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UK RESPONSE TO THE EUROPEAN COMMISSIONS CONSULTATION ON THE EU

By Brian Stevens,2014-07-10 12:56
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UK RESPONSE TO THE EUROPEAN COMMISSIONS CONSULTATION ON THE EU ...

    EU SMALL BUSINESS ACT

    UK RESPONSE TO EUROPEAN COMMISSION’S CONSULTATION

Introduction

    1 The UK believes that improving the enterprise environment for Europe‟s SMEs is key to delivering economic growth. We support the

    initiative to develop an EU Small Business Act and welcome the emphasis placed on it by the European Commission.

    2 On 12 March, the UK Government published a new Enterprise Strategy. In developing this, Ministers met with over 600 small business owners across the country to hear their ideas of what more the Government can do to help them. Officials have drawn on this information, economic and statistical data, and the views of business representative bodies to develop the new strategy. This work identified the following main enablers of enterprise:

? culture

    ? knowledge and skills

    ? access to finance

    ? regulatory framework

    ? business innovation

    The Strategy also recognises there are wider benefits that enterprise can bring to communities in deprived parts of the county.

    3 Through this and other work over the past 10 years, we have built up a strong evidence base on barriers to growth and we look forward to sharing this with the European Commission and member states in future discussions of the EU Small Business Act.

    4 The UK Government welcomes the opportunity to contribute to the development of the Small Business Act. We believe it is crucial to build on the progress made over the past 10 years that has been based around the principles of open markets, competition and better regulation.

    5 During this time, much effort has been devoted to making it easier, cheaper and quicker to set up a new company. We believe these efforts should continue, but that the Act should place particular emphasis on facilitating SME growth.

    6 In taking this work forward, it will be important to ensure that proposed measures are designed to address specific market failures, supported by a strong evidence base and formulated in line with better regulation principles.

    7 Furthermore, we believe that action should predominately be for member states to take forward, addressing individual national issues and

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circumstances. The EU should act where it can have the most impact and in

    our view this should primarily be ensuring that Europe has a well-functioning

    Single Market that is underpinned by the best possible regulatory environment.

8 It is also important to ensure that SME-specific issues are

    systematically consider in other relevant Commission initiatives such as Lead

    Markets, Sustainable Industrial Policy, Sustainable Consumption and

    Production, and Standards and Innovation.

9 Finally, the UK believes the Act should give firm commitments for

    action and, where necessary, foresee future legislation, but should not itself

    be a legislative measure.

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General question

What are the most important problems that European SMEs are facing and

    which prevent their growth? How to tackle them?

Consultation with UK SME representative bodies on domestic and European

    matters consistently shows that the main issue for their members is

    regulation. The 2007 EU Observatory Survey found that 36% of SMEs within

    Europe reported that regulations acted as a constraint or had presented

    difficulties in the previous two years.

Evidence shows that smaller businesses face a regulatory burden that is

    considerably higher than that of larger companies. The Commission‟s expert

    group on the burden of regulations reported in May 2007 that where a large

    company spends ?1 per employee on regulatory obligations, a small business

    might have to spend on average up to ?10.

Whilst progress has been at the EU level, for example on the promotion of the

    “Think Small First” principle and the European Commission‟s commitment to

    reduce administrative burdens by 25%, we believe a much more ambitious set

    of measures should be introduced. Our response to Section 1 of the

    consultation presents a number of specific proposals.

Another important issue is access to finance, where we believe action should

    be focussed on improving the demand side, in particular investment readiness,

    and the supply of modest amounts of finance for entrepreneurs who, for

    various reasons, are deemed to be a higher risk.

In order to grow, SME must also have access to new markets. Generally,

    exporting firms have been found to benefit from greater productivity growth

    than non-exporters. A recent study indicates that between 1996 and 2004

    some 60% of UK productivity growth was attributable to exporting firms. The

    EU Observatory, however, found that only 8% of SMEs report turnover from

    exports. SMEs still encounter barriers in trying to access and take advantage

    of the Single Market and its 490 million potential customers. We hope the

    Small Business Act, in tandem with the Single Market Review, will reflect the

    concerns and needs of the SME community. Our response to Section 3 of the

    consultation outlines some particular areas of concern.

