Enterprises by size class -overview of SMEs in the EU, 2008 
•  Eurostat, European business, Facts and figures 2007 

External studies: 
•  Aghion, P., R. Blundell, R. Griffith, P. Howitt and S. Prantl: “Entry and Productivity Growth: Evidence from micro-

level data”, Journal of the European Economic Association, 2003 

•  Almus,  Matthias  and  Eric  A.  Nerlinger,  Testing  Gibrat's  Law  for  Young  Firms  -  Empirical  Results  for  West 

Germany, Small Business Economics, 15(1), August, 1-12, 2000 

•  Audretsch, D. B., Innovation and Industry Evolution, Cambridge: MIT Press, 1995 
•  Baumol, W. J., The Free-Market Innovation Machine, Princeton University Press, 2002 
•  Baumol, W. J., Macroeconomics of unbalanced growth: the anatomy of urban crisis, American Economic Review, 

57 (3), 1967,  

•  Baumol, W. J., “Paradox of the Services: exploding costs, persistent demand”, Chapter 1 in “The growth of Service 
Industries – The Paradox of Exploding Costs and Persistent Demand” edited by T. ten Raa and R. Schettkat, Edward 
Elgar Publishing Limited, 2001 

•  Bartelsman  E.,  Haltiwanger  J.  and  Scarpetta  S.,  Microeconomic  evidence  of  creative  destruction  in  industrial  and 

developing countries, Industrial and Developing Countries,” IZA Discussion Paper Series No. 1374 
•  Berry A., SME Competitiveness: The Power of Networking and Subcontracting, No. IFM 105, 1997 
•  Birch D., Haggerty A., Parsons W., Who’s creating job?, Cambridge, MA, Cognetics Inc, 1997 
•  Caves,  Richard  E.,  Industrial  Organization  and  New  Findings  on  the  Turnover  and  Mobility  of  Firms,  Journal  of 

Economic Literature, 36(4), December, 1947-1982, 1998 

•  Cincera,  M.,and  O.  Galgau:  “Impact  of  Market  Entry  and  Exit  on  EU  Productivity  and  Growth  Performance,” 

Economic Papers 222, European Commission, 2005 

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39 

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•  Ericson, Richard and A. Pakes, Markov-Perfect Industry Dynamics: A Framework for Empirical Work, Review of 

Economic Studies, 62, 53-82, 1995 

•  Geroski,  Paul  A.,  What  Do  We  Know  About  Entry,  International  Journal  of  Industrial  Organization,  13(4), 

December, 1995 

•  Global Entrepreneurship Monitor 2007:   

http://www.gemconsortium.org/download/1207219104975/GEM_2007_Executive_Report.pdf 

•  Harhoff, D., K. Stahl and M. Woywode, Legal Form, Growth and Exit of West-German Firms: Empirical Results 
for  Manufacturing,  Construction,  Trade  and  Service  Industries,  Journal  of  Industrial  Organization  46,  453-  488, 
1998 

•  Harris  R.  and  Q  Cher  Li,  Establishment  level  empirical  study  of  links  between  exporting,  innovation  and 

productivity-CIS4”, 2006 

•  Hopenhayn, H.A., Entry, Exit and Firm Dynamics in Long Run Equilibrium, Econometrica, 60, 1127-1150, 1992 
•  Klepper,  Steven,  Entry,  Exit,  Growth,  and  Innovation  over  the  Product  Life  Cycle,  American  Economic  Review, 

86(3), 562-583, 1996 

•  Lambson,  Val  E.,  Industry  Evolution  with  Sunk  Costs  and  Uncertain  Market  Conditions,  International  Journal  of 

Industrial Organization, 9, 171-196, 1991 

•  OECD, Entrepreneurship and Local Economic Development, Programme and Policy Recommendation, Paris, 2003 
•  OECD, High-Growth SMEs and Employment, 2002 
•  OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs in Global 

Value Chains, 2007 

•  OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 
•  Sutton, J., Gibrat's Legacy, Journal of Economic Literature 35, 40-59, 1997 
•  U.S. Small Business Administration, The Small Business Economy, Report to the President, 2005 
•  Van Reenen, J., Economic Performance of the EU and the Structural Reforms Agenda: Firm Level Evidence, GEPA 

Meeting of 9th July, 2007 

Administrative burden 

Commission’s documents: 
•  European, Commission: Action Programme to reduce administrative burdens on businesses in the EU by 25% by 

2012, COM(2007) 23 

•  European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 final 
•  European Commission, Observatory of EU SMEs, 2007 
•  European Commission, Models to reduce the disproportionate regulatory burden on SMEs, 2007: 

http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 

External studies: 
•  OECD,  SMEs  Statistics:  Towards  a  more  Systematic  Statistical  Measurement  of  SME  Behaviour,  Second 
Conference  of  Ministers  responsible  for  Small  and  Medium-sized  Enterprises  (SMEs)  on  Promoting 
Entrepreneurship and Innovative SMEs in a Global Economy held in Istanbul on 3-5 June 2004 

•  Rapport de la Commission pour la libération de la croissance française, Sous la présidence de Jacques Attali) :   

http://www.liberationdelacroissance.fr/files/rapports/rapportCLCF.pdf 

•  UK Department  for  Business,  Enterprise  and  Regulatory  Reform,  Better  Regulation  and  Policy  Team,  Policy  and 
Challenge Directorate, Business, Enterprise and Regulatory Reform, Full and Final Impact Assessment for Common 
Commencement Dates 

•  World Bank, Doing Business in 2008: 

http://www.doingbusiness.org/documents/FullReport/2008/DB08_Full_Report.pdf 

Entrepreneurship 

Commission’s documents: 
•  2007 Flash Eurobarometer on entrepreneurial mindsets 
•  Commisssion  Communication:  Fostering 

entrepreneurial  mindsets 

through 

education 

and 

learning: 

http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 

•  European  Commission,  Good  Practices  in  the  Promotion  of  Female  Entrepreneurship  Examples  from  Europe  and 

other OECD Countries, 2002: 
http://ec.europa.eu/enterprise/entrepreneurship/craft/craft-women/documents/study-female-entrepreneurship-en.pdf 

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•  European  Commission;  Good  practices  on  social  protection  of  new  entrepreneurs  and  assisting  partners  and  the 

impact on business creation" EIM Business and Policy Research: 
http://ec.europa.eu/enterprise/entrepreneurship/craft/craft-studies/documents/social_protection_final_report_en.pdf 
•  European Commission, Assessment of compliance with the entrepreneurship education objective in the context of 

the 2006 Spring Council conclusions 

•  European Commission, Green Paper on Entrepreneurship in Europe (2003) 27 final 
•  European Commission, Observatory on EU SMEs, SMEs in Europe 2003 

External studies: 
•  De Koning A.C.P., Business failure and entrepreneurship in international perspective, EIM Small Business Research 

and Consultancy, 1999 

•  Grilo I., Irigoyen J-M, Entrepreneurship in then EU: to wish and not to be, Small Business Economics 26, 2006 
•  Reynolds,  P.D.  Bygrave,  W.D.,  Autio,  E.  Cox,  L.W.&  Hay,M.,  2002,  Global  Entrepreneurship  Monitor,  2002, 

executive report, Babson College, London Business School and Kauffman Foundation 

Bankruptcy, second chance 

Commission’s documents: 
•  European  Commission  Communication,  Overcoming  the  stigma  of  business  failure  –  for  a  second  chance  policy 

implementing the Lisbon partnership for growth and jobs, COM(2007) 584 final 

External studies: 
•  Armour  and  Cumming,  Bankruptcy  Law  and  Entrepreneurship,  University  of  Cambridge  Centre  for  Business 

Research Working Paper No. 300, 2005 

•  Baldwin et al, Failing Concerns: Business Bankruptcy in Canada, Statistics Canada, Ottawa, 1997 
•  De  Koning,  A.C.P.,  Business  failure  and  entrepreneurship  in  international  perspective,  EIM  Small  Business 

Research and Consultancy, 1999 

•  OECD, Bankruptcy legislation in OECD member and non-member economies, 2006 
•  World Bank, Doing Business in 2008: 

http://www.doingbusiness.org/documents/fullreport/2008/DB08_Closing_Business.pdf 

SMES and Information and Communication Technologies (ICT) 

Commission’s documents: 
•  The European e-Business Report 2006/07 edition: 

http://www.ebusiness-watch.org/key_reports/documents/EBR06.pdf 

External studies: 
•  Capgemini Consulting, Researching the impact of SEPA on the payments market and its stakeholders, 2007 
• 

IDC White Paper, Networking Skills in Europe, September 2005 

SMEs, labour force and sills 

Commission’s documents: 
•  European  Commission:  Joint  employment  report  2006/2007,  doc  number  6706/07,  adopted  on  23rd  of  February 

2007 

•  European Commission, Observatory of EU SMEs, SMEs in Europe 2003 
•  European Commission, Observatory of SMEs, Competence development in SMEs, 2003/1 
•  European  Commission,  Report  of  the  Expert  Group:  First  Employee  Obstacles  to  Growth  –  Recruiting  the  First 

Employee, final version, 2005 

•  European Commission, Eurobarometer survey, 2004 
•  Eurostat: labour cost surveys: http://europa.eu.int/estatref/info/sdds/en/lc/lc_lcs_sm.htm 
•  Eurostat (2002) SMEs in Europe – “Competitiveness, innovation and the knowledge-driven society 

External studies: 
•  EIM/SEOR, Policy instruments to Foster Training of the Employed, Vol. 1. Main Report, 2005 
•  Mäki,  K.;  Pukkinen,  T.,  Työnantajaksi  ryhtymisen  kynnykset  (Barriers  to  employment  among  Finish  self-

employed), Studies and reports, Ministry of Trade and Industry, Helsinki, 2000 

•  OECD, Employment Outlook, 2007 

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•  OECD,  Knowledge,  Work  Organisation  and  Economic  Growth,  Labour  Market  and  Social  Policy-Occasional 

Papers No 50, Paris, 2001 

•  OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 

SMEs and the Single Market 

For more references see:  
•  European Commission: Impact assessment on the proposal for a European Private Company Statute (reference to be 

added) 

•  Feasibility  Study  of  a  European  Statute  for  SMEs–  Final  Report,  Contract  letter  No  FIF  20030950: 

http://www.ec.europa.eu/enterprise/entrepreneurship/sme_statute.htm 

SMEs and public procurement 

Commission’s documents: 
•  European commission, The European Observatory for SMEs Sixth Report,   

2000:http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/ensr_6th_report_en.pdf 

•  European commission, Evaluation of Public Procurement Directives Markt/2004/10/D, Final Report 

External studies: 
•  Evaluation of SME Access to Public Procurement Markets in the EU, Final Report by GHK and Technopolis:   

http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 

SMEs and internationalisation 

Commission’s documents: 
•  European Commission, Supporting the internationalisation of SMEs, Final Report of the Expert Group, December 

2007: 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/internationalisation/report_internat.pdf 

•  European Commission, 2003 Observatory of EU SMEs, Internationalisation of SMEs: 

http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/smes_observatory_2003_report4_en.pdf 

External studies: 
•  Fliess, B. and C. Busquets, The Role of Trade Barriers in SME Internationalisation, OECD Trade Policy Working 

Papers, No. 45, OECD Publishing, 2006 

SMEs and finance 

Commission’s documents: 
•  European Commission Communication : Removing obstacles to cross-border investments by venture capital funds, 

COM(2007) 853 final 

•  European  Commission,  Recent  Developments  in  the  European  private  equity  markets,  ECFIN/REP/55145/07-EN, 

12 November 2007 

•  European Commission, Observatory of SMEs, SMEs and access to finance, 2003/2 

External studies: 
•  EVCA Yearbook 2007; BVK Special “Private Equity in Europa 2006, 17.07.2007 
•  OECD, The SME Financing Gap: Theory and Evidence, volume I, 2006 
•  Meyer T. ,Venture Capital in Europe: Spice for European Economies, Deutsche Bank Research, Oct. 2006 
•  Murray,  Venture  Capital  and  government  policy,  in  Handbook  of  research  on  venture  capital,  ed.  by  Hans 

Landström, Edward Elgar, 2007 

SMES, research and development and innovation 

Commission’s documents: 
•  European Commission, Observatory of European SMEs, High-tech SMEs in Europe, 2002 / No 6 
•  European  Commission,  Revised  Community  Framework  for  State  aid  for  research,  development  and  innovation. 

