This article is part of our special report SME’s Access to Finance.
SPECIAL REPORT / EU ministers with research portfolios have agreed new funding procedures for SMEs so that they can more easily access funds from the EU’s next framework programme for research – called Horizon 2020 – but the exact sums remain in doubt.
Ministers agreed on 11 October to an incentive mechanism within the Horizon programme, with its proposed €80 billion budget, designed to encourage the participation of small and medium enterprises.
This will see a proportion of the Horizon budget set aside for SMEs within a special legal instrument, designed to target businesses with a potential to grow rapidly and expend internationally.
Participating companies will not be required to dedicate a large part of their activities to research. The instrument is designed to push business opportunities and focus on bringing new technologies on the markets.
A reimbursement rate of 70% will apply to close-to-market activities under the future rules of participation.
Special terms for SMEs
Small businesses may also participate in collaborative research projects where the reimbursement rate reaches 100%, under the rules of participation.
The ministers also agreed to raise the flat rate payable for indirect costs on Horizon programmes from 20% to 25%, and called for creating an €8,000 bonus to compensate researchers for personnel costs.
What this will all be worth in cash terms remains subject to two key issues yet to be agreed: what percentage of Horizon will be ring-fenced for SMEs, and how much money will be available in Horizon itself.
In September, members of the European Parliament’s Industry, Research and Energy Committee called for 20% of Horizon 2020 funding to go to small businesses.
Paul Rübig, a Christian-Democrat MEP from Austria, is among those who suggested amendments to the Commission’s proposal regarding SME financing.
“While Framework 7 held and is likely to achieve a target of 15%, a more ambitious but realistic and achievable goal is needed to fully exploit the SMEs’ innovative potential,” Rübig wrote in a report.
Spanish MEP Teresa Riera Madurell (Socialists and Democrats), who is drafting the Parliament’s response on establishing Horizon 2020, agreed that 20% should be a binding target.
Belgian MEP Philippe Lamberts (Greens) said that “at least 10%” of the Horizon 2020 budget should go to the special instrument meanwhile, saying that this should be managed by a single, dedicated Commission department.
The special funding system would allow businesses to take the lead in projects instead of being added as token applicants, says Gerhard Huemer, policy director at the European Association of Craft, Small and Medium-sized Enterprises.
Questions over Horizon budget remain
Huemer said Máire Geoghegan-Quinn, EU commissioner for research and innovation, "has reassured us on other key aspects, such as less red tape and the use of the official SME definition. Unfortunately, she has made no commitments on the budget issue.”
“We hope that Parliament and Council will secure this crucial request in the months ahead,” he said.
Meanwhile, there are serious doubts that the ambitious provisional budget for Horizon – it would be the largest research budget in the world – will stand the difficult negotiations to come in the general budget talks.
Jan Olbycht, the Polish vice chairman of the European People’s Party, told EurActiv on 26 September that research should not take the lion's share of the budget at the expense of other areas like regional policy, which tend to benefit poorer EU countries.
His comments underline tensions over spending up as negotiations on the EU's 2014-2020 budget enter the final stages, with an agreement expected by the end of 2012.
“The "Horizon 2020" programme clearly has the potential to improve competitiveness and to strengthen sustainable growth and job creation, by starting from the needs of our society and from market ideas and covering all steps in the innovation cycle, from ideas to market application,” said Gerhard Huemer, policy director at the European Association of Craft, Small and Medium-sized Enterprises (UEAPME).
“However, this programme needs a ring-fenced, dedicated budget for SMEs of at least 15% of the overall envelope to succeed and really make a difference for SMEs,” Huemer said.
“It’s about implementation issues as well, and innovation in social policy,” said Jan Olbycht, vice chairman of the European People’s Party, “We know that we will observe reductions across the MFF, and it is unrealistic to imagine that there could be reductions in other areas, such as agriculture or cohesion funds, without there being a reduction to the research budget.”
Europe's 23 million SMEs are the backbone of the economy, representing 99% of businesses and accounting for 58% of total turnover in the EU. Their development and growth is essential for enhancing competitiveness and strengthening Europe's attractiveness as a place for investment and production.
European SME Week (15-21 October) is a forum for businesses, policymakers and investors to discuss ideas for promoting the sector.
With more than 1,500 events running across 37 countries and a summit in Brussels on 17 October, European SME Week is organised by the EU Directorate for Enterprise and Industry, as a campaign to promote entrepreneurship and inform entrepreneurs about support available for them at European, national, regional and local level.
- November 2012: EU's 2014-2020 Budget under discussion in the Parliament and Council
- European Central Bank: Survey on the access to finance of small and medium-sized enterprises in the euro area, from October 2011 to March 2012
- European Commission: SME week (General)
- European Commission: European SME Week
- European Commssion: Proposal for a Regulation on European Venture Capital Funds
- European Commission: Annual Report on SMEs in the EU 2011/2012
- European Investment Fund: Website
- European Investment Fund: More details about RSI
- European Private Equity and Venture Capital Association: Website
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