EU to promote SME exports

Germany

The contribution of SMEs to the German economy is lower than the EU average, with large firms accounting for a major chunk of total employment. The total SME sector employs 61% of the workforce – less than the EU average of 67%.

Micro-enterprises are particularly weak in Germany, contributing 19% of jobs compared to an EU average of 30%. Medium-sized companies have a relatively prominent role but large companies make up almost half of German industry in terms of value added.

Prior to the crisis, the number of new small businesses was growing rapidly with strong growth driven by new start-ups launched by unemployed people. Small service-sector firms were a major part of this trend and government policies helped foster a rise in the number of female entrepreneurs.

The SME Performance Review found that Germans were less inclined than the average European to want to be self-employed, although Germany fares better when it comes to giving failed entrepreneurs a second chance.

When it comes to making life easy for entrepreneurs, Germany has stepped up its efforts to cut red tape but is broadly on a par with the EU average according to key indicators like the how easy it is to hire and fire people. One area where Germany falls down is in the time it takes to start a new business.

France

France has a smaller-scale SME sector than Germany but it is similar to the EU average. The relative contribution of small firms is a little lower than other European countries, with the micro-enterprise sector seen as weak. French SMEs provide around 62% of jobs – significantly less than the EU average.

From 2002 to 2008, the small business sector grew by 17%, which is somewhat higher than average. This was driven by the micro-enterprise sector which grew quickly, albeit from a low base.

France came in for particular praise in the SME Performance Review for its high level of participation in entrepreneurship education. Just over half of school or university students (51%) take courses in setting up businesses – a figure that puts it well ahead of the European average of 32%. The proportion of entrepreneurs that have started their businesses based on opportunity rather than necessity is also above average.

However, the overall number of entrepreneurs is low, as is the number of thriving new businesses. 

On the plus side, 10% of French SMEs do business beyond their borders, mainly thanks to the number of companies with subsidiaries or joint ventures abroad. By comparison, the EU average is just 5%.

UK

Business groups in the UK are still smarting from the new government's decision to raise the VAT rate to 20% from next year – up by 2.5% on the current rate. Retailers have complained that the move will hurt sales and fuel inflation.

While the UK has a reputation for being relatively pro-enterprise, the SME Performance Review shows small firms have less impact than the EU average in terms of job creation. The number of new small firms has been lower than elsewhere in Europe.

However, by other measures, such as the cost of starting or winding up a business, the UK is seen as quite supportive of new start-ups and has been well ahead of average when it comes to reducing red tape and introducing flexible working hours regulations.

The UK also outperforms its European counterparts when it comes to providing access to finance for small firms, especially venture capital.

Ireland

Irish SMEs have suffered badly from the decline of the British pound given that the UK is Ireland's largest export market. However, last week's decision to raise the VAT rate in the UK has been welcomed by business groups. Retailers in particular had suffered from shoppers crossing the border with Northern Ireland to buy cheaper alcohol and other consumer products.

The difficulty small firms face in accessing credit has had a deep impact on Ireland's economy given the large contribution SMEs make to employment. The percentage of small enterprises is twice as high as the EU average and the number of medium-sized businesses is also above the norm. These companies play a particularly strong role in driving employment.

Ireland is also above average in terms of entrepreneurial activity and implementing the Think Small First principle of the Small Business Act. On skills, internationalisation and earmarking public procurement funding for SMEs, Ireland performs better than most.

The government's decision to introduce "innovation vouchers" is highlighted in the report as an example of good practice. These vouchers, introduced in 2007, are worth €5,000 and can be exchanged for advice and expertise from accredited experts.

Despite the factors running in favour of Irish SMEs, companies continue to go out of business and unemployment continues to rise due to a serious banking crisis and Ireland's position as an open economy. While the banking sector problems will take time – and taxpayers' money – to solve, the cost of doing business is falling and the EU is forecasting that Ireland's growth rate will be around 2.8% next year.

Spain

The SME Performance Review reveals a remarkable stability in entrepreneurship trends in Spain. Spanish youth unemployment has soared since the outbreak of the crisis but the rate of "enterprise survival" has increased significantly in the first half of the decade, while female entrepreneurship has also risen steadily.

Another positive development is the decrease in "lost payments", which has fallen from 3% in 2002 to 2.4% in 2009. Spain and its southern European neighbours have often been singled out for criticism over late payments.

Spanish exports have declined as a total of EU exports but the percentage of businesses receiving orders online has increased dramatically, demonstrating Spain's willingness to embrace e-commerce.

Italy

Italy comes in for praise in the report for a new law passed last year aimed at measuring administrative burdens facing SMEs and reducing them by 25%. The government has committed to cutting red tape in consultation with business organisations.

Overall though, Italy is criticised for the level of administrative work required to start a business and the high cost of enforcing contracts. Italy is also below par when it comes to entrepreneurship and the number of women starting their own businesses.

In terms of internationalisation, enforcing the single market and access to finance, Italy fares less well than the EU average. However, SMEs receive a greater share of public procurement and state aid funding than in the past.

Poland

Poland was the only European economy to record positive growth last year, despite the impact of the economic crisis. Business groups have praised the government's willingness to adopt pro-enterprise measures.

Poland is in line with the average EU performance when it comes to late payments but is among the under-performers in terms of venture capital and the planned share of EU structural funds dedicated to stimulating entrepreneurship. Just 5% of structural funds are earmarked for start-ups, compared to an EU average of 9%.

15 million Polish Zlotych (€3.65 million) of the EU Structural Fund Human Capital Operational Programme is being tapped as part of Poland's efforts to boost public procurement support for small firms.

€180 million of the EU Structural Fund Innovation Economy Operational Programme will be used to stimulate SME venture capital through Poland's National Capital Fund (NCF).

The environment for SMEs is seen as being largely positive, with micro-enterprises accounting for a larger-than-average share of the economy. However, Polish SMEs create proportionally less value added than their European counterparts (52% versus 58%).

Romania

EU funds play a role in ensuring access to finance for SMEs in Romania. The government has introduced a National Credit Guarantee Fund for small firms and this has been used to cover the risk associated with currency fluctuations, as well as to ensure co-financing of projects funded through European Structural Funds.

The European Investment Bank (EIB) has also supported Romania through the Jeremie initiative, which has seen €100 million transferred as financial capital to a Romanian fund.

Romania has introduced a new scheme known as 'Start', which developed entrepreneurial skills among young people and helps them access finance. Beneficiaries should be between 18 and 35 years of age, provided that they have not received state aid in the previous two years. It had a total budget of €21.2 million in 2009.

Support for entrepreneurship in schools and universities is conducted through the Minister of Education, Research and Youth. The government has also decided to develop new legislation which it hopes will reduce red tape for SMEs.

New laws now provide companies with protection against bankruptcy, and ensure that companies will not be refused credit by banks due to insolvency.