EU reshapes its vision for SMEs amid emerging threats

by Gerardo Fortuna

Policymakers have started re-thinking the EU strategy for micro, small and medium-sized enterprises (SMEs) that the European Commission unveiled only a few days before the start of the first lockdown all over Europe.

SMEs are the beating heart of Europe’s economy, accounting for over 90% of all businesses in the EU and for more than half of its gross domestic product (GDP) while employing about 100 million EU workers before the pandemic.

Already struggling with long-standing problems such as regulatory burdens and difficulties to access markets, small businesses were particularly hit by the ongoing COVID crisis.

Many of them, particularly in the hospitality sector, are still in the eye of the storm because of the lockdowns currently in force almost everywhere in Europe.

A recent survey by the consultancy McKinsey showed that half of SMEs are concerned they might go out of business within the next year as a result of the COVID-19 lockdowns.

The situation is expected to be made worse by another emerging threat for SMEs that sell their products and services across the Channel, as a no-deal Brexit is looming large.

A few days before the first lockdown was imposed in most EU countries, the EU’s industry commissioner Thierry Breton presented a strategy to support SMEs, which now seems overtaken by this cocktail of events.

But despite these new unforeseen circumstances, EU officials believe the strategy can still bring added value to SMEs.

“There are a lot of measures in there that can still be really useful because the key objective of the strategy is to bring companies into a digital and greener economy,” said Birgit Weidel, head of unit at the European Commission’s internal market directorate, who spoke at a recent EURACTIV event .

In the agrifood sector, two recent foresight analysis reports have made a clear case for digitalisation, underscoring the need for innovation in the sector to transform and increase resilience.

Parliament’s update

On Wednesday (15 December), the European Parliament approved a report that aims at contributing to update the European Commission’s post-COVID recovery strategy.

Although it does not mention any sector in particular, the Parliament’s report takes into high consideration the hardships faced by the hospitality sector, the rapporteur Paolo Borchia told EURACTIV.com.

“For instance, if we want to talk about digitalisation, the pandemic has shown in very clear terms how businesses must improve on e-commerce,” said the Italian MEP, affiliated to the far-right Identity and democracy group (ID).

References to unfair competition from third countries, a particularly sensitive issue for agri-food businesses, were also made in the final report, Borchia said.

The final report draws up suggestions to help SMEs deal with both crises and the twin challenges of digitalisation and decarbonisation, but without forgetting how excessive bureaucracy may hinder their ability to thrive.

In this sense, MEPs welcomed the European Commission’s commitment to a “one in-one out” principle and called for setting up a roadmap with concrete and binding targets for better regulation and simplification.

The report also calls for a better dialogue with the Commission for adjusting the SME strategy in light of the changed economic context.

Liquidity issue

Speaking at the EURACTIV event, Slovak Christian-democrat MEP Ivan Stefanec pointed out that the pandemic has confirmed once again that liquidity is the number one issue for SMEs.

“Immediate help for SMEs is necessary, as well as information on how to use and implement the Recovery Fund,” he said, mentioning the €750-billion stimulus package approved in December.

In the Parliament’s report, lawmakers have stressed the need to restore the liquidity of SMEs to ensure their basic functioning.

The European Commission has also put forward liquidity measures, such as the Corona response investment initiative, worth €7 billion.

The EU executive is also redirecting an extra €1 billion to the European Investment Fund to allow loans to companies, which will be able to raise €8 billion in additional to support 100,000 SMEs.

The temporary Support to mitigate Unemployment Risks in an Emergency (SURE) initiative is also providing €100 billion in the form of loans to member states in order to prevent companies from laying off their employees.

However, support measures alone will not solve SMEs problems in face of the pandemic, warned the Commission’s Birgit Weidel.

“It is also very clear that injecting liquidity is a temporary measure and there are limits to what you can achieve with this,” she said, adding that companies also need to make the necessary adaptations to their business models in the long term.

*first published in: www.euractiv.com