Unleashing the Potential of Europe's Small Businesses

Small and medium-sized enterprises (SMEs) are the backbone of Europe's economy, representing 99% of all businesses and driving the continent's green and digital transformations. However, in the face of recent economic challenges and uncertainties, these SMEs have been in need of support. On September 12, 2023, the European Commission unveiled a comprehensive SME Relief Package aimed at addressing the unique challenges faced by SMEs and bolstering their competitiveness and resilience. This significant development was followed by President Ursula Von der Leyen's State of the Union Address on September 13, in which she reiterated the importance of SMEs and introduced key initiatives to simplify business operations for them. Let’s take a closer look.

The SME Relief Package

The SME Relief Package presented by the European Commission aims to provide immediate relief and long-term support to SMEs. It encompasses both legislative and non-legislative measures to create a more favourable business environment across the Single Market. Key elements of the Package are:

1. Tackling late payments: One of the critical issues plaguing SMEs is late payments, which disrupt cash flow and hinder competitiveness. The new Regulation on combatting late payments proposes stricter maximum payment limits, automatic payment of accrued interest and compensation fees, and enhanced enforcement measures to protect SMEs from bad payers.

2. Head office tax system: Establishing a Head Office Tax System for SMEs is designed to simplify tax compliance for SMEs operating across borders. It aims to promote investment and cross-border expansion among SMEs.

3. Improving the regulatory environment: The package aims to enhance the regulatory environment for SMEs by building on the successful application of the 'one in one out' principle and the SME Test. The appointment of an EU SME Envoy, reporting directly to the President, will provide guidance and advocate for SME interests.

4. Streamlining administrative procedures: Administrative simplification is a key focus of the SME Relief Package. The introduction of the Once-Only Technical System will allow SMEs to complete administrative procedures across the Single Market without redundant document submissions.

5. Boosting investments: The EU is committed to supporting SMEs with increased investments. Measures include encouraging Member States to transfer funds to national compartments in the InvestEU's SME window and making a portion of the proposed €7.5 billion EU guarantee available for SMEs through the Strategic Technologies for Europe Platform (STEP) window.

6. Workforce development: Ensuring a skilled workforce is essential for SMEs to thrive. The European Pact for Skills and other initiatives will continue to support training actions, bridging the gap between skills and SMEs' needs within the European labour market.

7. Harmonising SME definitions: To unlock the full economic potential of small and mid-cap companies, the Commission plans to review and harmonise the current SME definition thresholds.

The State of the Union

In her State of the Union Address on September 13, President Ursula Von der Leyen reinforced the Commission's commitment to SMEs. She emphasised the challenges faced by SMEs, including skill shortages and economic pressures due to inflation. President Von der Leyen introduced a dedicated EU SME envoy who will report directly to her, ensuring a direct channel of communication with SMEs. This envoy will play a pivotal role in advocating for SME interests and participating in key decision-making processes.

Furthermore, an independent board will be established to review the impact of new legislative proposals on SME competitiveness, safeguarding their interests in the legislative process. These initiatives underscore the Commission's determination to simplify doing business, enhance SME competitiveness, and promote their growth. As these initiatives are implemented, SMEs can look forward to a more favourable business environment that fosters growth and innovation. These measures aim to ensure that Europe's SMEs continue to play a pivotal role in the continent's economic development and transformation.