French Presidency seeks strong 'Small Business Act'[fr][de] 

Following a public consultation on the SBA, the Commission has identified seven main challenges for SMEs: 

Better societal recognition of entrepreneurship 

49% of Europeans have never thought of setting up their own business, according to a recent TNS Eurobarometer. This almost doubles the US figure. In line with this attitude, only nine European young SMEs (created after 1980) made it into the world's top 1,000 companies, whereas the US accounted for 64. 

Businesses notably blame the media for this, accusing it of putting too much emphasis on the risks related to creating and running an enterprise rather than focusing on the success stories. 

Better access to risk capital 

This aspect is considered key to fostering a more competitive Europe. Businesses demand that "member states have to make much better use of the state aid opportunites". 

In a joint letter to Commission President José Manuel Barroso, Sarkozy and British Prime Minister Gordon Brown said there was a "compelling case" for action by the European Investment Bank (EIB) to improve the flow of finance to SMEs, which were "finding it more difficult and more expensive to access the credit they need to finance their longer term strategic investment plans". 

EIB President Philippe Maystadt has already said he will make proposals to the bank's board in June to "modernise and diversify" the way in which the EIB provides loans to SMEs. 

Improving skills and innovation

84% of European SMEs think that the education system and in particular school curricula do not focus enough on entrepreneurship, calling for a stronger link between the SME community and schools. 66% supported setting up EU programmes for cross-border mobility and e-skills. 

France wants to promote its "pôles de competitivité" system to the Commission as an example to be followed across Europe. This model brings small and larger businesses together as part of a cluster to address particular technologies.

Limited innovative capacities and limited R&D expenditure 

This aspect was also a central focus of the Stoléru group, which concluded that small, innovative businesses – similar to the US system - should be awarded a 15% quota of the research and development market in Europe. The proposal is based on the experience with the French SME pact, put in place in 2005, which represents a voluntary commitment made by large public or private entities. 

Administrative burdens 

One third of the surveyed SMEs cite 'red tape' as their biggest obstacle, stressing the need to reduce the time and costs to set up a company. The Commission stresses that the measures taken have already helped to reduce those from €813 in 2003 to €554 in 2007 (in the EU 15). 

Businesses also urge the Commission to accelerate its 'better regulation' process (see our LinksDossier), calling for cuts in red tape of at least 25% by 2010, while the Eu executive's target was 2012. 

Better access to public tenders in Europe and abroad

France had originally envisaged copying an American scheme whereby a set share of public markets is reserved for SMEs, but backed down at the beginning of this year due to outright opposition from more liberal-minded nations within the bloc that are against any form of state intervention in this field. 

The measure would also have contradicted a multilateral agreement on public procurement concluded between the EU and 27 other countries, which commits governments to opening up their public tenders to international competition. 

France, however, refers to the fact that several parties to the pact, including a number of Europe's major trading partners, have obtained derogations allowing them to favour their domestic companies in awarding contracts. It thus wants the Commission to negotiate a similar clause for European companies. 

"We maintain our demand for an exemption clause, so that European SMEs are put on an equal footing compared to American, Canadian, Japanese or Korean companies," French State Secretary for Enterprise Hervé Novelli said earlier this year. 

Novelli further backed the Commission's proposal to push for further market opening in these countries by insisting on more "reciprocity". 

"We should establish a system where our own public markets are temporarily less open to foreign companies based in countries where public markets are closed," he said. 

SBA to boost innovation and job creation  

France hopes that the SBA could also give a boost to the field of innovation and serve as an engine for other European projects, such as the lead market initiative or the talks on a Community Patent, which may also be concluded or at least brought close to conclusion during the French Presidency. 

The Commission also hopes that the SBA could contribute to the creation of new jobs amid fears that positions in big industry could be lost due to competition with low-cost countries. 

In a joint letter to Commission President José Manuel Barroso, British Prime Minister Gordon Brown and French President Nicolas Sarkozy expressed their support for the Commission's initiative, stating that SMEs' "continued success is key to the future prosperity of the European economy". 

They, however, also expressed strong concern regarding access to commercial loan finance and venture capital, saying the current situation was far from ideal. 

"The market alone does not provide sufficient finance for the start-up or expansion of innovative high growth businesses. This difficulty in accessing commercial finance has been made worse by recent developments in the financial markets," they said, referring to the global credit crunch. 

Industry Commissioner Günter Verheugen said that "a vibrant SME sector is crucial for the economic health of Europe". He considers the 'Small Business Act' as "a final step of a new policy", which "goes the famous extra mile" by fully unlocking the business potential for SMEs. 

Slovenia's Economy Minister  and current EU Council President Andrej Vizjak called SMEs "the backbone" of the European economy. 

Business representatives, such as Andrea Benassi, the secretary general of the Association of European Crafts, Trades and SMEs (UEAPME), insisted that small businesses would "not settle for anything less than a legally binding act providing a solid basis for SME policy in the coming years". He criticised the Commission for not addressing this "key question", saying that without a binding character the SBA was not more than a "paper tiger". 

Benassi also called upon the EU and the upcoming French Presidency to deliver this year as it was the last chance before the Parliament elections next June.