UEAPME Position Paper on The

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UEAPME position paper on the

Green Paper on Entrepreneurship.

Introduction.

UEAPME strongly welcomes the European Commissions initiative; UEAPME would like to congratulate DG Enterprise on the quality of the Green Paper as it gives a complete and in depth overview of the issue and covers nearly all elements involved. It could be advisable to include this Green Paper in the curriculum of every civil servant dealing with issues that can affect enterprises.

This position paper is the result of an extended consultation process and discussion amongst our member organisations.

UEAPME especially welcomes the consideration of the qualities of “Entrepreneurship” and the emphasis on developing the concept as outlined in the Green Paper.

In general UEAPME can also agree with the proposed measures to encourage entrepreneurship.

Although it contains nothing new for those who are dealing daily with entrepreneurs and enterprises, it has started a much needed wide discussion amongst the enterprise community and their representatives. The great merit of the Green Paper is that there is now a reference Commission document at European level available. Even if we regret that it comes quite late in the Commission's term, UEAPME considers it as a new start for European Enterprise Policy on which can and must be built further in the context of the current economic situation which is characterised by a lack of confidence.

Main critics.

-The Green Paper gives almost exclusive focus on “start ups” and “growth enterprises”. In UEAPME’s view attention has to be given to "traditional" SMEs as well, as 70% of SMEs would like to stay in their current situation. It is obvious that it is important to take growth enterprises into account, but this should not be done to the detriment of traditional SMEs and family businesses. UEAPME reiterates therefore the importance of measures that allow and facilitate the continuity of the enterprises. It would indeed be naive to think that the Lisbon targets can be reached by focusing on start-ups and growth enterprises. The Lisbon conclusions were very clear on this issue: "small enterprises are the main engine for job-creation in Europe, and [Commission and Member States] should respond specifically to their needs..." (point 15 of the Lisbon Conclusions).

With the knowledge that SMEs do contribute tremendously to job creation and growth, it is important to recognize that the creation of employment is not necessarily the main aim of the owner-managers. In fact as pointed out in the Green Paper, the objectives and aimsof the owner-managers are multiple. The aims of the owner-manager are closely related to their personal and business goals. Employment creation may occur, but as a by-product of the owner-manager pursuing those goals.

Most of the owner-managers perceive some "ideal size" for their enterprise. This often means that they wish to grow but that this growth is limited by concerns about maintaining control of day to day operations and steps in costs from expansion of the enterprise. For example, owner-managers may wish to avoid delegating responsibility to others, which might be the result of growth.

-The Green Paper does not emphasize enough on the important link between Entrepreneurship and SMEs, especially small and micro enterprises. Moreover, UEAPME regrets the fact that neither the SME philosophy ("Think small first") nor the link with the European Charter for Small Enterprises is present in the Commission’s document. Further to the Commission's work on the Lisbon Strategy, UEAPME is disappointed that only one reference has been made to the Lisbon Strategy and to the idea that SMEs are the “backbone of European economy.”

This is quite remarkable, especially rereading Commissioner Liikanen in his foreword to the printed version of the Charter:

"...At the Feira European Council in June 2000, the Heads of States or Governments of the European Union recognised their (= small enterprises) importance by endorsing the European Charter for Small Enterprises. The Charter outlines what Member States and the Commissionmust do to improve the environment for small businesses. By endorsing the Charter, we have committed ourselves to "thinking small first" in all our policy measures.

The Charter has become a cornerstone of the European Commission's enterprise policy and a tool to help Member States improves their performance. Implementing the Charter's strategic recommendations is central to achieving the Lisbon objective of making Europe the world's most competitive and dynamic economy by 2010."

So, the key objectives for an agenda for entrepreneurship are already known and agreed on by the European Commission and the governments of the EU and the accession countries by adopting and endorsing the European Charter for Small Enterprises. (see also question 1)

-It is without any doubt that entrepreneurship in Europe has to be encouraged, but the Green Paper takes the American entrepreneurship too much as the "ideal" reference point. However, it has to be stressed that if the percentage of fast-growers and the percentage of start-ups in the U.S. is higher than in the E.U., this is, among other things, due to the fact that the statute of an employee in the US is less attractive than in Europe (less social protection,). The European social model should be taken more into account in the stimulation and the promotion of entrepreneurship. In general the comparison with the United States seems to us quite superficial and it would be advisable to make a more in depth analysis.

