Special Report: London Stock Exchange, Commission link up on SME funding

London dominates the $5-trillion-a-day foreign exchange market, trading twice as many dollars as the United States and more than twice as many euros as the entire euro zone, according to TheCityUK study.

The London Stock Exchange is collaborating with the European Commission to devise new funding mechanisms for SMEs, and new SME envoys from all member states will meet for the first time in Budapest next week, the European Business Summit heard yesterday (19 May).

Speaking at a session questioning whether Europe had a future in the global economy (19 May), Commission Vice President Antonio Tajani said: "We are changing the rules on access to finance, where we need to account more for the needs of SMEs. The London Stock Exchange is working with me within the Financial Future Forum on formulating solutions to access to funding for SMEs."

He told EURACTIV that the deal to co-operate had been reached at a meeting between the CEO of the London Stock Exchange, Mr Xavier Roleta, and members of the Financial Future Forum.

Meanwhile, delegates were told that the first meeting of special "SME envoys" appointed from each member state would converge on Hungary next week to meet with industry.

Belgium, Denmark, Estonia, Portugal and Slovenia have not yet indicated who their envoys will be, and have until next week to do so.

The announcement came from the Commission's own SME envoy, Daniel Calleja Crespo, speaking at an opening session of the summit.

Calleja Crespo said he was responsible for co-ordinating the group, which was being selected from amongst senior members of each country's administration and would consider policy affecting SMEs.

He later told EURACTIV that Tajani would inaugurate the new network at the conference next week in Budapest – called 'Mobilising SMEs for the Future of Europe' – which has been co-organised with the Hungarian EU Presidency.  The event will bring together more than 400 representatives of small business, business organisations and public administrations tasked with co-ordinating SME policy.

Also speaking at the summit session – badged 'Entrepreneurship and SMEs: from declaration to implementation' – BusinessEurope's SME committee president Hugh Morgan-Williams welcomed the announcement. But he warned: "It's important that the envoys are close to SMEs. It will not work if they are just policy people; they must be close to the business people on the ground."

Access to funds required

The new envoys will have pressing issues to remedy. The session heard that efforts to shorten the time and expense required to set up companies across member states are lagging, with the current average time being seven days. The Commission's stated target is three days and a cost of 100 euros.

Access to funds remains a particular problem for SMEs. Calleja Crespo said that there was an urgent need to encourage the distribution of micro credit. Morgan-Williams said that initiatives to guarantee debt capital for SMEs should be introduced, and would repay themselves by the knock-on effect they would have on growth in the markets.

Growth prospects slim

Meanwhile, session participants were polled on a variety of questions relating to SMEs.

More than two thirds (70%) believed that enabling venture capital to pass more freely across national borders – a current EU proposal – would help them to raise funds.

The same proportion of delegates, however, believed that SMEs they were familiar with would not take on more staff in the next six months.

The audience also agreed by the same ratio that the financial crisis had impacted on the ability of SMEs to consider 'green' or sustainable factors in their operations.

Jeremy Fleming

"We have 23 million SMEs in Europe, and if we could persuade them all to take on one extra employee, the unemployment crisis in the EU would be solved," said Daniel Calleja Crespo, the European Commission's SME envoy.

He added: "The Commission has been working hard following the introduction of the Small Business Act to pursue its three main objectives. These are: first, simplification – we need to attain our target of limiting the number of days required to set up a company in each member state to three and limit the cost of establishment of a new company to €100. At the moment we estimate that the average is seven days."

"Secondly, we need more access to funds, which is currently a big problem. We need to improve access to EU programme funds, especially by encouraging micro-credit," continued Calleja Crespo. "The third area we need to encourage is access to markets: only a quarter of all European SMEs are currently exporting across borders within the EU and only an eighth are exporting outside the EU," he explained.

"I have the role of co-ordinating the new SME envoys who have been appointed by the member states. 23 countries have now appointed envoys, and the remaining countries have one week to do so. We have a meeting with industry in Hungary in one week. The envoys must be appointed from senior administration figures," Calleja Crespo explained.

He concluded: "We want to to have the involvement of shareholders in any policy discussions and we want ministers to discuss our ideas with the Competitiveness Council. We also want to meet and discuss ideas with the business community."

"Impact assessment is something which should be carried out within each department of the Commission rather than being dealt with at the end of the policymaking process," said Hugh Morgan-Williams, president of BusinessEurope's SME committee.

Morgan-Williams added: "I welcome the idea of having an envoy from each member state but it's important that the envoys are close to SMEs, it will not work if they are just policy people; they must be close to the business people on the ground."

"The cost of borrowing is excessive for SMEs and new instruments from the European Investment Bank could help," Morgan-Williams suggested, adding: "If the EIB could find an effective way of guaranteeing capital loans that would have a powerful multiplying effect on the market."

"We listen to so many speeches about SMEs but now really is the time for action," exhorted Luuk Borg, manager of the EU-EUREKA Eurostars programme. Borg said: "The way to success is to boost those SMEs – particulalry in the technology sector – which will themselves promote growth if they are successful."

Borg concluded: "We also need to cut down on the number of people required to belong the consortia of SMEs as they attempt to raise finance. The more complicated the composition of consortia, the more time is wasted on administration."

"Now that we are working toward the new financial perspectives these will be steered towards innovation and research,' said the European Commission vice-president responsible for industry and entrepreneurship, Antonio Tajani, speaking at a separate summit event on industry (19 May). He explained: "We are changing the rules on access to finance where we need to account more for the needs of SMEs."

The vice-president announced: "The London Stock Exchange is working with me within the financial forum on formulating solutions to access to funding for SMEs, which sends out a positive message."

"We are changing our rules on research funding, which will be a good opportunity to look at the access to funding issue for SMEs," said Tajani.

The Small Business Act (SBA) adopted by European leaders in 2008 explicitly commits the EU and its member states to helping SMEs benefit from the growth of emerging markets in other parts of the world.

The SBA says Europe should provide "market-specific support and business training activities" for smaller businesses, and calls for the setting up of 'European Business Centres' in countries such as China and India.

The Enterprise Europe Network (EEN), which provides support services for SMEs in the EU, also helps businesses to expand into new markets. It has partners in 21 non-EU countries.

The SBA aims to improve the conditions for entrepreneurship by adapting policies and regulations at both European and national levels.

It is hoped that such changes will encourage the growth and development of small and medium-sized enterprises (SMEs) throughout the EU.

The SBA review (published on 23 February 2011) presents an overview of the progress achieved in implementing the Small Business Act.

  • 26 May: Date by which SME envoys must be appointed.
  • 26 May: Meeting in Hungary between all 27 newly appointed envoys and industry.

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