See: http://ec.europa.eu/competition/state_aid/reform/rdi_en.pdf 

•  European Commission, DGRTD, Key Figures 2007 
•  European Commission, SMEs and Innovation, Note for the Economic Policy Committee, 26 October 2007 

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•  European commission, 3rd Community Innovation Survey 
•  European Commission, Innobarometer; European Innovation Scoreboard thematic report on non-R&D innovation , 

2007, (both forthcoming) 

•  European  Commission  Communication:  Towards  an  increased  contribution  from  standardisation  to  innovation  in 

Europe, COM(2008) 133 final 

External studies: 
•  Derwent Information, Dismantling the Barriers: A pan-European survey on the use of patents and patent information 

by Small and Medium-sized Enterprises (SMEs) 

•  Drews,  S,  U.  Sukowski:  Der  Staat  als  Partner 

innovativer  Unternehmen:  Die  mittelstandorientierte 
Innovationsförderung  des  BMWi,  in:  VDMA  (editor)  Innovationsmanagement  in  der  Investitionsgüterindustrie 
treffsicher voranbringen, Frankfurt am Main, 2006 

•  Klette, T.J., J.Moen, Z. Grilliches: Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric 
Evaluation Studies, in NBER Working Paper Nr. w6947; Jones, C.I. 1998: Introduction to Economic Growth, New 
York, 1998 

•  OECD, Understanding Economic Growth, Paris, 2004 
•  Van Pottlesberghe and Francois, The Cost Factor in Patent Systems". Solvay Business School Working Paper WP-

CEB 06-002 

•  Veugelers & Schneider, Working Paper in progress on Young Innovative Companies, (reference to be added), 2008 

SMEs and the environment 

Commission’s documents: 
•  European commission, Impact Assessment on the ECAP programme: 
http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf 

•  European Commission, Sectoral Costs of Environmental Policy, Final Report, 2007:  

http://ec.europa.eu/environment/enveco/industry_employment/pdf/sectoral_costs_report.pdf 

•  European  Commission:  Public  Policy  Initiatives  to  promote  the  uptake  of  environmental  management  systems  in 

small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004 

•  European  Commission,  The  effects  of  environmental  policy  on  European  business  and  its  competitiveness  a 

framework for analysis, SEC(2004) 769 

•  European Commission, Community Guidelines on State Aid for Environmental Protection: 
http://ec.europa.eu/comm/competition/state_aid/reform/environmental_guidelines_en.pdf 

External studies: 
•  Centre for Strategy & Evaluation Services LLP, Environment Related Regulatory Burdens for SMEs, 2006 
•  Correa,  JA,  Hurtado-Torres,  N,  Sharma,  S  and  García-Morales,  VJ  -  Environmental  strategy  and  performance  in 

small firms: A resource-based perspective, Journal of Environmental Management, vol. 86, 2008 

•  EIM, Stimular naar het jaar 2000, een evaluatie van 5 jaar Stimular, 1996 
•  Labonne J., A Comparative Analysis of the Environmental Management, Performance and Innovation of SMEs and 

Larger Firms based on the OECD database, 2006 

•  Marshall: Economic Instruments and the Business Use of Energy, 1998, Stationery Office, London 
•  Smith,  M.A., Kemp,  R.,  Small  firms  and  the  Environment  1998: A  Grounded  Report,  Groundwork,  Birmingham, 

1998 

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Report on the results of the open consultation on the “Small Business Act" for Europe 

ANNEX II 

INTRODUCTION 

Over the past few years, the European Commission has implemented a specific policy in favour of 
SMEs  and  has  committed  itself  to  improving  the  business  environment  in  which  they  operate  by 
applying  the  “Think  Small  First”  principle113.  This  policy  has  already  produced  significant 
improvements in creating a more SME-friendly business environment.  

However, the need to fully unlock SMEs potential for growth, innovation and job creation remains. 
As a major contribution to this objective, the Commission has proposed the preparation of a Small 
Business  Act  for  Europe  whose  main  aim  will  be  to  set  out  principles  and  concrete  measures  to 
improve the framework conditions for European SMEs, while taking full account of their diversity.  

Consequently, an open on-line consultation was launched to allow all interested parties to give their 
opinion. 

Profile of respondents 

Respondents

Public 
authority/Gov.body
5%

Other
6%

No answ er
2%

Non-prof it 
organisation
6%

Business 
association
17%

Citizen
8%

Company
56%

More than 500 contributions were received (499 via the IPM tool114) as well as a number of position 
papers from SME stakeholders and regional and national administrations. This report focuses on the 
replies  received  via  IPM  but  all  the  contributions  received  will  be  taken  into  account  in  the 
preparation of the SBA.  

113 

114 

See  Communications  on  Modern  SME  Policy  and  on  Mid-term  review  of  Modern  SME  Policy 
(http://ec.europa.eu/enterprise/entrepreneurship/sme_policy.htm). 
A statistical overview of the IPM replies is also available 

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44 

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The majority of the respondents are companies and in particular micro- and small enterprises. The 
respondents  are  based  in  25  of  the  EU  Member  States  with  a  large  participation  from  France, 
Germany, UK and Italy. 

A significant number of comments/suggestions were provided in answer to the open questions. 

Country 

s
t
n
e
d
n
o
p
s
e
r
f
o
r
e
b
m
u
N

140

120

100

80

60

40

20

0

FR

DE

UK

IT

BE

BG

RO

PT

ES

SE

Other
EU

Other
no t EU

No
answer 

Main problems that European SMEs are facing 

What  are  the  most  important  problems  that  European  SMEs  are  facing  and  which  prevent  their 
growth? How to tackle them? 

The  administrative  burden,  overregulation  and  bureaucracy  are  by  far  the  main  general  concerns, 
followed  by  access  to  finance,  taxation,  lack  of  skills,  access  to  public  procurement,  unfair 
competition and labour law. Excessive payment delays are also described by many respondents as 
an important problem for SMEs.  

EN 

45 

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Most important problems EU SMEs are facing 

0

20

40

60

80

100

120

140

160

Num ber of replies

A dminis trativ e and regulatory burden

A c ces s  to f inanc e

Tax ation

Lac k of  s kills

A c c es s  to public  procurements

Unf air/too s trong competition

Labour law

A c c ess  to Single Market

A c ces s  to EU programmes

Late payments

A cc es s to international markets

A c c ess  to inf ormation and adv ic e

Instability  w orld ec onomy /energy  c os ts

SME def inition 

N.B.: It w as pos sible to give s ev eral replies

1. BETTER REGULATION FOR THE BENEFIT OF SMES 

Questions 

•  1.1 Is the current EU SME definition an obstacle to targeting support for SME growth in 

the right way? If so why? 

•  1.2  In  addition  to  the  systematic  application  of  the  subsidiarity  and  proportionality 
principles  in  legislation  (see  question  6.2),  could  differentiation  regarding  the  way 
legislation is elaborated and applied according to the size of the company be useful (e.g. 
lower fees, fewer reporting requirements, thresholds or longer transition periods)?  

•  1.3 Do you consider that directly applicable EU-level legislation in certain areas creates a 
disproportionate  and  un-necessary  administrative  burden  on  SMEs?  If  yes,  in  which 
areas?  Would  excluding  SMEs  from  such  direct  application  of  EU  legislation  be  a 
solution? 

•  1.4  Would  the  introduction  of  common  commencement  dates  for  all  SME-relevant 
legislation  coming  into  force  and/or  publication  of  an  annual  legislation  statement  be 
useful for SMEs? 

•  1.5  Do  you  think  additional  focused  measures  to  alleviate  the  administrative  burden  on 

SMEs would be useful? If yes, in which specific areas or topics? 

•  1.6 Would you suggest any other obstacles or additional issues to address? 

The majority of respondents (around 60%) think that EU legislation creates an unnecessary burden 
on SMEs. Concerning the solutions, there is a mixed picture about the possibility to fully exclude 
SMEs  from  the  direct  application  of  EU  legislation  as  half  of  those  who  have  an  opinion  are  in 
favour and half are against. There is, however, a large consensus (more than 80%) on the fact that 
focused measures to alleviate the administrative burden would be helpful. 

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46 

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About two thirds of respondents do not think that the SME definition represent an obstacle to SME 
growth and should be modified. However, differentiation regarding the way legislation is elaborated 
and  applied  according  to  the  size  of  the  company  (including  differentiation  between  micro,  small 
and medium-sized enterprises) is largely advocated by all types of stakeholders. More than eighty 
percent consider it useful/very useful. However, some opinions warn about the danger of adding to 
the complexity of the legislative landscape. The support for common commencement dates reaches 
68%, although there are arguments that the initiative should be implemented only at national level 
and not at EU level.  

Differentiation

No opinion
4%

No answer
6%

Not useful at all
2%

Not very useful
5%

Useful
29%

Common dates

No answer
6%

No opinion
11%

Very useful
29%

Very useful
54%

Not useful at all
3%

Not very useful
12%

Useful
39%

The areas of employment and social affairs, health and safety including hygiene and labelling rules, 
public procurement, environment, and VAT and tax issues are most commonly quoted as sources of 
disproportionate  burden  on  SMEs.  CE  marking,  consumer  protection,  statistical  requirements, 
accounting  rules  and  standardisation  add  to  the  list.  Participation  in  R&D  projects  and  EU 
programmes is also often quoted as being difficult and bureaucratic. Access to IPR and in particular 
the  cost  of  patents  is  also  problematic.  Furthermore,  some  respondents  consider  that  measures 
should  be  taken  against  competition  from  third  country  enterprises  which  are  not  subject  to  the 
stringent EU rules.  

Some participants preferred to remain general and advocate an overall reduction of red tape and the 
administrative burden. These include the argument that many of the concerns and complaints about 
red tape emanating from business relate to national administrative practices such as licensing and 
authorisations,  and  should  be  tackled  at  national  level.  Others  have  forwarded  concrete  proposals 
such as an increase of the turnover level required for VAT registration, the simplification of cross-
border VAT rules, simplification of the Directive on qualifications, the obligation to apply payment 
terms  of  a  maximum  of  30  days,  longer  implementation  periods  for  labelling,  prohibiting  public 
authorities in the case of public tenders from demanding documents that are already in possession 
of  the  State  (e.g.  tax  or  social  contribution  certificates)  and  greater  use  of  electronic  services. 
Exemptions from legislation from SMEs and mitigating measures facilitating the implementation of 
legislation  by  SMEs  are  also  advocated.  Implementation  of  the  Services  Directive  and  the 
establishment  of  portals,  via  which  all  applicable  regulations  are  visible  to  businesses,  are  other 
measures deemed important to alleviate the burden on SMEs. Finally, financial and other support 
for entrepreneurs and SMEs is advised.  

Overall  there  is  strong  support  for  the  “Think  Small  First”  principle  based  on  reinforced 
consultation of SME representatives, ex ante and ex post impact assessment of legislation on SMEs 
and a stronger role of the SME Envoy especially in screening legislation. The implementation of the 
proportionality principle, the safeguard principle (withdrawal of the proposal if cost/benefit-ratio is 

EN 

47 

   EN 

 
 
inappropriate)  and  the  ‘only  once’  principle  (avoid  the  situation  where  the  same  information  or 
administrative  requirements  are  asked  several  times  by  public  authorities)  have  been  strongly 
mentioned and supported.  

A  particular  emphasis  is  put  on  the  problem  of  gold-plating  and  there  are  suggestions  that  the 
Commission  should  regularly  analyse  the  level  of  gold-plating  in  each  Member  State  when  EU 
legislation is implemented. 

