A fight has broken out over how much smaller companies should benefit from the EU's structural funds, highlighting the issues at stake in a forthcoming debate on the definition of SMEs, which is already the subject of fierce lobbying.

Johannes Hahn, the commissioner for regional development, will next week table rules governing the future direction of the EU's regional development funds. An earlier version of the rules stated that funds should be directed "primarily for SMEs".

The latest draft, however, has dropped the word "primarily" giving rise to fears from the larger business federation, BusinessEurope, that such funds would now only go to smaller companies. The organisation wrote to Hahn on Tuesday (27 September) asking for the word to be re-inserted.

Being classed as an 'SME' brings benefits

The argument highlights how categorisation as an SME can bring benefits, and lobbying over the definition has started well before a Commission debate on the issue next year.

Currently there are three broad parameters which define SMEs.

  • Micro-entities are companies with up to 10 employees;
  • Small companies employ up to 50 workers, whilst;  
  • Medium-sized enterprises contain up to 250 employees.

The Commission announced over the summer that a consultation would start in 2012, opening up all aspects of the definition to debate. Any changes to the definition arising from the consultation would be implemented in 2013, however, Commission officials stress that there is no intention from the outset to change the definition.

The current definition represents a political compromise which ensured that the upper figure of 250 employees was reached for medium-sized businesses.

This was seen as a compromise between the German tradition – where Mittelstand companies often extend to more than 400 employees – and those countries where medium-sized entails far fewer employees.

Larger German and French companies want to be SMEs

EurActiv understands that a number of French and German companies and industry sectors have begun to lobby for an increase in the definition to the top level of 400 employees, a move that SME groups are fiercely resisting.

A range of other criteria are currently taken into account under different rules, however, and may change the definition of a company for specific tax or regulatory purposes. These finer details are also the subject of fierce debate.

Gerhard Huemer, the director for economic and fiscal policy at the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) said that larger companies are also trying to change the rules which dictate how much share ownership of SMEs they may hold before the smaller company falls out of the definition.

"If they succeed it will lead to abuse as Europe's largest companies will simply set up strings of small subsidiary companies designed to benefit from SME funds and exemptions," Huemer said.

Jeremy Fleming