Small and medium-sized enterprises (SMEs) account for 99% of all European companies. They are not only important for economic reasons, but also for social ones. Products and services that are essential in our daily lives are actually provided by smaller companies - ranging from the bakery, to the hairdresser, to the high-tech manufacturer producing our vacuum bags.
Besides the benefits for the European economy as a whole, small and medium-sized businesses contribute to social cohesion. They are mostly stationed in rural areas where they provide high-quality and diverse employment opportunities and foster social balance by sponsoring the local football club. They also contribute to the attractiveness of a region and counter urban migration. Many of them are also the most innovative players in the European economy.
SMEs face financial and administrative barriers
Due to their limited resources, however, SMEs face various challenges. Small manufactures can produce only small quantities, which leads to a comparatively high price for the final product.
Loans are more expensive for SMEs since higher capital requirements apply to smaller businesses. Access to credit is the main obstacle to the growth and innovation of SMEs. Yet, growth and innovation are prerequisites to staying competitive and to not being driven out of the market.
SMEs not only encounter financial but also administrative barriers. What forms do my employees need to carry when they are on a mission in another EU Member State? Are they covered by the local insurance? Do my products comply with safety and health regulations?
Smaller firms simply cannot afford their own legal departments to answer these questions. Resources are limited vis-a-vis larger enterprises. Therefore, compliance costs are disproportionately higher for SMEs.
Putting the Single Market and the Capital Markets Union at the service of SMEs
In September 2014, we decided to give SMEs a voice by founding the SME Circle. Its Chairman is Markus Pieper and its board members are Bendt Bendtsen, Paul Rübig, Pilar Del Castillo, Michal Boni and Ivan Štefanec. Today, the SME Circle accounts for 63 MEPs from over 20 Member States.
Its objective is to put the Single Market and the Capital Markets Union at the service of SMEs. To avoid disproportionate burdens and bureaucratic restrictions from the start, the SME Circle aims to systematically evaluate the impact of EU legislation on smaller enterprises. We do not want to suffocate our small businesses with overregulation.
What does that mean more concretely? The SME Circle vets proposed EU legislation and acts in order to amend the elements of it that would adversely impact small businesses.
The Waste Framework Directive is one concrete example of where the SME Circle acted in a joint effort with the EPP Group Rapporteur and the Commission.
The SME Circle succeeded in exempting companies from the obligation to register with the competent authorities when transporting less than two tonnes of hazardous waste per year. It is small and medium-sized enterprises especially that work in the craft industry, for example, and use oil rags for cleaning purposes. Without the exemption, the oil rags could have been considered a hazardous substance and the obligation to register would have disproportionately affected these businesses, which account for 2/3 of total employment in the EU.
Another accomplishment in support of SMEs is the increased threshold for reporting duties under the EU Emission Trading System (ETS). Less stringent monitoring and reporting requirements now apply for small emitters who put out less than or up to 50,000 tonnes of CO². Around 13,500 companies will benefit from these rules by not having to employ additional staff.
The SME Circle believes we must be especially vigilant to ensure blanket legislation does not hamper the ability of our economies to grow and we continue to strive for the small and medium-sized enterprise.