2. PUTTING SMEs AT THE FOREFRONT OF SOCIETY 

Ensuring full recognition by society of the role of entrepreneurs 

Questions 

•  2.1  Do  you  see  a  need  for  additional  measures  in  the  Member  States  or  at  EU  level  to 

stimulate entrepreneurship through education?  

•  2.2 Is entrepreneurship sufficiently reflected in school curricula and if not, how could the 

situation be improved? 

•  2.3 Do you see a need for the media to take a stronger role in fighting negative stereotypes 

towards entrepreneurship? 

•  2.4 Would you suggest any other obstacles or additional issues to address? 

Different concrete issues discouraging young people from becoming entrepreneurs are mentioned. 
They  range  from  burdensome  administrative  procedures  to  a  lack  of  appropriate  training  and 
financing.  However  there  is  a  common  acknowledgement  that  the  main  problem  is  the  cultural 
attitude, and in particular the bad image of entrepreneurs as well as a generally risk-averse culture.  

A large majority of respondents (84%) think that the education system, and in particular the school 
curricula  does  not  focus  enough  on  entrepreneurship.  They  therefore  consider  it  important  to 
intervene in the education system with more systematic measures. Generally speaking, curricula are 
considered to be important but the crucial element for encouraging an entrepreneurial mindset is a 
closer link between the SME community (including all types of companies and SME stakeholders) 
and schools. Firstly, it is essential to change teachers' negative attitudes about entrepreneurship by 
bringing  them  closer  to  the  real  world  of  SMEs.  Practical  training/seminars  for  pupils  should  be 
organised at every educational level, starting at an early stage with the involvement of all types of 
local SMEs. Basic economic principles with a special focus on difficulties and constraints linked to 
creating and running an enterprise should be included in school curricula and not limited to specific 
studies.  Mini  and  virtual  companies  are  also  mentioned  as  useful  tools  for  developing 
entrepreneurial attitudes especially among younger pupils (i.e. in primary schools). 

The  media,  for  their  part,  do  not  recognise  the  important  role  played  by  entrepreneurs  and  when 
they  do  they  focus  on  large  enterprises  mostly  ignoring  SMEs.  SME  success  stories  are  not 
sufficiently highlighted, while the risks related to creating and running an enterprise are emphasized 
too much. 

EN 

48 

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Need of media support 

No opinion
5%

No answer
7%

Not needed at 
all
5%

Not much need
9%

Need
28%

Strong need
46%

Setting up or transferring a business and second chance 

Questions 

•  2.5  Would  it  make  a  significant  difference  to  further  reduce  the  time  and  costs  for 

registering a company?  

•  2.6 Do you think it would be useful to propose additional measures to facilitate business 

transfer and tackle bankruptcy? 

•  2.7 Would you suggest any other obstacles or additional issues to address? 

Around 60% of replies indicated that there is still a need to reduce the time and costs to set-up a 
business. Some respondents pointed out, that significant differences exist within Member States in 
this  regard.  The  lack  of  information  and  the  lack  of  appropriate  support  for  newly  created 
enterprises are identified as additional problems.  

In general, new measures for facilitating business transfer and tackling bankruptcy are considered 
useful  (around  80%  of  replies)  and  should  be  taken  up  at  Member  State  level.  Fiscal  incentives, 
specific training, financial/technical support and promotion of different transfer models (succession, 
cooperatives of employees etc.) are mentioned as possible supporting initiatives for facilitating the 
transfer  of  companies.  Respondents  think  that  a  second  chance  should  be  given,  as  failure  is  a 
"normal" event in the life of an enterprise. However there is a clear orientation towards the need to 
distinguish "honest" failures from fraudulent ones and to clearly avoid encouraging the latter. 

Helping SMEs acquire the skills they need 

Questions 

•  2.8 Do EU education systems deliver the necessary basic skills needed by entrepreneurs? 
•  2.9 How adequate are the existing measures for recognising qualifications at EU level?  
•  2.10  Do  you  see  the  need  for  cross-border  mobility  programmes  for  entrepreneurs  and 

apprentices? 

•  2.11 Would the development of a programme to foster the e-skills of entrepreneurs at EU 

level be useful? 

•  2.12 Would you suggest any other obstacles or additional issues to address? 

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There  is  a  recognised  need  to  improve  the  way  in  which  skills  are  acquired.  EU  schools  do  not 
provide the technical competences needed for more than 60% of companies responding. There is a 
more mixed picture on the evaluation of existing measures, which are considered to be inadequate 
by about 45% of respondents.  

Recognition  of  informal  training,  training  courses  better  tailored  to  SMEs’  needs  and  taking  into 
account the different types of company, more practical education and the improvement of technical 
skills  are  among  the  suggestions  made.  There  is  in  particular  a  lack  of  ICT  skills  which  are 
considered  essential  to  better  exploit  the  opportunities  offered  by  new  technologies  (and  also  for 
training itself, considering that small entrepreneurs often cannot follow traditional courses). Some 
ask  for  uniform  requirements  for  qualification  within  EU  countries  and  mobility  programmes  for 
entrepreneurs/apprentices.  In  this  context,  EU  programmes  for  cross-border  mobility  and  e-skills 
would be useful/very useful for the majority of respondents (66% and 61% respectively). Finally, 
the  necessity  of  bringing  together  all  the  relevant  actors  (SME  stakeholders,  schools  and 
administrations at EU, national and regional/local level) is underlined. 

Mobility programmes

EU programme for e-skills

No answer
6%

No opinion
8%

Not needed at 
all
5%

Not much 
need
15%

No ans wer
8%

No opinion
9%

Not us eful at 
all
6%

Not very us eful
16%

Strong need
29%

Need
37%

Very us eful
27%

Us eful
34%

3. FACILITATING SMEs’ ACCESS TO MARKETS 

Supporting SMEs to go beyond their local markets and better use the Single Market 

Questions 

•  3.1  What  are  the  areas  where  standards  are  not  yet  widely  applicable  and  where  SMEs 

would benefit from them? 

•  3.2  Do  you  see  a  need  to  increase  the  participation  of  SMEs  and  their  representative 

organisations in standardisation and improve the dissemination of standards? 

•  3.3  Do  you  see  a  need  for  improving  the  situation  of  SMEs  in  the  area  of  direct  and 
indirect  taxation;  if  yes,  which  measures  would  be  the  most  significant?  In  particular, 
should VAT rules be further reviewed? 

•  3.4 Which additional measures would you suggest to help SMEs to better use the potential 

of the Single Market including the EEA and Candidate Countries? 

Common  standards  are  in  general  considered  important  for  the  good  functioning  of  the  Single 
Market and only a few think that there are enough or even too many. However, the replies suggest 
that standards should be developed according to the needs of each specific sector and should not be 
too costly or too complicated to understand and use (e.g. provide free guidance). A total exemption 
from all costs was not explicitly mentioned. There is general agreement on the fact that SMEs and 
their representatives need to be better involved in the standardisation process. In particular, there is 

EN 

50 

   EN 

 
 
 
a  lack  of  information  and  dissemination  of  standards  and  SME  are  not  represented  enough  in  the 
standardisation bodies. 

SME participation in standardisation

No answer
10,0%

No opinion
9,0%

Not needed at 
all
4,0%

Not much 
need
6,8%

Need
29,9%

Strong need
40,3%

Concerning taxation, there is a clear need to improve the situation through reduction, simplification 
and  harmonisation,  especially  for  VAT.  Refund  procedures  and  VAT  rules  in  general  are 
considered too complicated for small companies, especially when related to cross-border activities. 
Dedicated  one-stop-shops  could  be  a  useful  tool  for  some  of  the  respondents.  Reduced  VAT  is 
asked  for  certain  sectors  and  especially  for  local  and  labour  intensive  services,  while  specific  tax 
measures  are  requested  for  R&D  activities.  A  number  of  different  proposals  for  taking  better 
advantage of the Single Market are suggested. They include the European Private Company Statute, 
full and effective implementation of the Single Market, specific training actions to help SMEs going 
abroad  (including  foreign  languages),  improved  information  systems/networks,  transnational 
cooperation  between  SMEs,  etc.  Some  of  the  suggestions  focus  on  issues  already  raised  in  other 
questions (late payments, standards, simplification, and improved access to public procurement).  

Facilitating SMEs’ access to public procurement 

Questions 

•  3.5 Do you see a need to improve SMES’ access to public procurement and if so how? 
•  3.6 Would increased transparency of EU procurement opportunities below the thresholds 
make  a  difference  (e.g.  through  a  voluntary  database  disseminating  procurement 
opportunities,  central  databases  in  the  Member  States  or  a  broader  use  of  electronic 
platforms)?  

•  3.7 Would you suggest any other obstacles or additional issues to address? 

More  than  70%  of  the  companies  and  of  all  the  responding  stakeholders  in  general  see  a  need  to 
improve SMEs’ access to public procurement and consider it very useful to increase transparency in 
EU procurement procedures. It is also worth mentioning that SMEs’ access to public procurement 
appears as an issue in the answers of various other questions throughout the consultation paper.  

EN 

51 

   EN 

 
 
Improve SMEs access to public procurement

Increased transparency in EU procurements

400

350

300

250

200

150

100

50

0

s
e
i
l

p
e
r

f
o
r
e
b
m
u
N

400

350

300

250

200

150

100

50

0

s
e
i
l

p
e
r

f
o
r
e
b
m
u
N

Y es

No

Don't know

No answ er

Y es

No

Don't know

No answ er

The idea of having special quotas in the field of public procurement, whether this is for SMEs, only 
for micro- or for young enterprises, is mentioned by some. Proposals going in the same direction 
suggest giving bonus points to offers involving SMEs.  

An  overwhelming  majority  of  those  responding  propose,  however,  other  solutions  to  facilitating 
SMEs’ access to public procurement. First, it is necessary to improve information on public tenders 
including  on  tender  opportunities  below  the  thresholds  of  the  EU  Directives.  Concrete  proposals 
suggest  ensuring  that  web  portals  publishing  public  procurement  opportunities  are  free  of  charge, 
the  introduction  of  centralised  tendering  platforms  for  each  Member  State,  a  review  of  the  EU 
publication  system  (OJ),  consistent  publishing  of  prior  information  notices,  systematically 
publishing the winner and the amount of the tender and giving feedback to unsuccessful enterprises, 
setting up tools to facilitate the search for complementary partners in view of collaborating for bids 
for larger contracts. Secondly, a major administrative simplification is required, which would imply 
less  paperwork,  more  use  of  e-procurement  and  electronic  signatures,  and  increased  time  for 
responding  to  tenders.  Simplification  and  improvements  are  also  required  as  far  as  technical 
specifications  are  concerned.  Dividing  markets  per type  of  activity  and  dividing  tenders  into  lots, 
better  application  of  the  proportionality  principle  as  far  as  previous  references  and  financial  and 
insurance  requirements  are  concerned, especially in view of improving the  participation  of young 
enterprises,  leaving  more  scope  for  innovation  in  the  technical  specifications,  prohibiting  the 
restrictive condition of minimal turnover or obliging r tendering authorities to justify this condition, 
allowing for better cooperation between SMEs. In addition, organisations of cooperatives consider 
that special attention should be given to tenders that include social or environmental clauses.  

Further  training  for  SMEs  on  how  to  prepare  tenders,  increased  dialogue  between  large 
organisations and SMEs to discuss how best they can work together, and encouraging the expansion 
of preferred supplier arrangements are advocated as well.  

Special attention needs to be paid to the activities of municipalities which might in some cases be 
biased  when  buying  goods  and  services.  Furthermore,  the  issue  of  subcontracting  has  also  been 
pointed  out  and  particularly  the  need  to  improve  the  conditions  of  subcontracting,  for  instance 
through direct payments to subcontractors or by imposing minimum standards or standard contracts. 
Finally, too long payment periods are an obstacle to SMEs’ access to public procurement. 

