Small European Businesses Taking On the World
Small companies are big business in Europe. It is estimated that almost 99% of all companies fall into the Small or Medium category, employing two-thirds of the workforce. These companies are the drivers of economic growth, jobs, and innovation. However, it is a rough and tumble world to be in. An EU report estimated that almost half of all small companies started in 2001 didn’t survive their first five years!
In such a competitive environment what is it that makes some small businesses stand out while others fade away? Before we answer that question, let’s have a look at the most common problems facing European Small Businesses:
Now we can have a look at how the EU aims to address these problems and what the SMEs can do to compete more effectively.
To find more customers, companies need to compete not only domestically but with players from across the globe. Through the “Single Market Act”, the EU created a unified European market with almost half a billion potential consumers. Outside of the continent, free trade agreements are one way by which governments can make markets more accessible to their SMEs. The resulting cost savings can help companies export to countries around the world and compete with the best local businesses.
Free movement of people
In addition to the free movement of goods and services, allowing for free movement of workers alleviates the second most pressing concern of European SMEs – access to skilled staff. Furthermore, this creates a more efficient labour market where companies can hire the best people from abroad while managing to stay cost-effective.
Economic growth is not the same across the world. In a scenario where many European countries are growing at less than 3%, it is hard for companies to compete for the same slice of the pie. In faster growing emerging nations, there is a large demand for high-end goods and services which cannot be manufactured or serviced locally. The decision to compete in one of these emerging markets might be challenging but there is much room to grow for those willing to take the plunge.
Access to financing
SMEs have a slightly harder time getting access to funds for expansion and operations compared to the big boys. Even when financing is available, the cost would most certainly be a bit higher. In order to compensate for this differential, governments have programmes that help provide funding to specific sections of the SME community. These are mostly sectors the government likes to promote like clean energy, innovative technology start-ups, service sector enterprises and so on. Through the state’s help, SMEs can hope to bring their cost of funding down and compete on a level playing field.
Removing red tape and creating an efficient legal environment is another focus area for the EU. Via the “Think Small First” principle the EU is creating customized regulations geared towards SMEs. This helps them circumvent tedious processes and focus more on their core businesses.
With many of these initiatives in place, the EU expects the SME sector to come out on top and create efficient, global players. The forecasts for 2016-17 call for a 7% increase in value added by SMEs and a 2.3% rise in employment. It remains to be seen how much of this can be achieved amidst the current political turmoil, but the foundation for growth is certainly being laid.
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