SMEs jostle for budget boost in funding ‘jungle’

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This article is part of our special report SME’s Access to Finance.

SMEs jostling for gains in the research budget and changes to the structural funds in the Commission's Multi-Annual Financial Framework (MFF) remain unclear which sectors will scoop the rewards in the complicated EU funding 'jungle'.

The new research budget, Horizon 2020, one of the biggest 'winners' under the draft MFF, is set to incorporate new instruments targeted at SMEs.

Horizon 2020's boosting finance to SMEs has long been a Commission priority, but behind the scenes disputes remain over how much to pump into general innovation projects – which could benefit all types of SMEs – or whether to focus on the Commission's so-called 'societal priorities', including themes such as healthy and active ageing.

How big do you need to be to get cash?

Gerhard Huemer, the director for economic and fiscal policy at the European Association of Craft, Small and Medium-sized Enterprises (UEAPME), said that his member companies were positive about the higher budget and greater focus on innovation.

But he added:  "How will the large SMEs fare compared with the smaller ones? The discussions are still ongoing at the moment. Will all SMEs be able to access the EU programmes, or will the only SMEs that benefit be those working within the societal challenges earmarked by the Commission?"

Richard Pelly, the chief executive of the European Investment Fund, told EURACTIV that they are currently working on a pilot programme for Horizon 2020 which focuses on risk-sharing to benefit innovative SMEs. "The project will emerge at the end of the year and is a good example of a targeted response to the crisis," he said.

Pelly did not explain which sectors the pilots covered, but said: "With a view to the future and the next financial framework, this pilot programme is intended to develop into something bigger."

Under the Commission's MFF proposal, SMEs will also benefit from changes to the distribution methods of the EU's massive structural funds pool, but lobbyists are calling for more explicit mentions of SMEs within the proposal, fearing that otherwise SME claims will not be safeguarded.

Currently SMEs can gain access to structural funds through the Jeremie programme, administered by the EIF.

"With our current commitments, we are triggering a total leverage volume of about €40 billion across Europe. That figure is likely to increase over the next few years. It will do so because I expect the EIF to be mandated by an increasing number of parties to manage resources on their behalf – both on the national level (member states) as well as on the European level (by the European Commission and EIB)," Pelly said. 

According to Danish MEP Bendt Bendtsen, who chairs the SME circle at the European People's Party (EPP), "everyone agrees that SMEs are the backbone but we need more funds to be available for investment in SMEs, and that means more of the structural funds."

"The most important thing for the SMEs is that structural funds and regional development funds should be capable of being directed towards SMEs. More needs to be directed to them and this should be explicitly mentioned within the MFF," Huemer insisted.

Access to EU funds is 'like a jungle'

Meanwhile smaller SMEs claim that they remain ostracised from the funding initiatives because of the complicated administrative procedure required to gain investments.

"EU funding is perceived by micro and small businesses as 'a jungle'. Most small business owners know that there is such a thing as EU funding but haven’t the faintest idea how to apply for it," said Patrick Gibbels of the European Small Business Alliance's Brussels representative.

Bendtsen said: "We need a one-stop shop and we wanted the Commission to make it simpler and to use the structural funds as financial instruments."

Jeremy Fleming

Positions

"I think that we need to prioritise some of those amounts, we need to have a broad discussion that we have a budget but we need to use more money because everyone agrees that SMEs are the backbone but we need the IEB family and pension funds should be more available for investment in SMEs but also structural funds," according to Danish MEP Bendt Bendtsen, who chairs the SME circle at the European People's Party.

"In general we have been positive about the multi-annual framework's effects with a higher budget and greater focus on innovation," according to Gerhard Huemer, the director for economic and fiscal policy at the European Association of Craft, Small and Medium-sized Enterprises (UEAPME).

"The most important thing for the SMEs is that structural funds and regional development funds should be capable of being directed towards SMEs. More needs to be directed to them and this should be explicitly mentioned within the MFF. Each member state is due to complete a separate contract with the Commission in which its share of the structural funds and its plan for implementation of the research budget is clearly set out," Huemer concluded.

"Our involvement with Horizon 2020 is an initiative with a long-term goal to provide support to innovative SMEs across Europe," said Richard Pelly, the chief executive of the European Investment Fund.

Patrick Gibbels the European Small Business Alliance's Brussels representative added: "Online portals are created at EU level but this is not enough to reach the actual businesses on the ground. Moreover, most funding is only attainable for small businesses if they are part of a larger consortium, in which they end up having a very small voice.  Tailoring certain funds specifically to SMEs could therefore be a solution. However, an effective information campaign is crucial if the EU wants to include SMEs into its funding programmes more."

Background

The European Commission presented on 29 June its proposals for the EU's next seven-year budget (2014-2020).

The Commission proposed raising the next seven-year budget to €1,025 billion, up from the current €976 billion, representing a 5% increase.

Probably the most controversial element of the Commission proposal is to raise taxes at EU level, something presented as a way to reduce contributions from national coffers.

Currently, the EU budget is mostly funded through financial transfers from member states.

Timeline

Further Reading

  • European Small Business Associationweb site
  • European Association of Craft, Small and Medium-sized Enterprises (UEAPME)web site

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