Institute of Certified Bookkeepers CEO, Garry Carter, in his speech to MEPs at the European Parliament on 5 March last, asserted that small businesses in Europe – in these unstable economic times – are continuing to find it harder than ever to get off the ground and face insurmountable challenges in securing finance throughout their business life cycle. He called for a ‘radical change in the EU’s financial infrastructure’ to place SMEs at the centre of economic growth and recovery.
Speaking at a dinner-debate hosted by Enterprise Forum Europe under its chairperson, Vicky Ford MEP, and joined by representatives from the European Banking community, UEAPME, EFAMA, and the European Small Business Alliance; Mr Carter urged MEPs to act fast in recognising that more must be done to reduce administrative burdens and increase access to finance.
The event comes on the heels of the European Commission’s announcement that 85% of new jobs in the EU are created by SMEs, and saw Vicky Ford MEP lead a debate on the critical obstacles to improved SME growth, especially at set-up.
Despite praise for recent European Commission initiatives to develop and facilitate the SME Guarantee Facility with microcredit guarantees of up to EUR 25,000, and its Competiveness and Innovative Framework Programme enabling some 200,000 SMEs to gain access to finance through public support to guarantee schemes by 2013, concerns were raised about the ring fencing of funding for only the most innovative new businesses that show fast-growth potential.
‘Not every small company has the potential to be innovative; many compete in the services sector offering vanilla, but essential, localised services.’
With the EU also failing to reach its targets for reducing the cost and time burden of setting up a business across all Member States, MEPs were asked to look to non-EU jurisdictions for inspiration on company formation. Says Garry Carter. “The EU has set a target of making it possible in all Member States to start a business in 3 days at a cost of no more than €100. We are far from this ambition. My proposal is that we seek inspiration from SME-friendly initiatives outside of Europe”.
A high percentage of the world’s entrepreneurs come from the USA where 80% of enterprise financing is from the capital markets. According to Garry Carter, the EIB must review the debt-financing model which currently accounts for more than 60% of SME financing.
Garry Carter went on to conclude that “the right start-up culture is dependent on the streamlining of processes at national level – using US, Singapore, or South Korea as a benchmark and by demanding that micro and small businesses maintain better financial records and controls”.