EUROPEAN CHARTER FOR SMALL ENTERPRISES
COM (02) 68
Commission Report on the European Charter for Small Enterprises.
|Document originated:||6 February 2002
|Forwarded to the Council:
||6 February 2002|
|Deposited in Parliament:
||6 March 2002|
|Department:||Trade and Industry
|Basis of consideration:
||EM of 21 March 2002|
|Previous Committee Report:
|Discussed in Council:
||European Council 15/16 March 2002|
|Committee's assessment:||Politically important
19.1 Small businesses
account for 99% of all businesses in the EU and provide 53% of
the jobs, according to the Commission. The proportion of jobs
in small businesses is significantly lower in the United States
and Japan. Recognising the crucial role that small and medium-sized
enterprises (SMEs) play in the development of competitiveness,
innovation and employment, the European Charter for Small Enterprises,
endorsed at the Feira European Council in June 2000, calls on
Member States and the Commission to create the best possible environment
for small businesses and entrepreneurship. It sets out ten clear
lines for action, in areas of central importance to SMEs.
19.2 The Charter includes a commitment for the Commission
to provide a progress report to the Spring European Councils.
The first report briefly summarised the main areas of activity.
The main objective of this, the second report, is to identify
general strengths and weaknesses and to maintain the momentum.
It is based on submissions from Member States and the Commission.
The strengths and weaknesses of the performances of the Member
States are brought out, and the Commission takes the opportunity
to set out, at considerable length, the work it has done. In presenting
the report, the Commission says that if governments do not think
small first, they may never think small at all. Think small
first sums up the essence of the EU's enterprise policy.
19.3 The Commission identifies broad trends which point
to progress being made, for example, in the areas of education
and the time and cost of setting up a business. However, it notes
that, even in these areas, the story is not consistent across
the Member States. In general terms, areas which require more
immediate attention include access to finance and SME representation.
19.4 The General Conclusions of the report are:
"Progress has undoubtedly been made since the Feira European
Council, although the perceived nature of the changes, and the
fact that many of them are recent, makes it difficult to evaluate
their overall impact. Nevertheless, the diversity of measures
is itself a source of strength, showing how much scope there is
for further, more systematic actions. Given the recent deterioration
of the economic situation in Europe, it is more important than
ever to restore small businesses' confidence and support their
Achievements vary from one country to the next and there is clearly
scope for further development. Performances also vary according
to the area considered. Most Member States have turned their attention,
for example to the need to facilitate business start-up and to
improve small enterprises' access to e-commerce. This may, in
part, be because it is a relatively visible issue that lends itself
to short-term improvement. Promotion of entrepreneurial spirit,
on the other hand, is a tougher assignment and is likely to take
longer. Against that, progress will be correspondingly valuable.
There also remains plenty of scope for more systematic representation
of small business".
Education and training for entrepreneurship
19.5 According to the Commission, the entrepreneurial
spirit remains weak across the EU and needs to be fostered with
a broad range of medium-term measures and a much wider commitment
to support learning and entrepreneurship. There is significant
potential for greater use of 'incubators'. Businesses that start
in an incubator have a much higher success rate than others, with
90% active three years later. University chairs on start-ups and
management of SMEs have been established in Germany, Spain and
Austria and university courses are offered in Denmark, Ireland,
Portugal, Finland and Sweden.
Cheaper and faster start-up
19.6 In a number of countries, the combination of time,
costs and capital requirements constitutes a significant obstacle
to entrepreneurship, and further efforts are required to simplify
existing requirements. There remains considerable scope for exploiting
information technology, particularly in terms of online registration.
This should be accompanied by reform of procedures.
19.7 The minimum capital required for registration ranges
from euro1 in Ireland and the UK to euro23,500 in another, unnamed,
Member State. The cost of registration of a private limited company
is relatively costly, although in Denmark it is zero.
