The European Commission is being advised once more to focus on measures to provide support and financing for small and medium-sized enterprises (SMEs), which are considered as the most important source of employment growth in the EU.
The SME sector should be recognised as “the only source of potential job creation in the EU”. So says Xavier Rolet, CEO of the London Stock Exchange Group, which also owns the Milan-based Borsa Italiana.
Rolet was in Brussels on Tuesday (15 March) to take part in a high-level meeting on financing for SMEs, hosted by Antonio Tajani, the European Commission vice-president in charge of industry and entrepreneurship.
The Frenchman presented a series of recommendations to Vice-President Tajani and members of the SME Finance Forum, which was set up by the EU executive last year with the task of formulating specific policy proposals.
Speaking to journalists, Rolet highlighted access to capital as “the number one challenge” facing small and medium-sized businesses in the EU.
Pan-European investment tax credit
The London Stock Exchange (LSE) chief is calling for a “pan-European investment tax credit” that would encourage large companies to invest more of their spare capital in start-ups, innovation and new technologies.
Rolet is also advocating the creation of a “specific listing regime for SMEs operating at the European level”. His London Stock Exchange Group already runs markets that are dedicated to SMEs, namely AIM and AIM Italia.
“We are facing a deep crisis today,” said Rolet, who was a senior executive of Lehman Brothers investment bank from 2000 until 2008.
“Our inability to properly manage leverage has induced the financial crisis which is deeply affecting companies’ ability to invest,” he added.
Referring to the need for more “good-paying innovation-based jobs,” Rolet said that the public sector would not provide any new jobs in the coming years.
“Governments are getting rid of their debt and frankly have to tighten their public spending all around the EU,” said Rolet, who began his financial career at Goldman Sachs.
Meanwhile, large and long-established companies cannot be relied upon to create more jobs, because even when corporate earnings are growing they are always looking for ways to reduce costs, explained Rolet.
“This points to the SME sector, not only as an important segment of job creation, but in fact as the only source of potential job creation in the EU,” he said.
Noting that there are 23 million SMEs across the whole of the European Union, Rolet said that if each of these companies could be helped to create just one new job, unemployment would be wiped out.
Tajani: ‘Good marriage’ between banks and SMEs
Commission Vice-President Tajani told journalists he wanted to put the real economy at the centre of the EU’s economic policy.
“My target is a good marriage between finance, banks, services and companies, and SMEs,” he insisted, adding that access to credit and financial resources was at the heart of the ‘Small Business Act’ (SBA) review adopted last month.
The role of the SME Finance Forum, which met for the second time in Brussels this week, is to bring together leaders from banking and business organisations to develop proposals for improving access to credit and financial resources for SMEs.
“We’re working in three main areas: relations between SMEs and banks, venture capital, and access to capital markets,” said Tajani, stressing the need for banks to access the European Union’s financial instruments, such us the European Investment Bank (EIB).
The vice-president mentioned that earlier this week there had been a meeting between the EIB and the Cooperative Bank.
“Sometimes it’s not a question of new rules,” he said, “it’s just a question of sorting out bureaucratic problems – and doing it quickly”.
On venture capital, Tajani is working closely with Michel Barnier, the commissioner for internal market and services, to look for ways of enabling venture capital funds to invest throughout the EU.
Concerning access to credit, Tajani said that the European Commission’s SME Envoy, Daniel Calleja Crespo, would coordinate efforts to improve the availability of loans, in cooperation with the ‘Mr or Ms SME’ at national level in each member state.
The commissioner promised that the SME Finance Forum will discuss “concrete proposals” at its next meeting. Proposals for an EU action plan on improving access to finance for SMEs are due to be published by the end of this year.
Entrepreneurship ‘drives innovation’
The call for a greater emphasis on enterprise, and more support for SMEs, was echoed at a high-level seminar on the ‘Europe 2020′ strategy, which also took place in Brussels this week (15 March) at the initiative of the Lisbon Council, a Brussels-based think-tank.
One of the contributors to the Action Plan for Europe 2020, Martin Schuurmans, chair of the European Institute of Innovation and Technology (EIT), argues that entrepreneurship is vital for innovation, and may be even more important than scientific research for driving the kinds of innovation that will lead to economic growth and job creation.
“Innovation today is no longer only driven by research or science,” said Schuurmans. “It is user-driven, supply chain-driven, design-driven, maybe cost-driven. It may be social or community-driven innovation. So there are many different flavours,” he explained.
The EIT chair complained that Europe lacks the kind of entrepreneurial culture which exists in the United States, and increasingly also in China and other parts of the world.
“We like employeeship much better in Europe than employership or entrepreneurship, because it’s much safer. We are very risk-averse,” he said, pointing to the role of education in contributing to a more entrepreneurial culture.
According to Schuurmans, European SMEs find it very difficult to grow and expand their activities, in part because the Single Market has not yet overcome all the legal and linguistic barriers that prevent companies from operating across borders.
Schuurmans insisted that the European Union must put entrepreneurship at the heart of everything it is doing. For example, the EU’s so-called ‘Innovation Union’ should put more emphasis on enterprise and less on scientific research.
“It is high time that we realised that by addressing primarily research, and putting most of our money and eggs there, we miss out on many other opportunities,” he said.
The Dutchman called on the EU to re-orient research and development (R&D) in a way that takes account of all the various factors that drive innovation, such as risk-taking and creativity. He said that this would “free up money for entrepreneurship”.
The EIT chair argued that European programmes, including research programmes, should be made simpler and more flexible, with fewer rules and controls, so that SMEs would find it easier to access European funds.
Meanwhile, research published this week (15 March) by UEAPME, the European association for crafts and SMEs, revealed that business confidence among entrepreneurs is steadily climbing, although there are wide differences between individual countries.
Hungarian Minister for Strategic Affairs Zoltán Cséfalvay underlined his support for ongoing efforts at EU level and by individual member states to create the conditions for small and medium-sized enterprises (SMEs) to grow.
Speaking in Brussels this week (15 March), Csefalvay said that the main priorities should be first, “cutting red tape and reducing the administrative burden,” and second, “to strengthen the single market”. He also highlighted the importance of access to finance, and the role of the SME Finance Forum in developing policy proposals in this area.
“The Hungarian Presidency supports the Small Business Act and all the innovative measures for financing SMEs, and all the measures that help SMEs gain access to proper financing,” said Cséfalvay.
Gerhard Huemer of UEAPME, the European association of crafts and SMEs, commented on the increasing confidence among small business owners, as measured by the ‘SME Business Climate Index’, which was published this week (15 March).
“This positive picture hides two very different stories, with the countries hardest hit by the crisis sliding further behind while the rest of the group presses ahead. This is a threat that cannot be taken too lightly, especially in an economy as interdependent as the EU’s,” said Huemer.
UEAPME is calling on national governments, especially in member states that are lagging behind, to press ahead with efforts to secure long-term sustainability of public finances in order to create the conditions for the restoration of business confidence.
End of 2011: European Commission to publish its proposals for an Action Plan on improving access to finance for SMEs.