The European Small Business Act: success and limits of a certain vision of Europe

In June 2008, the European Union adopted a comprehensive strategic framework to strengthen the competitiveness of small and medium-sized enterprises (SMEs): the Small Business Act (SBA) for Europe. Is this the harbinger of a genuine European policy aimed at small businesses? The entity has the advantage of wanting to strengthen European SMEs, often crushed by competition from more competitive companies, those from third countries. It also symbolizes a certain vision of Europe … less liberal, more federal.

The European SBA is largely inspired by the American Small Business Act, which was passed by Congress in July 1953. This basic text of the American aid policy for SMEs makes it possible to direct the efforts of the public authorities towards small businesses. An American SME can therefore quite easily turn to the North American market. In this framework law, Congress declares “the government shall aid, advise, assist, as far as possible protect the interests of small businesses to preserve the spirit of free competition, to ensure that a fair share of government contracts are awarded to small businesses, and to maintain by to strengthen the economy of the nation as a whole.” The federal authorities have understood the importance of reserving a portion of public procurement for SMEs to promote their development and revitalize the American economy.

The European Union, aware of its backwardness in this area, is trying to implement this model, not without certain difficulties. The European version of the SBA aims to facilitate the development of SMEs and promote job creation in small businesses to increase growth in the European Union. The initiatives of the past four years have also had many successes. However, between difficulties in accessing finance for SMEs, lack of access to public procurement and problems with governance, this strategic framework is still imperfect.

European SMEs employ almost 70% of the private sector workforce

European SMEs play an important role in the European economic structure and need the best possible support. Thus, 23 million SMEs employed 67% of the private sector workforce in 2010, according to the European Commission. In February 2011, the Commission revealed in a press release that 100,000 SMEs had benefited from financial support under the Innovation and Competitiveness Framework Program of the SBA. In two years, 100,000 jobs have been created. The time taken to start a business was halved in most EU Member States between 2007 and 2010 [1].

This remarkable progress should not overshadow the persistent structural problems faced by European SMEs. While business creation in the US is rooted in collective mores, the European imagination places greater value on the merger and acquisition of small innovative structures by large companies. Without a collective effort in this direction, the future of European small businesses is threatened. The European SBA somehow tries to protect and encourage innovative companies, but still does not fulfill all the promises it made when it was created.

On the way to the Europe of SMEs?

The European Commission is aware of the limits of the SBA and wants to align it with the priorities of the Europe 2020 strategy adopted by the European Commission in March 2010. This strategy for “smart, sustainable and inclusive growth” aims to relaunch the European economy based on greater coordination between national and European policies. The Europe 2020 strategy also provides for a thorough transformation of the European market to make it more innovative. In connection with this strategy, the Small Business Act makes it possible to envisage a revision of the support system for SMEs to make them more innovative.

However, access to finance for small businesses remains a sensitive issue. The mechanism for access to loans must be significantly improved. Within the Member States, the administrative procedures, which are far too cumbersome today, must be revised and the development of one-stop shops promoted. The SBA must also support and protect small and medium-sized European companies in the external market. Crushed by competition, small businesses are highly unsustainable and have a low life expectancy. The SBA must thus be accompanied by the creation and installation of transnational poles such as the French and German competitiveness poles and clusters.

Furthermore, while the US SBA imposes a 23% quota of federal government contracts on domestic SMEs, the European SBA does not grant privileged access to government procurement. Indeed, the European Union refuses to violate the Government Procurement Agreement (GPA), ratified by 28 member states of the World Trade Organization (WTO). In particular, this agreement imposes non-discrimination and fair international competition. The lack of access to public procurement reinforces the imperfect nature of the European model.

Finally, the governance of the SBA must be reassessed by placing business organizations at the forefront of the system so that the interests of small businesses are better defended and considered. These measures are essential to ensure the survival of the SBA, which is undoubtedly a good coordination instrument to increase the competitiveness of SMEs, promote research and innovation and stimulate growth.

François Hollande, the President of the French Republic, measures the importance of a rapid reform of the Small Business Act for Europe. During the election campaign, the former candidate had proposed the creation of a French and European SBA to direct public procurement towards new and innovative SMEs. Such a measure should make it possible to better support SMEs in their development, to stimulate growth and at the same time promote a certain vision of Europe … the vision of a federal Europe that prioritizes the competitiveness of its companies in order to bring its member states out of the crisis.

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