With a second Coronavirus wave upon us, EU policymakers must consider how they can help SMEs weather the COVID storm

SMEs play an essential role in Europe and right now, as much of Europe goes back into lockdown, they need our support, writes Angelika Winzig.
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By Angelika Winzig

Angelika Winzig (AT, EPP) is co-chair of Parliament’s Intergroup on Small and medium-sized enterprises

10 Nov 2020

SMEs are a crucial part of our domestic and international success. Their work, ideas and contributions make the EU an economic force and a beacon of stability in uncertain times.

In the European Union, there are 25 million SMEs, making up 99 percent of all businesses and employing two out of every three employees. They play an essential role in our economy and labour market. Furthermore, SMEs are a key driver for innovation, research and development. Between 2014 and 2016, almost half of Europe’s SMEs undertook an innovation activity.

Without the ingenuity of these entrepreneurial thinkers, we will not be able to overcome the challenges we currently face, be it climate or demographic change or the COVID-19 pandemic. Now more than ever, we must support SMEs by providing them with easier access to financing and reducing red tape wherever possible.

 “SMEs are a crucial part of our domestic and international success. Their work, ideas and contributions make the EU an economic force and a beacon of stability in uncertain times”

Earlier this year, Member States reacted to the spread of Coronavirus in varying ways, often driven by national interest. Some went into complete lockdown - as was the case in my home country of Austria – while others took virtually no measures.

The lockdown was unavoidable given the rapidly increasing numbers of infections, but delivered a big hit to local businesses. The Austrian government reacted quickly by offering support to struggling SMEs with an aid package of €38bn, including €10bn worth of bridge financing.

At EU level, Member States agreed the €750 billion recovery package, while the €37bn Coronavirus Response Investment Initiative provides liquidity to small businesses.

Now that a second wave of the virus is with us, we must again consider how we can help SMEs weather this storm. We need a long-term strategy and a tailored approach to effectively support them in this endeavour. For me, this needs to focus on three core areas.

First, making it easier for SMEs to access financing in all its forms. Small businesses struggle to access financing and are less likely to be granted bank loans than larger counterparts. Therefore, we need to increase their access to financing and close the financing gap.

One of the first actions taken by the European Commission during the crisis was - together with the European Investment Fund - to unlock €8bn in finance, benefitting approximately 100,000 SMEs. But now further, bolder steps are needed to help small and medium-sized businesses, particularly when it comes to financing innovative and sometimes riskier projects.

Policymaking in this area should also include new and alternative forms of finance such as peer-to-peer lending and crowd investments. Additionally, a new approach to venture capital must be developed because if we want SMEs to play a part in tackling today’s big challenges, we need to ensure that they can finance innovation and grow.

Second, one of the biggest challenges SMEs face is the huge administrative burden created by the legislative process. According to Business Europe, where a big company spends €1 per employee in connection with regulations, a small business has to spend an average of €10. Therefore, we need a proper impact assessment in place for any new and updated regulation, detailing the added administrative responsibilities.

I wholeheartedly support the Commission’s approach of “think small first” but this should not be a hollow phrase. It should be substantiated by concrete actions. Furthermore, it is not enough to say we need to follow a “one in, one out” principle when it comes to new legislation. We also need to follow the principal of proportionality.

 “The European Single Market, with more than 500 million consumers, o­ffers a unique opportunity for our SMEs in terms of export and trade”

Moreover, our approach should be to advise companies before automatically sanctioning them in cases of wrongdoing. Due to the sheer volume of regulations, small and medium-sized business in particular often miss the forest for the trees. That is why we should provide advice first.

Overall, clear and decisive action needs to be taken to improve the quality of our legislation and reduce the volume, making it easier for SMEs to focus on their core competences and day-to-day business. The final consideration is access to new markets.

The European Single Market, with more than 500 million consumers, offers a unique opportunity for our SMEs in terms of export and trade. To ensure and improve the free movement of goods and services, the EU must constantly strive for a stable regulatory framework.

Outside the EU, we need to access new markets by concluding free trade agreements. The high standards we enjoy in Europe are an important tool for enhancing the EU’s competitiveness. That is why safeguarding them and using them to improve standards outside the EU should be a focal point of our international trade policy.

Our focus must lie on reducing barriers and costs as well as facilitating new opportunities for our SMEs, helping them realise their full potential. Now more than ever, during these trying and uncertain times, we must do everything in our power to support the essence of that which makes our economy so successful.

Helping our SMEs means safeguarding and creating jobs, supporting innovation e‑ orts crucial for tackling the challenges of today and tomorrow, ensuring the EU’s long-term competitiveness and strengthening its role as a global player.