Encouraging SMEs to tap opportunities outside the Single Market 

Questions 

•  3.8 In general, how can SMEs be helped to go global? Which countries/areas should  be 

given priority? 

EN 

52 

   EN 

 
 
 
 
 
 
•  3.9 Is there a need to establish European Business Centres in some fast-growing countries 

and, if yes, in which ones? 

•  3.10 Do you see the need for new programmes supporting SMEs entering these markets, 

following the example of Gateway to Japan and the Executive Training Programme? 

Concerning  access  to  markets  outside  the  EU,  the  identified  areas  for  action  range  from  the 
provision  of  information  and  practical  support  (including  the  exchange  of  good  practices),  to 
linguistic and technical training better tailored to SMEs. The respondents think that the EU has an 
important  role  to  play  in  multilateral  and  bilateral  negotiations  in  order  to  reduce  trade  barriers. 
Some  replies  ask  for  more  reciprocity  with  third  countries  and  propose  that  trade  defence 
instruments should be better adapted to SMEs. Networks among SMEs and among SMEs and large 
companies and financing for going abroad are among the specific suggestions for helping SMEs to 
go global. The neighbour countries (Mediterranean, Eastern Europe), Asia and South America are 
considered the most interesting markets followed by Africa and the US. In particular, the so-called 
BRIC countries (Brazil, Russia, India and China) are mentioned most frequently.  

More  than  half  of  the  respondents  are  favourable  to  establishing  EU  centres  in  the  fast-growing 
countries. The places mentioned most frequently for these centres are - by far - China and India, and 
in  general  the  Asian  countries  followed  by  South  America  (Brazil)  and  Russia.  Coordination  and 
synergies  with  all  the  actors  involved  (Member  States,  business  organisations,  chambers)  and 
existing centres/networks is considered a key element for the success of the EU centres (and crucial 
to avoid duplications with market based service providers). 

European Business Centres in third countries

0

5

10

15

20

25

30

35

40

Number of replies

China

India

Brazil

A sian countries

Russia

Eastern Europe

South A merica

Korea

United States

Middle East countries

Japan

North A f rica

A ngola

Other areas/countries

N.B.: It w as possible to give several replies

4. SUPPORTING SMEs’ ACCESS TO FINANCE AND INNOVATION 

Improving SMEs’ access to finance at EU and national level 

EN 

53 

   EN 

 
 
 
Questions 

•  4.1  How  could  public  policies  and  instruments  to  facilitate  SMEs’  access  to  finance  be 

improved (e.g. awareness, procedures, cost, or better adequacy of products)? 

•  4.2 What are the main problems SMEs face in accessing various EU support programmes 
such  as 
the 
Competitiveness  and  Innovation  Framework  Programme  (CIP)  or  the  Structural  Funds 
(including the JEREMIE initiative)? 

the  7th  Framework  Programme  for  Research  and  Development, 

•  4.3  What  are  the  main  obstacles  for  SMEs  in  accessing  micro-credit  (less  than  25000 

Euros)?  

•  4.4 Would you suggest any other obstacles or additional issues to address? 

Respondents  agreed  on  the  necessity  of  improving  current  policies  and  instruments.  Important 
points were making it possible to deal with a bank in another EU country (e.g. to get a loan) and 
developing pan-European venture capital markets. It is also proposed to extend the use of the Small 
Firms Loan Guarantee Scheme, to create a specific EU instrument for the financing of start-ups, to 
promote  mezzanine  finance  and  to  improve  the  distribution  of  EU  instruments  by  the  banking 
sector.  As  for  the  CIP  Financial  instruments,  it  is  suggested  that  they  should  include  pilot-type 
instruments to finance specific operations such as business transfers or innovation.  

The  main  problems  identified  regarding  SMEs’  access  to  EU  programmes  were  the  lack  of 
awareness of these programmes, the difficulty created by the need to have a consortium and, finally, 
the  administrative  burden  together  with  the  long  timescale  associated  with  any  application,  in 
particular in the context of the 7th Framework Programme for R&D and the JEREMIE initiative.  

To overcome these difficulties, the creation of single contact points at national level, both to better 
inform  SMEs  about  EU  schemes  but  also  to  facilitate  the  supply  of  financial  instruments  was 
suggested  in  several  replies.  Some  mention  the  key  role  of  business  intermediaries  not  only  to 
inform  SMEs  about  these  programmes  but  also  to  provide  guidance  and  practical  support.  E-
solutions in the context of support schemes should also be encouraged.  

Several  obstacles  to  access  to  micro-credit  were  identified  and  several  respondents  regretted  that 
banks usually wanted to lend against property, request collateral and are in general risk-averse. As a 
solution, it was proposed to promote mutual guarantee schemes for SMEs and to establish an EU 
fund to support micro-credit schemes at national level. For some, banks should communicate better 
on their credit decision criteria and rating systems, while for some others it would be important to 
allow non-banks to provide micro-loans.  

Encouraging a knowledge-based economy 

Questions 

•  4.5  Is  there  a  need  to  help  SMEs  deal  with  IPR  protection,  to  improve  awareness  and 

provide support services for SMEs to protect their innovation? 

•  4.6 What are the most significant problems SMEs face in the use of patents? 
•  4.7  Would  you  suggest  any  other  obstacles  or  additional  issues  to  address  to  further 

enhance the innovation capacity of SMEs? 

EN 

54 

   EN 

 
 
 
In  the  field  of  innovation,  several  replies  insist  on  the  need  to  better  consider  non-technological 
innovation.  The  importance  of  knowledge  transfer  for  SMEs  and  of  better  cooperation  between 
SMEs,  universities  and  research  centres  is  also  pointed  out.  The  link  between  innovation  and 
finance  is  often  made,  and  the  availability  of  strong  equity  is  mentioned  as  a  key  factor  for 
innovation. Moreover, for several respondents a key action would be to support cluster management 
and to favour cross-border cooperation between clusters.  

In the field of Intellectual Property Rights, the main obstacles identified widely in responses are the 
high level of patent fees and the fact that SMEs have difficulties in defending their rights because of 
their  lack  of  legal  knowledge  and  because  this  usually  implies  complex  and  costly  procedures, 
especially  if  the  violation  of  the  IP  rights  occurs  outside  the  European  Union.  In  addition,  many 
replies also mention the need for harmonisation of IPR legislation and insist on the need to have a 
Community patent adopted soon. Several respondents propose to improve patent litigation system 
to help especially SMEs, a simplified linguistic regime and a significant reduction of patent fees, in 
particular for the first patent submission of by SME. Finally, the detrimental effect of counterfeiting 
is described as a worry for many European SMEs and it is suggested that an EU-wide alert system 
and confiscation procedure for counterfeited goods should be introduced.  

From  a  general  point  of  view  a  large  majority  of  stakeholders  (more  than  70%)  think  that  SMEs 
need support in the area of IPR protection. 

5.  TURNING  THE  ENVIRONMENTAL  CHALLENGE  INTO  OPPORTUNITIES  FOR 
SMEs 

Questions 

•  5.1 How could SMEs best benefit from policy measures on a sustainable industrial policy 

such as voluntary standards for particularly environmentally friendly products? 

•  5.2 Would Community support for energy audits in SMEs be useful?  
•  5.3  Do  you  see  the  need  for  facilitated  access  to  the  European  Environmental 

Management and Audit system (EMAS)? 

•  5.4 Would you suggest any other obstacles or additional issues to address? 

Half  of  the  respondents  found  potentially  useful  both  Community  support  for  energy  audits  and 
facilitated  access  to  European  Environmental  Management  and  Audit  system.  Simplified 
implementation and proof of compliance through self-certification without third party intervention 
would  help  in  that  respect.  It  was  also  suggested  that  EMAS  should  be  better  explained  to 
entrepreneurs. 

Support for energy audits in SMEs

Facilitated access to EMAS

No answer
13%

Very useful
26%

No answer
15%

Strong need
22%

No opinion
12%

Not useful at all
8%

No opinion
15%

Not needed at 
all
4%

Need
27%

Not very useful
14%

Not much need
17%

Useful
27%

EN 

55 

   EN 

 
 
While  some  suggest  that  'standards'  are  inherently  not  SME  friendly  or  that  voluntary  standards 
could  confuse  and  divide  markets,  others  consider  them  useful  to  tackle  the  lack  of  clarity  and 
legislative  divergence  of  environmental  legislation,  provided  they  do  not  involve  excessive  costs 
and  bureaucracy  and  that  they  create  a  competitive  advantage.  Hence,  financial  support  or  (tax) 
incentive  schemes  to  help  SMEs  to  adopt  these  standards  are  part  of  the  proposals.  In  the  same 
spirit,  free  education/information  on  voluntary  standards  addressing  how  to  increase  a  product's 
environmental performance are considered useful.  

In general it is stated that SMEs tend to be very innovative and can adapt to new needs for products 
and  production  methods.  However,  incentives  (such  as  reduced  interest  rates  for  investment  in 
green technology, tax reduction, VAT reduced rates etc.) for SMEs are needed since investments in 
energy saving and environmental protection have lower or zero return on investment compared to 
other investments.  

Some see green public procurement as the ultimate solution and in particular the idea of local SMEs 
providing local products and services thus minimising GHG (greenhouse gas) emissions. 

Furthermore, it is argued that labels should be practical and not administratively burdensome. The 
need for awareness raising activities and more and better communication is also stressed. Finally, 
understanding  the  functioning  of  SMEs  and  the  necessity  of  including  them  –  and  their 
representative  organisations  - in  policy  debates  and  consultation  on  environmental  problems  have 
been  highlighted  as  key  elements  since  environment  legislation  in  increasingly  affecting  SMEs’ 
activities.  

In general there is widespread support for rapid implementation of the Environmental Compliance 
Assistance Programme for SMEs.  

6. ENHANCING THE IMPLEMENTATION OF EU SME POLICY PRINCIPLES 

Questions 

•  6.1  What  is  the  right  way  to  agree  on  principles  of  SME  policy  across  the  EU  and  to 
ensure  their  implementation  at  EU  and  Member  States  level?  Is  there  still  an  untapped 
potential within the SME Charter Process?  

•  6.2 Would a systematic application of the subsidiarity and proportionality principles at EU 

level help to further strengthen the application of the ‘think small first’ principle?  

•  6.3 Would you suggest any other obstacles or additional issues to address? 

The  systematic  application  of  the  subsidiarity  and  proportionality  principles  (question  6.2)  is 
considered helpful by 70% of the respondents.  

A  relatively  limited  number  of  contributions  on  the  two  other  questions  were  received  from 
individual companies or citizens, as most opinions come from organisations. There is an apparent 
clash between a number of opinions arguing for less EU-level action and those favouring more EU 
intervention and universality in the field of SME policy. However, the latter view seems to prevail 
as an overwhelming majority of business organisations argue for a legally binding SBA. The raison 
d’être of the SBA is considered to be primarily making the “think small first” principle effective at 
Community level and making Member States more proactive in the SME policy field. 

Many consider that the adoption of the SBA would render the Charter process unnecessary, while 
others believe that the Charter could continue.  

EN 

56 

   EN 

 
As  in  the  part  on  Better  Regulation,  the  importance  of  consultation  with  SME  representatives  is 
given special emphasis. Suggestions were made to have permanent consultations with national and 
European  SME  representatives  (both  private  and  public)  on  an  annual  basis  followed  by 
dissemination of the results and conclusions across EU States. Others argued for longer and sector-
specific  consultations.  One  interesting  contribution  suggests  making  consultation  documents 
available  through  business  organisations  at  one  time  every  year.  This  way,  SMEs  would  come  to 
know  that  their  input  is  required  at  a  certain  time  each  year.  Direct  consultations  of  SMEs  on 
concrete  legislative  proposals  are  also  mentioned  as  a  good  solution.  Finally,  the  Enterprise 
Experience programme for EU officials is strongly encouraged (also for other DGs).  