Better legislation and regulation
19.8 This is identified by businesses themselves as one
of the areas where reform is most urgently needed. The report
- more attention should be given to repealing redundant regulations;
- more use should be made of systematic impact assessments when
legislation is drafted and greater use should be made of economic
analysis when assessing costs and benefits to business; and
- bankruptcy laws should be examined with a view to finding
solutions for insolvent but viable business and to lessening the
penalties and stigma attached to 'honest' failure.
Availability of skills
19.9 The Commission says that, with some notable exceptions,
the EU is failing to address its skills gap adequately. On average
10% of 25-64 year-olds participate in some type of training. Only
in Denmark, the Netherlands, Finland, Sweden and the UK is the
figure substantially higher. An increasing number of small and
consider the lack of skilled labour as their most important problem,
with figures of 30% and 20% respectively in 2001.
19.10 The EU faces a deficit of skills in the "crucial"
ICT sector, as well
as in other important sectors such as engineering. Although Germany,
Spain, France, Ireland, Italy and the UK all perform well in terms
of the numbers of graduates they produce in computer sciences
and related subjects such as mathematics, most other Member States
compare relatively poorly in this respect to competitors like
the United States.
19.11 The report says that:
"there is a need to focus more on certain key skills
in the education system, to develop stronger governmental support
for the industry-science base and to encourage business investment
in R&D. Beyond the education system, lifelong learning, particularly
in ICT-related skills, needs to be encouraged in order to overcome
the skills deficit; and greater mobility of labour within and
between Member States should be encouraged to enable some of the
skills bottlenecks to be surmounted and to improve access by SMEs
to a wider pool of qualified labour. National administrations
are increasingly committed to making all relevant documents and
forms available online, as well as to providing guidance and information
via the Internet."
Improving online access
19.12 The proportion of small businesses using the Internet
has increased steadily, with micro-enterprises doing so increasing
from 40% in 1999 to 70% in 2001 and small enterprises from 67%
to 81% over the same period.
19.13 The report finds that all governments have demonstrated
an awareness of the need to make their services as accessible
as possible and many now have Internet sites that provide information
and advice on administrative procedures, financing opportunities
and other issues related to start-up and management. There has
also been progress, notably in Greece, towards linking ministries
with authorities in remote regions so that information can be
shared more easily between them. Single access points that provide
business with a direct link to all government information and
services are becoming more widespread, and the Swedish Government
has recently developed an interactive website aimed at providing
information to businesses and increasing their dialogue with the
administration. Electronic transactions can be carried out between
businesses and tax and social security authorities in France,
Ireland, Austria and Norway, while public procurement portals
are either in place or under development in Denmark, Germany and
Greece. E-Envoys have been introduced in the UK and Norway to
lead the way in putting their country online.
More out of the Single Market
19.14 According to the Commission, the Single Market
has already been of immense benefit to businesses, but it is clear
that these benefits will increase with its full completion. SMEs
can particularly benefit from increased openness in public procurement.
19.15 The Commission says that it will continue its efforts
to improve the business environment, particularly for small businesses,
through the target actions in the Internal Market Strategy.
19.16 The report points to the emphasis given in the
IDA (Interchange of Data between Administrations) work programmes
for 2001 and 2002 on the direct benefits of pan-European services
and says that the main initiative it foresees is to create a common
portal for the EU administration.
Taxation and financial matters
19.17 Despite important progress in this area, businesses
still see lack of financial support as their greatest constraint.
Early-stage financing (seed and start-up capital) still constitutes
a very limited share of the venture capital available. The increasing
use by the Member States of tax incentives and exemptions aimed
at enabling small enterprises to reinvest is welcome. France has
reduced the rate of corporation tax for businesses with a turnover
lower than euro7.6 million.
Strengthen the technological capacity of small enterprises
19.18 All governments are committed to promoting technology
transfer to small enterprises, and increasing attention is being
given to co-operation between enterprises and research institutes.
However, less has been reported about inter-firm co-operation,
clusters and networks, which raises the question of whether or
not enough progress is being made in these areas.
