SMEs account for 99% of all businesses in the EU, yet the impact legislation has on them is rarely analysed in enough depth. If we are serious about jobs and growth, this has to change, writes Arnaldo Abruzzini.
Arnaldo Abruzzini is CEO of EUROCHAMBRES, the Association of European Chambers of Commerce and Industry.
The European Commission regularly disregards its own guidelines for assessing the impact of policy on SMEs. This is what emerges from a new EUROCHAMBRES study of the application of the SME test within 13 pre-legislative impact assessments.
The dossiers covered in the study were selected on the basis of their significance to the SME community and relate to legislative proposals in a range of policy fields, including the posting of workers, geo-blocking, online sales contracts and insolvency.
Despite the strong commitment of the Juncker Commission to the ‘Think Small First’ principle, less than half of the scrutinised impact assessments contained what could be considered a good SME test.
This disappointing picture is worryingly consistent with that revealed in the previous studies conducted by EUROCHAMBRES in 2011 and 2013, which also highlighted a frequent underperformance within the Commission in assessing the needs of SMEs during the preparation of policy proposals.
Many of the weaknesses observed start from the consultation process. Corners are sometimes cut in carrying out public consultations and targeted consultations of SMEs are rare, which significantly undermines the quality of data collected, a crucial ingredient in evidence-based policy-making.
In over three-quarters of the impact assessments analysed, the views of SMEs are not discernible from those of large businesses or other respondents in the presentation of consultation results, thus making it hard, if not impossible, to identify their specific needs and concerns.
These shortcomings in consultation have a knock-on effect on the assessment of the impact on SMEs: thorough cost-benefit analysis and quantification are often absent, there is a lack of detail and accuracy and insufficient attention to differences between SME size classes (micro, small, medium).
The persistence of such flaws in the application of the SME tests is detrimental to the policy-making process, as they increase the risk that the Commission tables legislative initiatives that will create unnecessary and excessive burdens on ‘the backbone of the European economy’.
So, what should be done?
We’re not asking for a radical new approach or a major shift in procedures. On the contrary, our main recommendation to the Commission is very simple: apply the existing guidelines!
These guidelines explain how to consult stakeholders and to present the consultation results, they underline the need to pay attention to different business sizes and to quantify costs and benefits.
They also highlight the importance of analysing the impact on SMEs for all the policy options, not only the preferred one. In other words, all the ingredients for a good SME test are already in place within the Commission’s internal procedures. They just need to be applied accurately.
Additional support and more robust checks and balances are needed to ensure that SME tests are done properly and are not just a box-ticking exercise. The officials in charge of a particular dossier should receive greater assistance in conducting the SME test before their impact assessment is submitted to the Regulatory Scrutiny Board.
The Board, in turn, should more systematically verify that the SME test is properly carried out before issuing a positive opinion on an impact assessment.
Ultimately, the Commission must consider many elements in deciding whether to adopt specific policy measures, but one such element must be a thorough analysis of the implications – positive and negative – for SMEs.
SME tests are not a goal in themselves, nor indeed are the principles of better regulation and evidence-based policy-making. But job creation and growth are goals; very important goals.
That is why it is crucial to our competitiveness that legislation relevant to SMEs – 99% of all EU businesses and well over half of employment and value added – is based on a thorough analysis of the impact on them. This cannot be optional. It must be a pre-condition for moving forward with the legislative process.