Overall there is strong support for the re-launch of the activities of the SME Observatory as a basis 
for developing SME policy. In addition, there are arguments that the implementation of the “think 
small  first”  principle  needs  to  be  monitored  through  a  series  of  indicators  and  that  the 
implementation of  SME Policy should be based on annual priorities and improved reporting (e.g. 
via Lisbon or Competitiveness Council). 

EN 

57 

   EN 

 
ANNEX III 

Identification process of the remaining problems EU SMEs are facing, despite the existing 
policies 

I. identification of the problem areas 

Step 1: Problem areas identified in the context of the Modern SME policy115 

•  Administrative and regulatory burden (red tape). 

•  Insufficient  access  to  markets  (Internal  market,  international  markets  and  public  procurement 

market) 

•  Lack entrepreneurship and skills issues: 

–  negative effects of business failure on entrepreneurship; 
–  shortcomings in bankruptcy procedures; 
–  inadequate  educational  and 

training  policies  at  Member  States’  as  regards 

entrepreneurship; 

–  needs of women entrepreneurs are still not being sufficiently met. 

•  Direct sustainable growth constraints : 
–  insufficient access to finance; 
–  insufficient innovation and R&D; 
–  insufficient ICT uptake; 
–  difficulty to turn environmental challenges into opportunities. 

•  Insufficient dialogue with and consultation of SME stakeholders 

Step 2: New problem areas identified by recent surveys, including the public consultation on 
the SBA 

•  Main problems identified by the public consultation: 

–  The results of the public consultation (for a complete analysis see Annex II) confirmed 
that  the  administrative  burden,  overregulation  and  bureaucracy  are  by  far  the  main 
general concerns, followed by access to finance, taxation, lack of skills, access to public 
procurement,  unfair  competition  and  labour  law.  Excessive  payment  delays  are  also 
described by many respondents as an important problem for SMEs. 

–  New problems in the context of globalisation: there is a feeling that the EU has a role to 
play  in  multilateral  and  bilateral  negotiations  in  order  to  reduce  trade  barriers.  Some 
respondents  ask  for  more  reciprocity  in  negotiations  with  third  countries  and  propose 
that trade defence instruments should be better adapted to SMEs. 

115 

Commission  Communication,  Implementing  the  Lisbon  Programme.  Modern  SME  Policy  for  Growth  and 
Employment, (COM(2005)551) 

EN 

58 

   EN 

 
                                                 
•  Main problem areas identified by the 2007 Observatory of EU SMEs116 

•  Reported problem areas in above surveys that are however clearly outside the EU's remit or not 

specific to SMEs 

–  limited demand  
–  labour force too expensive 
–  problems of infrastructure 
–  instability of world economy 

116 

The majority of the respondents are companies and in particular micro- and small enterprises. The respondents 
are based in 25 of the EU Member States with a large participation from France, Germany, UK and Italy. For 
more detailed analysis see annex II 

EN 

59 

   EN 

 
 
 
                                                 
Step 3: Synthesis 

Table 1: Overview of the potential remaining problem areas to be compared with 
existing or planned policies 

•  Interests  of  SMEs  not  sufficiently  taken  into 
consideration  in  policy  making  (Think  Small 
First Principle)  

•  Lack of entrepreneurship and skills 

•  Direct sustainable growth constraints  

•  New  problems  for  EU  SMEs  arising  in  the 

context of globalisation 

Need to further simplify the business environment for 
SMEs 
Implementation of the Conclusions of the 2006 Spring 
European council at Member States’ level  
Need for an enhanced dialogue and consultation with 
SME stakeholders 
Late payments 

Educational and training policies 
Insufficient level of women entrepreneurship  
Lack of skilled labour and managerial skills 

Lack  of  productivity  growth  correlated  to  a  lower 
churning  effect,  due  in  particular  to  less  exit  in  EU 
than in the US, including: 
–  Start-ups (time + costs needed) 
–  Stigma of failure + bankruptcy procedures. 
Insufficient access to finance 
Insufficient innovation and R&D 
Insufficient ICT uptake 
Insufficient access to markets: 
–  Internal markets 
–  Public procurement 
–  Standardisation 
–  Difficulties  to  access  international  markets  and 

especially fast growing markets 

Difficulty  to  use  and  defend  Intellectual  Property 
Rights (IPR) by SMEs 
Difficulty  to  take  advantages  from  the  opportunities 
linked to the environment 

EN 

60 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Comparison of the above detailed potential remaining problem areas with the existing or planned policies at EU and national level 

Table 2: Implementation of the conclusions of the 2006 Spring European Council at Member States’ level 

Member States’ level: 

taking 

The conclusions of the 2006 
Spring  European  Council 
called  on  the  Member  States 
to  unlock  the  EU’s  business 
five 
potential  by 
priority actions: 
Establish  a  one-stop-shop  for 
setting  up  a  company  in  a 
quick  and  simple  way  and  to 
reduce  the  average  time  for 
setting  up  a  business  to  one 
week 

Encourage entrepreneurship, 
including through 
entrepreneurship education 
and training 

Overall, the measures and initiatives in the area of SME policies undertaken by Member States since the re-launch of the Lisbon partnership for 
growth and jobs in 2005 are going in the right direction117 Progress has been particularly visible in improving the start-up procedures but also in 
the  integration  of  the  "think  small  first"  principle  into  the  policy-making  process.  In  the  area  of  entrepreneurship  education,  SME  access  to 
public  procurement  and  recruitment  of  the  first  employee,  policy  actions have been  initiated  in  almost  all  Member  States while their  results 
have  not  yet  materialised.  Most  of  the  priorities  set  at  the  Spring  European  Council  2006  –  start-ups,  recruiting  the  first  employee, 
entrepreneurship education, think small first – need to be seen in a long term perspective, and related policy actions need to be intensified. 

•  Average time and cost to start up a private limited company is 12 days and cost is € 485 (see following Table). This is substantially lower 
than  the  24  days  and  €  830  for  an  equivalent  company  in  2002.  Many  Member  States  have  established  a  one-stop-shop  or  equivalent 
arrangement even though in some cases they do not cover all types of companies: only 2 out of 3 one stop shop systems offer the possibility 
to register a private limited company. Member States that fully comply with all three objectives (one-stop-shop, time and cost) are BE, DK, 
EE, FR, HU, PT, RO, SI and UK. 
In general registration times have improved and in 13 Member States, it is now possible to register a company within one week. It should be 
noted, however, that this analysis only looks at the steps to get a company registered. 
In many countries there are further administrative steps and more time is required before a new SME can start its business operations118. 
• 
•  Awareness of the need to enhance entrepreneurship education at school is constantly increasing in the Member States and in the last couple 

• 

of years new plans and individual initiatives have been flourishing in this area. 

•  However reforms planned in a number of countries are sometimes described in rather generic terms and their implementation in practice 
will  have  to  be  monitored.  In  a  few  Member  States,  entrepreneurship  is  already  a  recognised  objective  of  the  education  systems  and  is 
embedded  explicitly  in  national  framework  curricula  (ES,  FI,  IE,  CY,  PL,  UK)  but  implementing  means  (teacher  training,  teaching 
materials)  still  need  to  be  stepped  up.  In  some  cases,  elements  of  entrepreneurship  are  found  horizontally  throughout  the  curriculum,  or 
entrepreneurship forms part of economic subjects (LV). Other Member States are starting to implement or are planning reforms in the same 
direction. However, Member States where entrepreneurship is well established in the curricula are still a small minority. 

The recruitment of a first 
employee should not involve 
more than one public 

•  Since 2005, some limited progress has taken place in the simplification of procedures for recruiting a first employee. Overall, the average 
number of mandatory external contacts (social security organisations, tax offices, labour offices, etc.) has been reduced from 3 to 2.5 and 
the average number of procedures (filing forms, etc.) from 3.5 to 3. 

117 

118 

EN 

The analysis on the Member States’ achievements come from the Communication from the Commission to the European Council: Strategic report on the renewed Lisbon 
strategy for growth and jobs: launching the new cycle (2008-2010), COM(2007) 803 final, PART III, available at:  
http://ec.europa.eu/growthandjobs/pdf/european-dimension-200712-annual-progress-report/200712-annual-report-annex3_en.pdf 
In this context, the timely implementation of the points of single contact foreseen in the Services Directive, to be implemented by end 2009, will also be an important task 
for Member States. 

61 

EN 

 
  
 
 
 
                                                 
administration point 

Make the ‘Think Small First’ 
principle  a  guiding  principle 
in  all  relevant  legislation  and 
apply it systematically 

Facilitate  SMEs’  access  to 
public procurement 

•  However, the target of having no more than one public administration point in that process is still far and the situation varies significantly 
from a Member State to another. Only three Member States (e.g. ES, MT, and PT) have a special one-stopshop system for recruitment of 
first employee or one-stop-shops for start-ups that can also take care of recruitment. Several other Member States have procedures that are 
so simple that only one contact with a public administration is required (e.g. BG, FR, IE, LV, LT, SE). In others, at least the social security 
registration  is  organised  as  a  one-stop-shop  or  one-window-system,  i.e.  one  branch  of  the  social  security  collects  the  registration  and 
distributes the information to the other branches (e.g. DE, SK or the UK). BE is a special case where "social secretariats" take care of all 
employment related procedures for businesses, including the registration of new employees etc. but have to be paid by businesses. 

•  Member States are increasingly integrating the "think small first" principle into the policy-making process. While only few have set up a 

specific body to represent SMEs interests, almost all of them consult SMEs representatives. 

•  A  number  of  Member  States  (for  example  BE,  DK,  ET,  MT,  NL,  SE,  FI,  UK)  evaluates  or  is  planning  to  evaluate  the  impact  of  new 
legislation on SMEs. Examples of specific provisions to alleviate the administrative burden on SMEs go from the simplified conditions for 
accessing subsidised finance (FR) to longer payment time for VAT (DK) or development of dedicated electronic services (FI). 

•  However,  further  national  efforts  are  needed  in  the  application  of  this  principle  in  order  to  meet  the  specific  needs  of  micro  and  small 
enterprises but also to maximise its positive contribution to the target of reducing by 25%, at EU level, the administrative burden by 2012. 
•  Almost  all  Member  States  have  already  taken  or  are  currently  introducing  measures  to  raise  SMEs’  awareness  on  public  tenders  and  to 
provide  them  with  easy  access  to  tender  information (single  electronic access  points or electronic procurement,  training  and  counselling, 
etc.). 

•  However, only a handful of Member States report on more specific measures to help SMEs’ to participate in public procurement (use of 
prior  information notices,  dividing contracts  into  small  lots)  and only  very  few have  put  in  place  a  strategy  or specific  measures  to  help 
SMEs to participate in public procurement (e.g. UK, IT, FR). 

•  A study published by the Commission in November 2007119 showed that 42% of the value of public procurement contracts above the EU 
Directives’ thresholds goes to SMEs. This share is smaller than the economic importance of SMEs in the EU, but above the SME quota for 
federal public procurement in the US (23%). 

119 

EN 

Evaluation 
http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 

SME  Access 

Procurement  Markets 

Public 

of 

to 

in 

the  EU, 

Final  Report 

by  GHK 

and  Technopolis, 

available 

at: 

62 

EN 

 
  
 
 
 
 
                                                 
Table 3: Existing SME policies at Community and National level, planned measures, remaining problems and potential new actions 

Problems  

•  Existing policies 

•  Lack of implementation of the “Think Small First Principle” 
•  Administrative 

•  EU better Regulation Agenda 
•  The  Commission  regularly  assesses  the 
impact  of  a  new  piece  of  Community 
legislation 

burden  

•  The  Commission  has  started  proposing 
for  micro  and  small 

rules 

specific 
enterprises 

•  A number of Member States (for example 
BE,  DK,  ET,  MT,  NL,  SE,  FI,  UK) 
evaluates  or  is  planning  to  evaluate  the 
legislation  on  SMEs. 
impact  of  new 
Examples  of 
to 
alleviate  the  administrative  burden  on 
SMEs  go  from  the  simplified  conditions 
for  accessing  subsidised  finance  (FR)  to 
longer  payment  time  for  VAT  (DK)  or 
development  of  dedicated 
electronic 
services (FI).  

specific  provisions 

• 

Implementation 
of 
the  think  small  first 
the 
principle 
in 
framework  of 
the 
Lisbon Partnership  

•  Conclusions of the 2006 Spring European 

Council set up five priority actions: 

•  Establish  a  one-stop-shop  for  setting  up  a 
company in a quick and simple way and to 
reduce  the  average  time  for  setting  up  a 
business to one week. 