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1. Better Regulation for the benefit of SMEs

    1.1 Is the current EU SME definition an obstacle to targeting support for SME growth in the right way?

    The UK has not seen evidence to indicate there are market failures not being met by the current SME definition. Statistics show that over the period 1998-2005, productivity growth was faster in UK SMEs than in larger companies. This would seem to argue against an increase in the definition and indicate that business support should focus on helping the smallest businesses to grow into larger businesses.

    We would participate in any discussion on the definition more broadly, including looking at existing ownership rules and the restrictions these can place on, for example, business angel ownership. Our firm view is that any debate must be underpinned and steered by robust data and analysis. We would support a change to the definition only if the evidence clearly pointed to this conclusion.

We are also aware of calls for the creation of a separate “innovative SME”

    definition. Again, we believe thorough analysis must be undertaken before deciding whether to introduce such a definition.

    The UK supports current Commission action on State Aid and would not favour any weakening of State Aid or competition rules.

    1.2 In addition to the systematic application of the subsidiarity and proportionality principles in legislation (see question 6.2) could differentiation regarding the way legislation is elaborated and applied according to the size of the company be useful (e.g. lower fees, fewer reporting requirements, thresholds or longer transition periods)?

    1.3a Do you consider that directly applicable EU-level legislation in certain areas creates a disproportionate unnecessary administrative burden on SMEs?

    1.3b Would excluding SMEs from such direct application of EU legislation be a solution?

    Evidence also shows that smaller businesses face a regulatory burden that is considerably higher than that of larger companies. We calculate that around 300 regulations are introduced each year that impact on UK business and 50% of those originate from the EU. So action to reduce regulatory burdens on SMEs must be taken at EU as well as national level. We believe the Commission should utilise the “think small first” principle and where relevant,

    introduce exemptions from administrative requirements and undertake specific screening from a small business perspective. This could be done through two mechanisms:

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Exemptions

The Commission should, where possible, look to exempt small businesses

    with fewer than 20 full time employees from new regulation. Where

    exemption is not possible, either for legal or policy reasons, Directorate

    Generals should work with small firms to design specific approaches for them,

    including simplified enforcement and effective guidance.

Small Firms element in impact assessment

The importance of the “Think Small First” principle is now widely recognised,

    but the challenge remains to convert the principle into reality. We believe the

    only way this can be achieved is to build a small business element into the

    impact assessment process. A small business filter would ensure that all new

    and amended legislation affecting business is systematically assessed to

    identify impacts and any unintended consequences on small businesses, with

    a view to introducing exemptions and/or thresholds.

The Government recently announced its intention to consult on the

    introduction of a new system of "regulatory budgets" for Government

    Departments which will set out the cost to business of new regulation that can

    be introduced within a given period. The Government is considering whether

    this new system could be piloted by focusing on the costs faced by SMEs. In

    the future, the Commission could consider introducing a similar approach

    within Directorate Generals, learning from the UK pilot project experience.

In addition, completing statistical returns can be time consuming and costly for

    small businesses. The coverage of Intrastat should be reduced so as to

    effectively minimise the burden on as many small businesses as possible

    while maintaining those aspects of the data that are essential. Also, if a small

    business is sampled, it should then be exempt from any further requirements

    for at least three years.

1.4 Would the introduction of common commencement dates for all SME-

    relevant legislation coming into force and/or publication of an annual

    legislation statement be useful for SMEs?

The UK strongly supports the introduction of common commencement dates,

    supported by annual legislation statements at the EU level. Common

    commencement dates and annual statements were introduced in the UK for

    domestic regulation in 2005. Feedback received so far from business (not just

    SMEs) indicates that they have been well received, in particular the reduced

    need for horizon scanning for impending new legislation. Our cautious

    estimate is that they have saved UK SMEs between ?15- 30 million a year;

    the figure could be as high as ?1 billion a year if savings for large business

    were included.

