European Parliament’s support for Small and Medium Sized Enterprises is welcomed and important

European Parliament’s recent adoption of the State of the SME Union is timely and important. Small and Medium Sized Enterprises (SMEs) are the backbone of our economy representing as much as 99% of all businesses in the EU, employing around 100 million people and creating wealth and wellbeing. At the same time, they continue to face challenges when it comes to access to finance, adopting digitalisation, financial struggles due to late payments, scaling business within the internal market and access to skilled workforce among others.

It is necessary to reduce administrative burdens for companies. We need to avoid the cumulative effect of legislation and the increase of reporting obligations such as environmental, social and governance reporting. European Commission has promised to simplify reporting requirements by reducing the obligations by 25%. SMEs look forward to seeing this in practice.

The competitiveness check introduced by the Commission when preparing for new legislation is welcomed. The impact assessments of legislative proposals should always be properly done mapping out the legislation’s impacts on cost and price competitiveness, international competitiveness and indeed on SME’s competitiveness.

Regarding the upcoming revision of the Late Payments Directive, it is necessary to improve payment behaviour in Europe and to enforce the rights of SMEs. The current directive’s implementation and enforcement differs among Member States and industry sectors and has resulted SMEs going bankrupt waiting for their invoices to be paid. This is not acceptable. However, preserving the freedom of contracts and flexibility especially in B2B relations and benefiting all parties, must be ensured.

Many SMEs report the shortages of skilled workforce as one of their major challenges. Europe is already facing shortages of skilled labour, also due to demographic change. To succeed in the twin transition of greening and digitalisation and simply running a business, a workforce with the relevant skills is essential enabling companies to expand. It is indeed necessary to upskill and reskill people as well as simplify the recruitment of skilled non-EU nationals for SMEs.

Only 17% of SMEs have integrated digital technology into their businesses. This is regrettable as digitalisation has a profound impact on the competitiveness of the EU economy, boosting efficiency and innovation. Digital technologies adoption and integration across the economy will be vital to the overall competitiveness and productivity. SMEs should be supported in every way to manage it.

Finally, continuous efforts are needed to ensure the further deepening of the single market. Both practical and regulatory barriers still exist making it especially difficult for SMEs to operate across the member states’ borders. Lack of harmonization and varying implementation of rules remains a challenge. More integrated implementation and unification of EU regulations is needed.

As the backbone of European economy and significant employers and wealth creators, SMEs continue to take risks to improve their businesses, invest, open new export markets, and thus seize growth opportunities even in challenging times. This must be applauded and supported.