•  Encourage  entrepreneurship, 

including 
through  entrepreneurship  education  and 
training. 

•  The recruitment of a first employee should 
than  one  public 

not 
involve  more 
administration point. 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Administrative 
Burden 
Reduction 
programme: 
reducing  the  administrative 
from 
arising 
burden 
Community  legislation  by 
25%  by  2012  in  a  number 
of priority areas. 

•  Commission  Is  proposing 
track  administrative 
fast 
burden  reductions  in  2008 
which will quickly simplify 
legislation  hampering  the 
success of business, notably 
in  the  areas  of  company 
law, 
and 
accounting 
statistical reporting 

•  Conduct  a  more  focused 
screening  of EU  legislation 
to  identify  possibilities  for 
de-burdening  SMEs  from 
unnecessary  requirements, 
in  the  framework  of  the 
Better Regulation 

•  Monitoring 

the 
framework  of  the  Lisbon 
Partnership 

in 

•  Member 

the 

States 

are 
increasingly  integrating  the 
"think small first" principle 
into 
policy-making 
process.  While  only  few 
have set up a specific body 
to represent SMEs interests, 
almost  all  of  them  consult 
SMEs representatives.  

•  Remaining problems  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

•  The  administrative  burden  created  by  public 
authorities is still a major concern for SMEs.  
•  New  legislations  do  not  always  take  into 

•  Further guidance in IA 
guidelines  to  measure 
SME impacts (COM) 

account SMEs specificities 

•  Heterogeneity  of 

implementation  of  SME 

policy at national level 

•  New  EU  legislation  coming  into  force  is 
introduced  at  many  different  dates  along  the 
year, depending on the negotiation process. 

principles 
as  Common 

•  Guiding 
such 
Commencement 
Dates,  tacit  approval, 
once 
etc. 
for 
(COM/MS) 

all, 

•  Further  national  efforts  are  needed  in  the 
application of this principle in order to meet the 
specific  needs  of  micro  and  small  enterprises 
but also to maximise its positive contribution to 
the target of reducing by 25%, at EU level, the 
administrative burden by 2012 

• 

Increase 
implementation 
and 
coordination  between 
EU 
and  Member 
States 

•  Reinforced monitoring 
and  governance  of 
trough 
SME  policy, 
SBA 
reporting 
(COM/MS)  

EN 

63 

EN 

 
  
 
Problems  

•  Existing policies 

•  Make  the  ‘Think  Small  First’  principle  a 
guiding principle in all relevant legislation 
and apply it systematically 

•  Facilitate  SMEs’ 

access 

to  public 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

•  Need for an enhanced 
and 
with 

dialogue 
consultation 
SME stakeholders 

procurement 

•  Regular 

information 

and  discussion 
business 

European 

meetings  with 
organisations chaired by the SME Envoy 
•  Several high-level stakeholder conferences 
with a wide variety of representatives from 
the  European  Parliament,  Member  States 
and business community, 

•  Late payments 

•  Directive 2000/35/EC 

•  Lack of entrepreneurship and skills 

•  Educational 

and 

•  Entrepreneurship 

Action 

Plan 

training policies 

(COM(2004) 70 final) 
•  2006  Communication 

on 
mindsets 
learning, 

fostering 
through 
entrepreneurial 
providing 
education 
examples  of  good  practices  which  were 
discussed  at 
the  Oslo  conference  on 
entrepreneurship education120. 

and 

•  On going activity 

•  Mobility  scheme  for young 
(would be) entrepreneurs 

•  Mobility 

scheme 

for 

apprentices 
•  EU SME week 

•  Currently,  one  out  of  four  insolvencies  in 
Europe is due to late payment. This leads to the 
loss  of  450,000  jobs  each  year,  adding  to  the 
high  unemployment 
In 
addition,  outstanding  debts  worth  23.6  billion 
Euros  are  lost  every  year  through  insolvencies 
caused by late payment.  

in  Europe. 

level 

• 

be 

on 

whereas 

self-employed 

•  Lack  of  entrepreneurship  in  Europe:  The  2007 
Flash  Eurobarometer 
entrepreneurial 
mindsets shows that 45 % of Europeans prefer 
to 
the 
entrepreneurial urge reaches 61 % in the US 
In  only  a 
is 
few  EU  Member  States, 
entrepreneurship already a recognised objective 
of  the  education  systems  and  is  embedded 
explicitly 
in  national  framework  curricula. 
Even  in  these  Member  States,  implementing 
means  (teacher  training,  teaching  materials) 
still need to be stepped up 

•  Young  entrepreneurs  and  apprentices  do  not 

•  Proposal to be made to 
fight  late  payments  by 
simplifying 
the 
Directive  2000/35/EC. 
Impact  Assessment  to 
be  carried  out  at  later 
stage, 
relevant 
if 
(COM) 

• 

Increase 
entrepreneurship 
mindset 
(MS) 

in  Europe 

•  Promote 

teaching  of 
entrepreneurship 
in 
national  curricula  and 
improve  the  image  of 
entrepreneurs (MS) 
•  Step  up  cooperation 
different 
the 

between 
departments  of 

120 

http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 

EN 

64 

EN 

 
  
 
 
 
 
 
 
                                                 
Problems  

•  Existing policies 

an 

•  The  Commission  launched  a  pilot  action 
for 
exchange 
ERASMUS-type 
programme  for  apprentices  to  encourage 
them  to  get  professional  experience  in 
another Member State 

• 

Insufficient  level  of 
women 
entrepreneurship  

•  Lack of skilled labour 

and basic skills 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

sufficiently  use  the  possibilities  offered  by 
cross-border  mobility  to  enhance  their  skills 
potential. According to a recent Eurobarometer 
survey  on  a  planned  pilot  project  “ERASMUS 
for  young  entrepreneurs”12181%  of  young 
would-be entrepreneurs and 71% of those who 
are already entrepreneurs say that participation 
for  young 
in 
entrepreneurs  could  be  useful  for  them.  These 
results  were  confirmed  by  the  answers  to  the 
consultation on this initiative122 
remaining  a  gap 
entrepreneurship between men and women.  

such  a  mobility  action 

terms  of 

in 

is 

•  There 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

public  administrations 
(MS) 

•  Extend  commission’s 
schemes 

mobility 
(COM) 

•  Establishing  an  EU 
female 

network  of 
entrepreneur 
ambassadors 
and 
promoting  mentoring 
schemes 
inspire 
to 
women  to  set  up  their 
own business (COM) 

•  Promote 

•  At EU level, the importance of improving 
the  competencies  and  skills  (in  particular 
ICT  skills)  of  enterprises'  human  capital 
been  recognised  as  a  key  element  for 
Europe's 
the  Lisbon 
Partnership  and  a  comprehensive  set  of 
actions have already been developed123 

future 

under 

•  Develop on-line services to 

promote e-skills 

•  Supporting 

the 
by 
development 
stakeholders of an online e-
Skills  and  Career  Portal  in 
2008  that  will  enable  firms 

•  SMEs  suffer  in  particular  from  the  lack  of 
skilled labour in the field of new technologies. 
A  2005  industry  report  predicted  that  there 
would be a shortage in 2008, across Europe, of 
up  to  half  a  million  people  with  advanced 
technology  skills124  A  sectoral 
networking 
survey  on  e-business  in  2006  reported  that 

to 
graduates 

entrepreneurship 
women 
(MS) 
•  Study 

in  2009 

to 
identify  the  jobs  and 
skills needs up to 2020 
and  paying  particular 
to 
small 
attention 
businesses (COM) 

121 

122 
123 
124 

Flash Eurobarometer 212, November 2007   
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/erasmus/eurobaro.htm 
EU programmes for cross-border mobility and e-skills would be useful/very useful for the majority of respondents (66% and 61% respectively) 
See: http://ec.europa.eu/enterprise/sme/competitive_en.htm 
IDC White Paper, Networking Skills in Europe, September 2005 

EN 

65 

EN 

 
  
 
 
                                                                                                                                                                                                                                                    
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

•  To  facilitate  the  take-up  of  e-skills,  not 
the  Commission  has 

least  by  SMEs 
proposed a new e-skills policy agenda 

to  self-assess  their  e-skills 
needs  and  find  out  how  to 
the  careers  and 
develop 
qualifications of their staff.  

enterprises  are  anticipating  skills  shortfalls  for 
ICT  practitioners,  particularly  in  ICT  strategy, 
security and new business solutions125 

•  Lack  of  managerial 

skills 

•  Mini-companies: 

secondary 

school 
students  participate 
in  a  practically-
oriented  training  scheme  launched  by  the 
Commission,  

•  SMEs lack managerial skills. According to the 
2007  Observatory  on  EU  SMEs,  11%  of  EU 
SMEs 
lack  of  quality 
that  a 
management  had  constrained  their  business 
activities over the past two years.  

reported 

tools 

•  Provide  training  and 
(e.g. 

related 
schoolbooks) 
reflecting correctly the 
role 
of 
entrepreneurship (MS) 

•  SMEs’ growth constraints 
• 
•  Start-ups 

Insufficient churning process, including:  

•  March 2006 Council Conclusions 

•  Start  up:  In  general  registration  times  have 
improved  and  in  13  Member  States,  it  is  now 
possible  to  register  a  company  within  one 
week.  It  should  be  noted,  however,  that  this 
analysis  only  looks  at  the  steps  to  get  a 
company  registered.  In  addition,  in  many 
countries  there  are  further  administrative  steps 
and  more  time  is  required  before  a  new  SME 
can start its business operations126. 

• 

Increase 
implementation  of  the 
conclusions  of 
the 
March  2006  Council 
in  the  framework  of 
the Lisbon Partnership 
(MS) 

125 
126 

EN 

E-Business Watch Survey 2006 
In this context, the timely implementation of the points of single contact foreseen in the Services Directive, to be implemented by end 2009, will also be an important task 
for Member States. 

66 

EN 

 
  
 
 
 
                                                                                                                                                                                                                                                    
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Stigma of failure  
•  Bankruptcy 
procedures 

•  Communication  on  Overcoming 

the 
stigma  of  business  failure  –  for  a  second 
chance policy” where some areas of action 
for  facilitating  the  fresh  start  of  honestly 
failed entrepreneurs are put forward.127 
In  the  context  of  the  renewed  Lisbon 
Strategy,  around  one  third  of  Member 
States  have  already  put  forward  plans  to 
reform  the  national  insolvency  legislation 
in their National Reform Programmes128 

• 

•  The 

2007 

Flash 

Eurobarometer 

on 
entrepreneurship shows that around 50% of EU 
citizens  agree  that  “one  should  not  start  a 
business  if  there  is  a  risk  it  might  fail” 
compared to just 20% in the US.  