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UK business has also expressed a wish to see the concept extended to EU

    legislation. There would be clear advantages in having greater consistency

    over national and EU implementation deadlines. The UK believes that an

    approach of setting fewer, more consistent, transposition deadlines or

    implementation dates should be explored further subject to exceptions

    covering:

    ? emergencies; e.g. those involving public, animal or plant health;

    ? anti avoidance measures necessitating urgent closure of loopholes;

    ? measures which remove significant risk or detriment from business;

    ? instances where the costs of timing a measure to meet a CCD

    would be wholly disproportionate to the public purse and/or

    business;

    ? measures that do not impact on business.

1.5 Do you think additional focused measures to alleviate the administrative

    burden on SMEs would be useful?

The UK welcomes the European Commission commitment to reduce

    administrative burden on business by 25% and the progress made in 2007.

    However, this exercise currently only covers existing legislation. We would

    like the Commission to be bolder and extend this work to new legislation. We

    believe that tackling both current stock and new incoming legislation would

    ensure an overall reduction in administrative burdens.

1.6 Would you suggest any other obstacles or additional issues to address?

    Consultation periods

Business representative organisations that are invited by the Commission to

    submit views on new and amended policy, need time to assess the relevance

    of a consultation to their members, consult them, analyse their responses,

    build alliances and submit views to the Commission. The current consultation

    period of 8 weeks is insufficient when potentially contacting 23 million

    businesses in 27 member states. Consideration should be given to extending

    the period to a minimum of 16 weeks (as recommended by the Mandelkern

    Group) to give SMEs and SME organisations adequate time to distribute,

    collect and analyse members‟ views.

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2. Putting SMEs at the forefront of society

2.1 Do you see a need for additional measures in the Member States or at EU

    level to stimulate entrepreneurship through education?

We believe it is important to have an enterprise culture where everyone with

    entrepreneurial talent is inspired to take up the challenge of turning their ideas

    into wealth.

The UK has implemented measures to stimulate entrepreneurship through

    education. As well as these, other existing measures, such as the work of the

    UK National Council for Graduate Entrepreneurship (NCGE), already play a

    significant role in supporting international entrepreneurship education. The

    NCGE has a founding role in the EU Expert Group for Entrepreneurship

    Education and has been involved in developing a proposed learning

    outcomes framework.

The role of education in fostering entrepreneurship is an area where the

    European community can add value by facilitating peer learning activities and

    exchange of best practice. The European Skills review should include

    entrepreneurial skills in its scope to assess gaps and identify future needs.

2.2 Is entrepreneurship sufficiently reflected in school curricula?

The Government is keen to promote an enterprise culture. It wants to see

    stronger links between business and schools, giving pupils and students a

    better understanding of their future role and responsibility in the economy. The

    Department for Children, Schools and Families has an Enterprise Education

    Strategy to help young people to be creative and innovative and take and

    manage risks. Its work embraces future employees, not just future

    entrepreneurs, and social enterprise.

Enterprise is now written into most School Development Plans in England and

    the proportion of secondary schools providing enterprise education for all or

    most of their students has increased to well above 90 per cent. Moreover, the

    Government has recently announced that it will extend enterprise education in

    England from secondary to primary and tertiary education. Enterprise is also

    reflected in school curricula in the Devolved Administrations in Scotland,

    Wales and Northern Ireland. For example, Wales has introduced interactive

    material into its National Curriculum to equip young people aged 5-19 with

    entrepreneurial skills, knowledge and experiences by effectively utilising

    successful SME role models in schools and placing entrepreneurship

    champions in every higher education and further education institution.

The NCGE is working to ensure a stronger role for enterprise within Higher

    Education curricula, particularly for those HE institutions and teaching

    disciplines where these have not traditionally been strengths. NCGE's Flying

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Start programme has radically improved the support available to HE students

    thinking about or planning to start up their own business.

