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Small and medium-sized enterprises (SMEs) represent over 99% of businesses in the EU. They play a critical role in global economic development and are the backbone of the EU economy, it is therefore crucial to support them throughout their life cycle. The limits of the traditional debt financing model for SMEs have been exposed by the financial crisis, but changing a long standing culture of sole reliance on bank lending is not a simple process. This takes time and effort to promote and develop the range of complementary options necessary.
With this in mind, ACCA, Barclays & UEAPME organised a conference to discuss how to create the right environment for the provision of private capital to SMEs and what role it can play in moving us towards our Capital Markets Union (CMU). Participants also heard some insights regarding the newly published EuVECA Commission proposal to boost venture capital markets.
The debate revealed that the EU is very committed to pursuing the CMU agenda. Access to finance for SMEs seem to be improving but there is still a lot more to do. Venture capital (VC) plays a determining role in stimulating entrepreneurship and young companies, but the current EuVECA systems suffer from imperfections, such as barriers to use the European passport for venture capital funds introduced by certain Member States - like taxing registration charges, a too rigid and prescriptive definition of what is an eligible SMEs, or a too narrow list of possible fund managers.
Rosana Mirkovic, head of small business affairs at ACCA added: 'We should all encourage a more entrepreneurial and risk-taking culture. Capital markets will not flourish across Europe unless SMEs and other investors are willing to embrace non-debt finance and be comfortable with the risks in doing so. A pan-European venture capital fund could have a positive impact and send the right signal. But we need to lower the barriers for SMEs for venture capital funding and enhance the free flow of capital within the single market. We also need the political action and will to achieve this goal.'
Othmar Karas, MEP concluded 'There are many talented men and women in all regions and sectors. Our challenge is to provide them with the necessary economic framework to accomplish their visions. Besides the reduction of red tape and regulatory burdens, we need to focus on attracting more investment. Venture capital is one of the areas where Europe is in danger of falling behind, we need to develop a broader venture capital culture that could help SMEs and start-ups.
'We also need to reassure young entrepreneurs that Europe is the continent where they will have the best chances for their future. We need a Europe which believes in itself and its economy. Brexit must be a warning sign for us. We have to go forward and implement what we decided, showing people the positive aspects of Europe and the single market.'