Verheugen prescribes tonic for small firms

Günter Verheugen, the European commissioner for enterprise and industry, is preparing to announce measures aimed at boosting small businesses, encouraging risk-taking and lightening the burden of regulation.

Small- and medium-sized enterprises (SMEs) will welcome Verheugen’s bid to promote a risk-friendly business climate. According to a draft version of the paper, due out in October, only 3% of failed entrepreneurs make a second attempt at setting up their own business. The paper promises an overhaul of EU rules on insolvency. Current rules, dating from 2002, tend to damn all business failures, irrespective of the circumstances.

"Two out of five start-ups do not survive the first five years," said Patrick Foller of the SME Union, a network of Christan Democrat, Conservative and Liberal organisations. "We don’t just need a winner culture, we also need a failure culture. We need to be able to take more risks."

Luc Hendrickx, of SME lobby UEAPME, called on policymakers to tackle the root cause of bankruptcies by tightening EU rules on late payments dating from 2000. According to Hendrickx, one quarter of bankruptcies among SMEs are caused by late payments, often from public agencies.

As well as tackling the negative stigma that "creates psychological and practical obstacles to restarting a new business", Verheugen will pledge to improve access to finance for failed businesses. Member states should, the paper says, allow institutions that are not banks to offer micro-lending facilities under "minimum supervisory standards". Natascha Waltke, a policy adviser at employers’ lobby BusinessEurope, said that loan amounts should be set at "useful" levels and that the development of venture capital markets across the EU should also be a priority.

Assistance is also to be offered to SMEs struggling to comply with the EU’s tough environmental goals, particularly targets for reducing greenhouse gas emissions. Help could take the form of advice or training. Hendrickx said that the approach marked a shift in the perception of SMEs. "SMEs should not be treated as polluters, but as responsible enterprises striving to comply with environmental legislation," he said.

Member states are promised more freedom to set their own administrative requirements for SMEs. Verheugen pledges to avoid introducing "administrative requirements for micro enterprises at European level". Exemptions from current community requirements could be granted to small businesses.

Verheugen’s paper follows on from resolutions adopted at the European Council of March 2006. Member states were instructed, among other things, to provide one-stop shop systems for company registration and to facilitate SMEs’ access to public procurement markets. The paper will pave the way for SME priorities over the coming three years. "We think the Commission is on the right track," said Hendrickx. "What we are seeing are promises. We would like to see more concrete action."

Most of the 3.5 million new jobs created last year were in the SME sector. SMEs are described in the paper as the backbone of the EU economy, driving growth in sectors such as construction, transport and tourism.

Günter Verheugen, the European commissioner for enterprise and industry, is preparing to announce measures aimed at boosting small businesses, encouraging risk-taking and lightening the burden of regulation.