•  Exit  rates  and  hence  gross  turnover  rates  (the 
sum of entry129 and exit rates) are higher in the 
U.S. than in the EU 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
• 

Improve 
bankruptcy 
procedures  based  on 
the  implementation  of 
the  Communication 
(MS) 

127 
128 

129 

COM(2007) 584 final 
Annex to the Communication from the Commission to the Spring European Council: Implementing the renewed Lisbon Strategy for Growth and Jobs - "A year of delivery". 
European Commission, COM(2006)816 final 
Based  on  data  for  a  sample  of  nine  EU15  countries  and  the  U.S. both  entry  and  exit  rates  are  lower  in  the  EU  than  in  the  U.S.  though  the  differences  in  exit  rates  are 
substantially larger. Exit rates in EU range between 1/10 and 1/3 of US rates, while EU entry rates represent between 0.4 and 0.8 of the U.S. entry rates. See Van Reenen, J. 
(2007):  Economic  Performance  of  the  EU  and  the  Structural  Reforms  Agenda:  Firm  Level  Evidence,  GEPA  Meeting  of  9th  July.  Cincera,  M.,and  O.  Galgau  (2005): 
“Impact of Market Entry and Exit on EU Productivity and Growth Performance,” Economic Papers 222, European Commission 

EN 

67 

EN 

 
  
 
 
 
                                                 
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Transfer of business  

•  Further 

a 

to 

Commission 
Communication130,  a  pilot  action  aims  to 
in  EU 
promote  mentoring 
Member  States  in  order  to  enhance  the 
knowledge  and  core  competences  that  are 
essential  for  the  successful  transfer  of 
business ownership 

schemes 

Insufficient access to finance 

• 
•  Access to finance 

•  To  improve  SMEs’  access  to  finance,  1.1 
billion  has  been  earmarked  for  financial 
instruments  within  the  Competitiveness 
and  Innovation  Framework  Programme 
(CIP) for the period 2007-2013 
•  To  allow  efficient  use  of 

regional 
the 

financial 
the 
instruments 
Commission 
European 
Investment  Bank  (EIB)  and  the  European 
launched 
Investment  Fund 
the 
the  Structural 
JEREMIE 
Funds132 

(EIF) 
initiative  of 

level, 

with 

at 

•  Remaining problems  

to  another 

•  SMEs  still  face  the  challenge  of  transfer  from 
one  generation 
represents  a 
challenge for Europe. Some 700 000 SMEs are 
concerned on average every year, and some 2.8 
million jobs are involved throughout Europe on 
an annual basis. “To obtain bank financing for 
the  transfer  is  difficult  since  the  appraisal  is 
complex  and  does  not  allow  for  standardised 
procedures.  Smaller  transfers  (most  transferees 
need  less  than  120  000  EUR  in  total  for  their 
investment)  often  do  not  generate  the  fees 
necessary  to  cover  the  higher  transaction  costs 
incurred  by  the  banks.  Equity  providers  are 
only  interested  in  high-yield  cases  which  are 
not the majority”131. 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
• 

Improve 
transfer  of 
business  following  the 
Communication (MS) 

•  Member  States  should 
ensure  that  their  legal 
and 
administrative 
frameworks favour the 
use  of  ERDF  funding 
to  support  the  starting 
and 
of 
growing 
businesses (MS) 

•  The European Agricultural Fund for Rural 
Development  (EAFRD)133  will  spend  up 
to  €10  billion  to  support  the  creation  and 

130 
131 
132 
133 

Implementing the Lisbon Community Programme for Growth and Jobs: Transfer of Businesses - Continuity through a new beginning COM (2006)117 
European Investment Bank SME consultation 2007/2008, p.52 
http://ec.europa.eu/regional_policy/funds/2007/jjj/jeremie_en.htm 
Council Regulation (EC) No. 1698/2005 of 20 September 2005 

EN 

68 

EN 

 
  
 
 
 
 
                                                 
Problems  

•  Existing policies 

•  Mezzanine finance 

of 

development 
non-agricultural 
enterprises in rural areas, skills acquisition 
in 
training,  as  well  as  SMEs 
and 
agriculture, food industry and forestry 
•  Guarantees under the Competitiveness and 
Innovation  Framework  Programme  (CIP) 
can  be  used  also 
for  guaranteeing 
mezzanine finance 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

• 

Insufficient  provision  of  mezzanine  finance, 
(combining  features  of  equity  and  debt), 
especially  for  High  Growth  SMEs  and  SMEs 
that want to internationalise 

•  Micro-credit 

•  The Commission has also promoted active 
dialogue and cooperation between bankers 
and  SMEs  which  has  lead  to  improved 
mutual  understanding  and  more.  The  5th 
Round  Table  of  Bankers  and  SMEs134 
discussed  transparency  issues  as  well  as 
innovative  financing  tools  like  mezzanine 
finance and SME securitisation 

•  Micro-credit Communication 

• 

Insufficient  availability  of  micro-credit  for 
SMEs  prevents  potential  entrepreneurs  and 
small businesses from achieving their goals and 
slows  down  the  growth  of  the  European 
economy 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

•  Developing  markets 
mezzanine 
for 
financing 
in 
cooperation  with  the 
EIB, 
for 
including 
High Growth SMEs or 
SMEs 
to 
internationalise 
(European  Investment 
Bank). 

that  wish 

•  Member  States  should 
financing 
develop 
that 
programmes 
address the availability 
of  mezzanine  funding 
between  €100 000  and 
€1 million (MS) 

•  Supporting 

microfinance 
institutions  through  a 
"Microfund" 
new 
providing 
additional 
support  for  non-bank 
microfinance 
institutions,  with  an 
initial  capital  of  about 
€40 million (European 
Bank/ 
Investment 
COM/ MS) 

•  Ensure 

that 

134 

See the final report at: 
http://ec.europa.eu/enterprise/entrepreneurship/financing/round_table.htm 

EN 

69 

EN 

 
  
 
 
                                                 
 
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
accompanying 
business 
support 
services  are  available 
entrepreneurs 
for 
getting 
microcredit 
(MS) 
•  Ensure 

that 

microfinance 
institutions 
from 
regulation (MS) 

benefit 
appropriate 

•  Venture capital  

•  The  Commission  has  identified,  in  its 
Removing 
recent 
Communication: 
Obstacles  to  Cross-border  Investments  by 
Venture  Capital  Funds135,  together  with 
Member  States  and  industry,  the  main 
obstacles  to  the  development  of  cross 
to 
border  capital  markets 
encourage  the  development  of  a  truly 
European venture capital market 

in  order 

•  Fragmentation  of  European  venture  capital 
market  along  national  borders  contributing  to 
small  funds,  small  invested  amounts  and  low 
profitability 

incentives 

•  Review tax systems so 
that  private  investors 
(like  business  angels) 
have 
to 
invest  in  SMEs  either 
directly  or  indirectly 
investment 
through 
funds (MS) 
of 
a 
benchmarks 
the 
content  of  investment 
readiness 
programmes; 
establish 
accessible 
criteria (COM) 

and 
easily 
quality 

•  Define 

set 
for 

135 

COM(2007) 853 final, 21.12.2007 

EN 

70 

EN 

linking 

•  Establish  a  standing 
network 
the 
Commission,  the  EIF 
and  Member  States 
regions 
and 
implementing 
JEREMIE  ((European 
Bank/ 
Investment 

 
  
 
                                                 
Problems  

•  Existing policies 

•  State Aids  

• 

Innovation and R&D 

•  Revision of the Community state aid rules 
has  increased  the  de  minimis  threshold 
under  which  aid  need  not  be  reported  to 
€200,000.  

•  New  Community  framework  for  State  aid 
for  research  and  innovation  (introduces 
more flexible rules for SMEs’ costs related 
to  Intellectual  Property  Rights  (IPR), 
hiring highly qualified staff and accessing 
innovation support services) 

•  Environmental State Aids Guidelines 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Various existing exemption regulations:  
•  Lack of consistency 
•  Need  to  update  according  to  recent  changes  in 

Community Guidelines  

•  Opportunity to increase aid intensity for SMEs  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 

COM/ MS) 

•  General 

Block 
Exemption  Regulation 
to be adopted the same 
the  SBA. 
as 
day 
analysed 
Proposal 
by  DG 
separately 
COMP 
services 
(COM) 

EN 

71 

EN 

 
  
 
Problems  

•  Existing policies 

• 

Innovation policy  

•  The 

launch  of  a  new,  broad-based 
Innovation Strategy with a ten-point action 
plan  addresses  several  key  issues  for 
SMEs,  including  skills,  standardisation 
and IPR 

•  The  Commission  has  also  published  a 
the  promotion  of 

practical  Guide  on 
innovation136 

•  The  Commission  adopted  in  November 
2006 a revised Community Framework for 
State  aid  for  research,  development  and 
innovation137  
•  The  Commission 

actively 
promoting  cluster  policies  in  the  Member 
States  and  ensures  the  co-ordination  of 
clusters at EU level to help the emergence 
of world-class European clusters 

also 

is 

•  Communication on clusters 

•  Measures 
planned 
implementation phase  

already 
in 

or 

• 

Implementation of the lead- 
markets initiative 

of 

•  Action  plan  to  promote  the 
use 
interoperable 
electronic  signatures  and 
electronic 
authentication 
between Member States 
in 

•  Actions 

the 

chains 

second 
quarter  of  2009  to  help 
SMEs  participate  in  global 
supply 
by 
harmonising  data  exchange 
standards  and  e-business 
processes  across  Europe, 
both  within  and  between 
particular industrial sectors 
e-Business 
Guide,  to  be  published  by 
mid-2008,  will  help  SMEs 
to  self-diagnose 
their  e-
business  needs  and  options 
local 
and 
providers  of 
e-business 
solutions 

online 

locate 

then 

•  An 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
•  Encourage 

SMEs’ 
participation 
the 
in 
lead  market  initiative 
(MS) 

• 

Implement  the  actions 
the 
from 
on 
Communication 
clusters (MS) 

•  Remaining problems  

to 

•  SMEs  are  not  sufficiently  R&D  intensive: 
According 
the  2007  Observatory  of 
European SMEs, only around 3 out of 10 SMEs 
in the EU indicated that they have new products 
or have income from new products. 

•  Problems  still  hinder  the  use  of  electronic 
invoicing  as  a  mean  to  transfer  invoicing 
information  (billing  and  payment)  between 
business  partners  in  the  Single  Market138. 
Currently, 
the  proliferation  of  different 
standards,  legal  uncertainty,  and  operational 
constraints are the main barriers which prevent 
the  take  up  of  cross-border  interoperable  e-
invoicing solutions, especially for SMEs, which 
face  particular  difficulties  with  the  take  up  of 
ICT 

•  Patent 

•  Pending  proposal 

for  a 
Community  Patent  and  an 
Patent 
EU-wide 
Jurisdiction 

•  Adopt  the  Community 

Patent. (MS) 

136 
137 
138 

EN 

http://ec.europa.eu/enterprise/innovation/documents_en.htm 
.See: http://ec.europa.eu/competition/state_aid/reform/rdi_en.pdf 
The essential features of e-invoicing are the replacement of manual paper-based routines, with new integrated systems and processes to integrate supply chains and make 
them more cost effective and faster 

72 

EN 

 
  
 
 
                                                 
Problems  

•  Existing policies 

•  Support programmes  

•  FP7 programme 
•  A significant share of the Structural Funds 
(2007-2013)  will  be  spent  to  support  the 
creation  and  growth  of  SMEs,  notably  to 
improve  their  innovative  capacity,  their 
investment in RTD and skills 

•  Measures 
planned 
implementation phase  

already 
in 

or 

for 

the 

•  EU’s 

7th 
Framework 
research 
programme 
(FP7) 
and  development 
target  of 
established 
allocating  15%  of 
the 
budget  of  its  Co-operation 
programme to SMEs.  
•  The  results139  of  the  first 
calls  for  proposals  show 
that  the  part  allocated  to 
SMEs 
the  main 
proposals  listed  (e.g.  after 
evaluation)  is  just  below 
20% 

in 

Insufficient access to markets 

• 
•  Access to the Internal 

Market  

•  An  integrated  business  and  innovation 
support  network  (the  European  Enterprise 
Network)  was  set  up  in  2007  and  became 
fully operational in 2008 to assist SMEs in 
benefiting  more  from  the  opportunities  of 
the Single Market 

•  The Commission has tabled a proposal for 
a  regulation  which  will  require  national 
authorities  who  deny  market  access  to 
duly justify their decision140 

•  Full 

of 

legal 

timely 
and 
implementation 
the 
Services  Directive141  by 
to 
end  2009  will  help 
and 
remove 
administrative  barriers 
to 
the development of services 
activities, it will free up the 
establishment of businesses 
cross-border 
and 
provision  of  services,  in 
particular for SMEs 

the 

•  Remaining problems  

•  Access  to  finance  for  innovative  companies 

especially for High Growth SMEs 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
•  Continue  efforts  over 

time (COM) 

•  Adapts 

FP7 
participation  rules  to 
encourage  the  growth 
of  SMEs,  by  ensuring 
that 
SME 
an 
participating  in  a  FP7 
project  can  keep  the 
SME 
benefit 
of 
treatment 
the 
whole  duration  of  that 
it 
if 
project,  even 
SME 
exceeds 
the 
ceilings  during 
that 
period (COM) 

for 

•  The  participation  of  SMEs  in  the  Internal 

Market remains low.  

