Europe’s ‘everyday entrepreneurs’: can the EU protect the heartbeat of its competitiveness?

Being a citizen of the European Union (EU) means either having a good chance of owning a small or medium-sized enterprise (SME) or being the only person in a room of ten people who does not own or work for one. Two in every three employees in the EU’s private sector work for an SME. While public attention frequently gravitates toward large companies operating in the EU —those with more than 250 employees or annual turnover above €50 million— SMEs make up 99% of one of the world’s largest economies.

Yet when thinking about business and entrepreneurs, it is rarely the newly opened barbershop or the freelance graphic designer working from home that comes to mind. During this year’s illustrious 2025 Schumpeter ‘Innovation in Enterprise’ Lecture delivered by Prof. Dr. Dr h.c. Friederike Welter MAE, she stated that Europe is trapped in a narrow, stereotyped understanding of entrepreneurship —one that overlooks the diversity of entrepreneurial activity and largely ignores the social and non-technological ventures that shape everyday life. This blind spot is not merely a matter of recognition; it represents a missed opportunity to foster more inclusive and resilient economic growth.

But what does growth actually look like in the EU’s economy? How should Europe think about its strategic dependence on faster-growing economies such as the U.S. or China? And what role do SMEs play for EU competitiveness in an increasingly fragmented Single Market and global economy, destabilised by trade wars, armed conflicts, and climate crisis?

The SME Assembly 2025 in Copenhagen provided the stage for policymakers, businesses, and young entrepreneurs to grapple with these questions and explore possible avenues for policymaking that can empower SMEs and boost EU competitiveness.

Brakes on competitiveness and a narrow outlook on growth potential

The European economy —one of the world’s third largest economies by GDP and purchasing power— retains key strategic importance, particularly for the US and China as the Union’s main trading and investment partners. While the EU remains the world’s largest trading bloc in manufactured goods and services, it is witnessing a moment of geopolitical uncertainty, resurgence in trade tensions, and a shrinking of the labour force. 

On top of an increasingly hostile global environment, the EU contends with internal barriers to competitiveness that are notoriously difficult to overcome due to its very intergovernmental nature. “More capital and fewer burdens’”, recalled the Danish Minister for Industry, Business and Financial Affairs, Morten Bødskov, during the 2025 SME Assembly Schumpeter opening ceremony. Drawing on the Draghi Report on EU Competitiveness, a landmark policy paper by Professor and former European Central Bank President, Mario Draghi, the Minister pointed out that the EU’s business sector —99% of which is formed by SMEs— is challenged by slow productivity, excessive bureaucracy and market barriers, both at the EU and global level.

Regulatory burdens and persistent Single Market fragmentation continue to define the business environment in Europe. While the EU is remarkably good at setting common objectives, joined-up policy action remains flawed and increasingly disaggregated. Likewise, collaboration in innovation is lacking not in terms of research public spending and advancement of breakthrough technology, but in the ability to translate scientific knowledge into practical solutions, marketable products and thriving companies.

The outlook may appear pessimistic — but it is reversible. To do so, however, Europe must broaden its focus beyond high-growth, high-tech firms and pay greater attention to what Welter calls “everyday entrepreneurs”: the micro-firms, family businesses, slow-growth ventures and even failures that collectively form the backbone of Europe’s economic and social fabric.

Welter’s understanding of value creation calls for new ways to measure growth — not only through GDP but through the societal wellbeing businesses generate. Broadening this perspective reveals entrepreneurs as essential nodes of local economic resilience and community wellbeing. Shifting how we think and talk about entrepreneurs can potentially shape how we support them.

Is the EU vouching against self-sabotage?

Legislative action, however, moves slowly. The Omnibus I package —intended to reduce regulatory burdens on SMEs and improve EU competitiveness by simplifying key sustainability and financial frameworks such as CSRD and CSDDD— was proposed in March 2024. Yet trilogue negotiations only began on 18 November this year following internal divisions within the European Parliament that delayed the adoption of a negotiating mandate.

The package aims to reduce burdens on SMEs and improve the EU’s overall competitiveness through simplification of major sustainability and financial frameworks. It addresses what Geraldine Magnier, chairwoman of the Small Firms Association (SFA) National Council, calls: the ‘overstretching of SMEs in Europe’ through excessive and overlapping regulation affecting both businesses and the overall position of Europe in the global economy.

Even in the most optimistic scenario, a final agreement would arrive in early 2026. And once adopted, implementation and transposition —especially for directives— could take much longer. Given past experience, a timeline similar to the year-long CSDDD negotiations is likely. Meanwhile, the clock on Europe’s competitiveness continues to tick.

At the same time, the Omnibus I package should not be seen as a silver bullet. “Europe isn't an attractor and retainer of innovation, not because of regulation only, but because the VC ecosystem isn't there,” Magnier argues. Europe has the entrepreneurial mindset, strong education systems and research excellence —but lacks the capital and market conditions to keep ideas and intellectual property from moving elsewhere. “We lack investment and intellectual property retention, not ideas.”

SFA Director David Broderick adds that the fragmentation of the Single Market remains a major barrier: “You’re knocking on 27 doors. All you're doing is tiring people and replicating. I just need to knock on one door —copy, paste— and let it carry through the system.”

The EU may now be on a better path toward simplification, but lasting improvement requires more: national efforts to resist fragmentation through protectionist measures, stronger tax incentives for risk-takers, and support for smaller players who stand to lose much more than established firms.

Junior Enterprises: shaping entrepreneurial minds for a more competitive Europe

One element often overlooked in discussions of entrepreneurship is education. Real-life business experience is increasingly being built into school programmes across the EU, reflecting the need for hands-on learning that fosters entrepreneurial mindset rather than only focusing on end products.

“That is how the skills gap is closed,” says Boris Gurzhy, head of Public Affairs and Treasury at Junior Enterprise (JE) Europe— a confederation of over 300 student-led non-profit organisations that promote youth innovation, practical business experience and cross-border collaboration. Junior Enterprises operate as real companies within a non-profit model, giving students direct exposure to business realities.

Gurzhy leads the organisation’s EU-level advocacy to help close the gap between business-minded students and the entrepreneurial landscape they aim to enter. In cooperation with the Commission’s DG Employment, Social Affairs and Inclusion, JE Europe contributed to EntreComp, the EU framework defining entrepreneurial competences. It also participates in the EU Youth Dialogue and the SME Envoy Group. Their current priority is securing political recognition of the Junior Enterprise model within the EU Youth Strategy and eventually within national education systems.

Europe does not lack excellence in academic institutions or talented graduates ready to launch and lead businesses. What it lacks is an accessible, attractive and supportive market in which such businesses can take root all while ensuring growth on equal footing, reducing risks of human capital flight from the EU, and offering SMEs the conditions to flourish rather than merely survive.

In the end, the picture that emerged in Copenhagen was not one of a continent without ideas, talent or entrepreneurial energy, but one where the conditions for turning those strengths into sustainable businesses remain uneven. The future of the EU’s economy will depend on whether it can support the hairdresser as much as the biotech founder, give students a pathway into real enterprise, and replace fragmentation with a true Single Market. Europe has the people; what it needs now is the environment that allows them to stay, grow and lead.