The development of small and medium-sized businesses in Europe is proceeding at a rapid pace, as SMEs represent the actors of economic relations of great importance. These are the members of the middle class, which serves as the basis for stable economic development. Today, in the most developed countries, SMEs account for about 70-90% of the total number of enterprises: for example, in the USA, about 53% of the total working population works in the SME sector, in Japan - 71.7%, and in the European Union countries, small enterprises employ about half of the working population. Moreover, in the member states of the European Union, medium-sized enterprises make up only 1% of the total number of enterprises, but at the same time provide 20% of the total turnover of enterprises and 17% of the total employment of the population.

Comprehensive approach

Many years of experience in the development of SMEs in European countries has shown that stimulating small and medium-sized businesses promotes competition, and this, in turn, encourages large companies to introduce new technologies and improve production efficiency, therefore, the efficiency of the entire nation-economy. The more successful SMEs are, the more diverse and more capacious it is. In Europe, one of the main tasks in promoting economic diversity is to support SMEs and balance the interests of the state and business, ensure optimal conditions for business, as well as increase the competitiveness of SMEs.

A unique system of regulation and support for SMEs in Europe began to take shape in the 70s of the last century and continues to evolve to this day through the implementation of various programs and the creation of finances and infrastructure supportive funds. To date, among the main directions of the EU SME development policy can be distinguished:

  • financial support;
  • simplification of the regulatory framework, administrative procedures in the field of SME support;
  • participation of associations representing the interests of SMEs in decision-making within the framework of EU activities;
  • assistance in the field of research, innovation and training;
  • elimination of violations in the functioning of the EU "single market" and competition within;
  • increasing the competitiveness of SMEs (also in order to enter foreign markets;
  • cultivating an entrepreneurial spirit among the EU population and supporting various forms of cooperation between SMEs.


Agencies for support

The EU has developed a well-functioning infrastructure for supporting SMEs. For example, all EU member states have a well-developed network of both public and private organizations to regulate the development and support of SMEs. At the same time, policies for the development of SMEs in each EU country are developed by the ministries of economy, industry and trade, while other government bodies, for example, the Ministry of Employment, are also involved in supporting SMEs, helping this segment of enterprises in the processes of employment, training, international trade, and etc.

  • State institutions, in particular chambers of commerce and industry, are involved in training and advanced re-education, technological consulting of personnel involved in SMEs, stimulating international trade and cooperation, issuing quality certificates, and providing business information to representatives of SMEs;
  • Private financial institutions, namely commercial banks, venture capital companies provide credit support to SMEs, and private research and consulting structures advise on various issues of management, marketing, development and implementation of information technologies, etc.;
  • In the past few years, interactive tools to support SMEs have become widespread in Europe, such as information portals, webinars, videoconferences, etc. An example is the European Enteprise Network, a portal with free information resources for SME support, which brings together more than 600 agencies and organizations that act as an intermediary between SMEs and the European Union.

Any SME representative can relatively quickly and easily find out about all the opportunities for the development of the company, new methods and technologies, advanced training of employees, assess the riskiness of working in another EU country and, most importantly, get direct contacts and all the necessary information about a specific European fund that can co-finance development project for this enterprise.

Thanks to the ramified and progressive system of support for small and medium-sized businesses in Europe, a more global goal is achieved - strengthening the EU's single internal market, removing administrative barriers to doing business, unifying the legal framework, as well as enhancing interaction between EU countries for deeper economic cooperation with other countries.

Pandemic and SMEs in Europe

25 million of small and medium-sized enterprises have been affected in the EU by the coronavirus pandemic, representing 99% of the Union’s businesses. Therefore, business support measures have become not only one of the most huge and impetuous, but also expensive. The volume of economic assistance is already estimated at trillions of euros, which is quite consistent with the severity of the blow that the pandemic has inflicted on national economies.

According to the McKinsey poll, about 70% of those surveyed reported a drop in income as a result of the pandemic, with serious business consequences. Every fifth respondent is afraid of not repaying loans and admits the dismissal of employees. Another 28% are afraid that they will have to cancel new projects aimed at business growth. Italy and Spain were among the countries most affected by the coronavirus - 30% and 33% of respondents reported a strong decline in income, respectively. In Germany, this figure is 23%.

The European Union decided to support business with the help of a temporary state aid structure. It has five main measures:

  • Direct grants, selective tax breaks and up-front payments: EU members are able to develop schemes for providing companies with up to € 800,000 for urgent liquidity needs;
  • Government guarantees on loans taken by companies from banks: Countries are able to provide government guarantees so that banks can continue to issue loans to business customers who need them. These measures can cover loans to help businesses meet current working capital and investment needs;
  • Subsidized government loans to firms: EU members are able to provide loans to companies with favorable interest rates;;
  • Precautions for banks that address government aid into the real economy: some countries are to use existing lending capabilities of banks to support SMEs. Such assistance is seen as direct assistance to bank customers, and not to the credit institutions themselves;
  • Short term export credit insurance: The Framework provides additional flexibility in how to demonstrate that certain countries are free from market risks. This allows the state to provide short-term export credit insurance, if necessary.


Cases to help

So how do the European leaders face the challenge? For example, France has allocated more than 45 billion euros to help businesses, both small and large, and has promised state guarantees for loans worth 300 billion euros. According to the Ministry of Finance for the spring of 2020, 40,000 companies have asked for loans of 7 billion euros, or 130,000 per firm on average. The government also promises to pay workers 84% ​​of their salaries, unless they are fired by their employer. In addition, taxes and social contributions will be postponed for all companies, and for small businesses - and utility bills. The government has also created a “solidarity fund” to which private companies can contribute to help the self-employed and small business owners.

In Germany, aid for business is coordinated by the state development bank KfW and a newly created anti-crisis fund. The first guarantees bank 500 billion euros ($ 544 billion) loans in total, although these are issued by banks. The fund can guarantee loans of 400 billion euros, provide grants for 100 billion euros and directly provide up to 100 billion euros for capital replenishment. However, information on how this assistance can be obtained is inaccessible and difficult to find online, moreover banks slowly work with applications from businesses.

The Kurzarbeit Employee Support Program (Kurzarbeitergeld) covers companies that may have 10% of employees at risk of being fired; also, people with temporary work can receive payments. The government compensates 60–67% of salaries. The total size of the anti-crisis measures is estimated at about 1 trillion euros ($ 1.09 billion), the government makes an "unlimited promise" to help both small businesses and very large companies.

What comes to the south part of the EU - Italy, the government approved 25 billion euros ($ 27 billion) of anti-crisis measures. They include 5 billion euros for state guaranteed loans, support for those temporarily suspended from work, a moratorium on payments on loans, including mortgages, for small and medium-sized businesses. However professional associations complain that funds are insufficient and difficult to obtain. That is why the government is preparing a stimulus package for another 30 billion euros.

By the end of November, more than 67 million people in all countries had got infected with coronavirus. Due to the beginning of the second wave of COVID-2019, many people still have to isolate themselves; some of them lose their jobs, and businesses suffer colossal losses due to the closure of restaurants, shopping centers, cinemas, etc. Given the role SMEs play in a dynamical European economy, EU governments should develop additional support measures that will not only launch the rehabilitation of SMEs in the sector and catch up with slower growth, but also maintain a balance between state ownership and overregulation, which may impede recovery of the European economy from the impact of the pandemic.

Privacy Policy