2.3 Do you see a need for the media to take a stronger role in fighting

    negative stereotypes towards entrepreneurship?

While there is no fixed stereotype towards entrepreneurs/entrepreneurship in

    the UK, the media is contributing to addressing any potential stereotyping,

    through popular television programmes such as Dragons' Den. The media

    has an important role in promoting positive images of entrepreneurship,

    particularly in relation to representing and targeting entrepreneurs from under-

    represented groups.

2.4 Would you suggest any other obstacles or additional issues to address?

    Women‟s enterprise

While women make up an equal proportion of the EU adult population, they

    remain a minority in terms of enterprise activity. Data from the Global

    Entrepreneurship Monitor shows that across all EU countries women have low

    rates of entrepreneurial activity, in particular in comparison with the US, where

    the rate is 9.7%, with the EU average being just 3.5%. The UK has already

    established a Women‟s Ambassadors Network and recently announced plans

    to pilot women‟s business centres, a national women‟s mentoring networks

    and dedicated enterprise support for women. We believe member states

    should increase efforts to encourage female enterprise and that the European

    Network to Promote Women's Entrepreneurship (WES) should play a stronger

    role in identifying barriers/solutions and facilitating the sharing of good

    practice.

Social enterprise

Social enterprises are playing an increasing role in the economy. As well as

    contributing to the economy, social enterprises also draw new people into

    business from groups historically not attracted to entrepreneurship. They also

    help tackle some of our most entrenched social and environmental challenges

    in innovative ways. It is important, therefore, to consider the specific needs of

    social enterprises when developing new legislation and devising support

    activities.

Business to business mentoring

Feedback from UK SME business has shown there is a growing demand for

    business to business mentoring with experienced entrepreneurs willing to give

    time to mentor other entrepreneurs. This is not just true of high growth

    entrepreneurs but also of those in underrepresented groups (women, ethnic

    minorities, young people and the over 50s). The UK is about to undertake

    work to establish better links between existing mentoring programmes and the

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    overall business support network. We believe the Commission and member states should look at how to promote and facilitate mentoring as a source of business advice for established SME owners seeking to grow their business and to help encourage entrepreneurial success in underrepresented groups.

Global Entrepreneurship Week

    The UK has been running its annual Enterprise Week since 2004. This aims to help create a more enterprising culture amongst young people in the UK. The 2007 event attracted over half a million participants. The first ever thrd 23 November 2008 and Global Entrepreneurship Week will run from 17

    will be the world's biggest single event of its kind. So far over 30 countries have signed-up to take part. We believe the event will encourage young people all over the world to realise their entrepreneurial potential and leave a legacy of people inspired to think and work globally in order to create value for their own local economies and communities. We believe a strong European participation would contribute to creating a more enterprising culture amongst young people in Europe.

    2.5 Would it make a significant difference to further reduce the time and costs for registering a company?

    Clearly it is important to make it easier to set up a company, but it should be recognised that authorities often need time to make necessary checks to prevent potential fraudulent activity. Cost, however, is still an issue. The Commission announced last October that the average cost of starting a business across Europe had fallen to ?382. This is still very high; in the UK it costs a minimum of ?20 to set up an incorporated company.

    2.6 Do you think it would be useful to propose additional measures to facilitate business transfer and tackle bankruptcy?

    The UK thinks that measures to facilitate business transfer and tackle bankruptcy are largely for action at member state level. On the latter, recent studies, including one prepared by an EC expert group in 2006, have found no conclusive evidence of the benefit of public sector intervention in the buying and selling market. There could, however, be a role for the Commission in helping member states share good practice.

    The UK is seen as having a tax and legal environment that generally offers a level playing field for the various possible transfer options. A UK cross-Departmental review of the barriers to successful business transfer and an independent study into the operation of the UK market for buying and selling have been undertaken in recent years, but no fundamental market failures were identified to necessitate new policy initiatives.

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