Successful e-business models and top-class small business support
19.19 The report says that the results are encouraging
but performances differ greatly between one country and another.
There is plenty of scope for raising the profile, and use, of
e-commerce among small business. The Commission states that strengthening
the legal framework for e-commerce and improving the infrastructure
need to be combined with awareness-raising measures and training
in ICT skills.
The Government's view
19.20 The Minister for Small Business (Mr Nigel Griffiths)
notes that the Commission urges the European Union to adopt the
UK's Think Small First principle as the central approach
to enterprise policy development. He goes on to select references
to the UK in the report. Highlights he notes are that the UK:
- is amongst those Member States with the lowest costs and shortest
time required to start a business in the EU;
- has established a Regulatory Impact Assessment system and
analyses alternatives to regulation;
- has set up the High Technology Fund which invests in early-stage
high-technology focussed funds;
- sets tough targets for businesses to trade online;
- has opened a representative office in Brussels smallbusiness
europe, a voice by small business for small business
where the UK has been the only Member State to take direct action
on this element of the Charter;
- has introduced scholarships for potential entrepreneurs from
- has introduced steps to modernise insolvency laws and allow
- has introduced an E-Envoy; and
- has launched a programme to promote links between universities
and business for the commercial exploitation of university research
to make the most of the UK's innovative potential.
19.21 The Minister comments on the policy implications
of the report as follows:
"The Government welcomes this valuable report by the
Commission. The report is important both in terms of what it reveals
on progress made against the Charter commitments and the fact
that as a substantial, informative document it strengthens the
validity of the Charter itself. The UK believes that the Charter
must be recognised as a crucial instrument in the development
of enterprise policy and it is reassuring to see that the Commission
describe the Charter as being 'a pillar of the European Commission's
enterprise policy and a cornerstone of the policy of the Member
"The report demonstrates that many good initiatives have
been brought forward by the Member States and the Commission,
but that, for the EU to increase significantly its competitiveness,
much more needs to be done. The Charter must continue to be fundamental
to the development of enterprise policy in the EU for the remainder
of the decade to help us achieve the Lisbon goal to become the
most competitive and dynamic knowledge-based economy in the world.
"The Government agrees with the findings of the report regarding
strengths and weaknesses. We will seek to learn from the good
practice of other Member States that the wider report identifies
and builds on those areas where we are perceived to be doing well.
We agree with one of the principal findings of the report that
better representation of small firms interests is an urgent necessity
in all policy fields. The UK has already taken action in this
area through the setting up a representative office in Brussels".
Barcelona European Council
19.22 The report was presented to the Spring European
Council in Barcelona which asked the Member States to speed up
implementation of the Charter and learn from best practice. It
took note of the Commission's intention to submit a Green Paper
on entrepreneurship before the 2003 Spring European Council and
agreed that it would meet before every Spring European Council
to assess progress in this area.
19.23 The report is a useful benchmarking tool. It
constructively highlights good practice and successful initiatives,
but occasionally names and shames, though this is as a result
of comparing information provided by the Member States themselves,
rather than of any independent judgment. The report credits the
Member State governments with commitment, but certainly serves
to draw attention to the gaps which need to be closed if the EU
is to achieve the Lisbon objective of making Europe the world's
most competitive and dynamic knowledge-based economy by 2010.
19.24 It points to better legislation and regulation
as one of the areas which businesses themselves regard as most
urgent, selecting the repeal of redundant regulations as a priority.
We shall be looking to see, in next year's report, what the governments
of the Member States, including that of the UK, can show that
they have done to remove unnecessary bureaucracy from small businesses.
19.25 We now clear this document.
employing 50 people or fewer. Back
see HC 23-xxi (1999-2000), paragraph 15 (14 June 2000). Back
7125/01; see HC 28-xii (2000-01), paragraph 11 (25 April 2001). Back
and Communication Technologies. Back