•  SMEs  face  legal  and  administrative  obstacles 
when  creating  and  operating  their  business  in 
the Single Market.  

•  Difficulties  and  high  costs  of  setting-up  and 
operating  business  in  another  Member  State 
due to differences of the national legal regimes 
and the national company legal forms. 

for 

•  Proposal 
a 
European 
Private 
Company  Statute  for 
SMEs.  Proposal  that 
has  been  subject  to  a 
separate 
Impact 
Assessment (COM) 

139 
140 
141 

EN 

1st progress report of the FP7 SME inter-services task force 
http://ec.europa.eu/enterprise/regulation/goods/mutrec_en.htm 
Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on Services in the Internal Market, OJ L376 of 27.12.2006, p. 36 

73 

EN 

 
  
                                                 
Problems  

•  Existing policies 

•  Standardisation 

•  The  Commission  is  increasing  its  co-
funding  to  support  the  participation  of 
experts representing the SMEs’ interests in 
the  process 
that  establishes  European 
standards 

•  Public Procurement  

•  The  Public  Procurement  Directives 
provide a framework to foster competitive 
public procurement markets to the benefit 
of  SMEs.  In  response  to  the  2006  Spring 
European  Council,  the  Commission  has 
also  taken  action  in  analysing  how  public 
procurement  markets,  which  account  for 
about  16%  of  EU  GDP,  could  be  better 
used 
and 
competitiveness of SMEs 

to  promote 

the  growth 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Remaining problems  

•  Remaining administrative burden  
•  Culture  of  tendering  authorities  not  always 

SME friendly  

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
• 

EU 
Increasing 
financial  support 
to 
promote SMEs’ access 
to 
and 
standards 
standardisation 
process (COM) 

•  Promoting 
the 
of 
publication 
abstracts  of  European 
Standards 
without 
access restriction in all 
languages 
(COM 
ESOs) 

•  A  “SME  Help  Desk” 
in  the  ESOs  (COM/ 
ESOs) 

•  Code  of  conduct  for 
authorities 

awarding 
(COM) 

•  Foster  e-procurement 

(COM) 

•  New problems for EU SMEs arising in the context of globalisation 

•  SMEs  have  difficulty 
to  use  and  defend 
Intellectual 
their 
in 
Property  Rights 
foreign markets 

•  Reduced 

fees 

for 

Community Trade Mark 

•  SMEs  often  do  not  have  a  representative  in 
foreign  markets  and  have  difficulty  to  defend 
their intellectual property rights 

•  Develop  IPR  support 

services (MS) 

EN 

74 

EN 

 
  
 
 
 
 
 
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Need 

to 

improve 
growth 
SMEs’ 
a 
in 
potential 
sustainable way  

•  Environmental  State  Aids  Guidelines  (23 
of  January  2008).  The  various  measures 
these 
which  can  be  adopted  under 
Guidelines provide for a bonus of 10% for 
medium  and  20%  for  small  enterprises  in 
addition to the already high aid intensities 
allowed 
of 
the 
environmental policy measures142 

promotion 

for 

•  The 

on 

Policy 

forthcoming  Action 
Sustainable 
Plans 
and 
Industrial 
Sustainable  Consumption 
and 
will 
Production 
contribute towards boosting 
the  competitiveness  and 
sustainability of SMEs 

•  Significant  amount  of 

the  European 
Agricultural  Fund  for  Rural  Development 
2007-2013,  supplemented  by  additional 
national/regional and private co-financing, 
to  business  creation  and 
is  devoted 
development  of  SMEs  in  rural  areas, 
improving  the  skills  of  their  management 
and  personnel  as  well  as 
the 
implementation  of  new  and  innovative 
practice 

to 

•  Difficulty  to  comply 
environmental 

with 
legislation  

•  ECAP  Programme 

to  help  SMEs 

to 
integrate  environmental  concerns 
into 
production processes and products starting 
with 
compliance  with 
environmental legislation143 

better 

a 

•  Remaining problems  

•  SMEs lack of awareness and information 

•  SMEs  still  report  to  have  difficulty  to  comply 

with environmental legislation. 

•  Need 

for 

further 

public action? 
•  COM: Commission 
•  MS: Member States 
•  Establish a network of 
and 
environment 
efficiency 
energy 
the  new 
experts 
Europe 
enterprise 
and 
business 
innovation 
support 
network,  financed  by 
the  CIP  programme 
(COM) 

in 

•  Provide  incentives  for 

(e.g. 

eco-efficient 
and 
businesses 
products 
tax 
incentive  schemes  and 
subsidies  prioritisation 
to  funding  sustainable 
business)  in  line  with 
the 
Community 
Guidelines  on  State 
Aid  for  Environment 
protection (MS) 

•  Better 

examine 
existing  environment-
related 
subsidy 
structures  to  remove 
to 
disadvantages 
SMEs (MS) 

142 

143 

EN 

See:  Community  Guidelines  on  State  Aid  for  Environmental  Protection.  The  General  Block  Exemption  Regulation  (GBER)  also  contains  different  categories  of 
environmental investment aid which could be used by eco-efficient business (see articles 16 – 20 GBER). Article 22 GBER concerning environmental tax reductions could 
also be used. Member States could also use general investment aid provisions, like article 12 GBER on SME investment aid, to promote environmental objectives 
http://ec.europa.eu/environment/sme/programme/programme_en.htm 

75 

EN 

 
  
 
                                                 
Problems  

•  Existing policies 

•  Measures 
planned 
implementation phase  

already 
in 

or 

•  Difficulty  to  access 
international markets  

•  Development 

of 

trade 

facilitation 
provisions  in  future  free-trade  agreements 
(FTAs)  and  in  the  WTO  and  regulatory 
and  industrial  policy  dialogues  with  third 
countries  to  tackle  regulatory  obstacles  to 
trade.  In  addition,  specific  measures  such 
as 
information  and  awareness-raising 
campaigns  and  match-making  events  to 
facilitate  SMEs’  access  to  third-country 
markets, 
AL-INVEST, 
MEDINVEST  and  PROINVEST  have 
proven successful and will be continued 

such 

as 

•  Continue 

WTO 
negotiations 
the 
Government  Procurement 
Agreement (GPA) 

on 

•  Actively  seek  mutual  and 
reciprocal  opening  up  of 
third 
countries' 
procurement  markets  in  its 
bilateral  negotiations  with 
fast growing third countries 

•  Remaining problems  

•  Need 

for 

further 

•  A  certain  number  of  SMEs  have,  at  least  by  a 
restricted  number  of  service  providers,  access 
to  go 
relevant 
to  nearly  all 
international and to make business in China 
•  However,  under  the  current  situation,  many 
other SMEs are excluded from services/ service 
providers 

services 

•  Service  providers  do  not 

competition 
suboptimal 

and 

services 

face 
are 

serious 
therefore 

and 

public action? 
•  COM: Commission 
•  MS: Member States 
•  Establish 

European 
in 
markets, 
fast 
economies 
China 

Business  Centres 
selected 
starting  with 
growing 
India 
(COM) 
•  Launch 

in  2010  a 
‘Gateway 
to  China’ 
scheme, 
with 
particular 
focus  on 
establishing 
an 
Training 
Executive 
Programme  in  China 
to  promote  European 
SMEs’  access  to  the 
Chinese 
market 
(COM) 
•  Encourage 

coaching 
from  large  companies 
to  SMEs  in  order  to 
to 
bring 
international  markets 
(MS) 

them 

EN 

76 

EN 

 
  
ANNEX IV 

Fact and figures 

Box 1: EU Definition of SMES 

On  6  May  2003,  the  European  Commission  adopted  a  new  Recommendation  2003/361/EC144 
regarding  its  definition  of  small  and  medium-sized  enterprises  (SMEs),  which  took  effect  in  1 
January 2005. Under this recommendation, enterprises are classified as SMEs when they have fewer 
than  250  employees.  Furthermore,  the  annual  turnover  of  enterprises  should  not  exceed  EUR  50 
million, or their annual balance sheet total should not exceed EUR 43 million145 In order to provide 
a  realistic  picture  of  an  enterprise's  economic  situation,  a  distinction  has  been  introduced  between 
the different categories of enterprises (autonomous, partner and linked), each of them corresponding 
to  a  type  of  relationship  which  an  enterprise  might  have  with  another  one.  Depending  on  the 
category  in  which  an  enterprise  fits  it  may  then  need  to  add  some,  or  all,  of  the  data  from  those 
enterprises to its own. 

Enterprise category  Headcount 
medium-sized 
small 
micro 

< 250 
< 50 
< 10 

Turnover 
≤ € 50 million 
≤ € 10 million 
≤ € 2 million 

or 

Balance sheet total 

≤ € 43 million 
≤ € 10 million 
≤ € 2 million 

Figure 1: Breakdown of value added and number of persons employed by enterprise size-
class, non-financial business economy (NACE Sections C to I and K), EU-25, 2003 (% share of 
total)146 

144 
145 

146 

Commission Recommendation of 6 May 2003, OJ L 124 of 20.5.2003, p. 36 
More details can be found on the web-site for the Directorate-General for Enterprise and Industry, available at: 
http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm 
Eurostat, European business, Facts and figures, 2007 

EN 

77 

   EN 

 
 
 
                                                 
Figure 2: SMEs' employment share: manufacturing and services, 2003 

1

0,9

0,8

0,7

0,6

0,5

0,4

0,3

0,2

0,1

0

si bg de sk fi pt dk fr be hu se ie at uk cz ro lt nl lv ee es it pl

eu-25

SME's employment share: manufacturing SME's employment share:services

Figure 3: Development of employment by size-class, Europe-19 (index, 1988 = 100) 

The  figure  3  “depicts  the  size-class  pattern  of  employment  development  in  Europe-19.  It  can  be  clearly  seen  that 
employment  growth  is  negatively  related  to  enterprise  size.  In  the  1991/1993  period  of  slow  economic  growth, 
employment  decline  is  smallest  in  micro  enterprises  and  largest  in  large  enterprises.  Also,  during  the  recovery  from 
1994 onwards employment growth was strongest in micro enterprises”147. 

147 

European Commission, Observatory on EU SMEs, SMEs in Europe 2003, 
http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/smes_observatory_2003_report7_en.pdf 

EN 

78 

   EN 

 
 
 
                                                 
 
Figure 4: listing breakthrough innovations made by small firms during the 20th century)148. 

Figure 5: Intensity of innovation per size class 

148 

Other  studies on  the distribution  of  innovations  certified  as  "significant"  by  industry  experts,  confirmed  that 
small (as well as large) firms outperform medium-sized firms for the US (see OECD 2006 for an overview) 

EN 

79 

   EN 

 
 
 
                                                 
Aggregated entry, exit and net entry rates (in %) by country (1997-2003) 

Figure6:

Source: “Impact of Market Entry and Exit on EU Productivity and Growth Performance”, M. Cincera  
and O. Galgau  (2005). EC Economic Papers 222. 

Figure 7: Average firm size relative to entry, by age 

Figure 8: complementarities between small and large innovative firms 

EN 

80 

   EN 

 
 
 
EN 

81 

   EN