General Remarks

In the opinion of UEAPME and its member organisations it is dangerous to consider the creation of an enterprise as a weapon in the fight against unemployment for the person concerned. Although recently created small enterprises contribute to job creation, it would be very naive to presume that one can start-up without the necessary skills to manage an enterprise. Incentives for the unemployed to become an entrepreneur should always be accompanied by preparation, in depth training and advice. As mentioned before in our comments, it gives the impression that the Commission is only interested in increasing the number of start-up and less in the survival and continuity of the enterprises.

Raise awareness.

In order to promote entrepreneurship, society in general has to be made aware of the issue. It is necessary to restore the image of the entrepreneur and to raise understanding of the advantages of entrepreneurship. Currently, there is too much emphasis on the disadvantages and the prejudices that are linked with it.

To realise these objectives, the public authorities and policy makers at European, national, regional and local level have an important role to play as they have to assume the elaboration of legislation and conditions that enable enterprises to evolve in a framework based on a sound and fair competition. The public image of entrepreneurship could be improved by governments by making the general public aware of the benefits of entrepreneurship. Also the media play an essential role in the elaboration and the communication of a "new" especially dynamic image of an entrepreneur and its important role in the social-economic framework. It is necessary to present the entrepreneur in a positive way, however, without hiding the reality which is sometimes difficult.

Education.

In order to promote entrepreneurship and to make the future generation aware of an orientation towards self-employment, it is of utmost importance to teach about entrepreneurship already in the primary schools. So far, education is not very creative on this issue. Contact with entrepreneurship comes at a too late stage (if it comes...). parents and the school system take too few efforts to let young people know more about assessing economic risks and taking economic and social responsibility. The whole educational system should support the development of awareness and skills necessary for developing an entrepreneurial mindset and skills. Entrepreneurship (in the broad sense) training should be part of a school’s curriculum, by e.g. getting entrepreneurs into the classroom. Also the image that is given of entrepreneurs in the school manuals is rarely positive and often caricatural. This should be changed urgently.

The education of its inhabitants in terms of the (social) responsibility of enterprises can avoid unjustified perceptions the people have towards the business world. The mobility of apprentices through the EU should also be encouraged and supported.

There is a strong evidence from the Global Entrepreneurship Monitor (GEM) study that people with more education are more likely to be involved in overall or opportunity entrepreneurship, but less likely to be involved in necessity entrepreneurship.

Given the international evidence than 50% of all high potential ventures are set up by people with a university or post-graduate degree, there is a clear and pressing need to encourage and motivate highly educated people to set up their own enterprise. The results indicate that for well-trained people this is not a natural career choice, while they are the ones most able to set up and develop high potential ventures.

Leadership and Management.

Whilst UEAPME fully supports the recognition of “Entrepreneurship” in the Green Paper, we are concerned that there appears to be insufficient emphasis on the development of the qualities of Leadership and Management, except to include them in the concept of the development of “relevant” personal skills. The belief that “entrepreneurship” should be “accessible to all members of society” does seem to UEAPME to be a laudable objective, but we are again concerned that where successful entrepreneurship is fundamentally based on personal skills, then there could be many individuals who do not possess those skills but yet are being encouraged into setting up businesses.

It still must be accepted that personal qualities vary from individual to individual, and motivation into entrepreneurship is not suited to all.

So, it is not about making everybody an entrepreneur. It may be clear that not everybody has the required personal skills and aspirations. It is about motivating, encouraging, informing and training all those who have the potential to create their own enterprise, to avoid that valuable initiative is lost.

Although mentioned correctly in the Green Paper (C.ii) that people's attitudes towards involvement in entrepreneurship vary widely across the EU Member States, and differences are even greater between regions, it has to be reiterated that studies have shown that the problems SMEs are facing are the same all over Europe and that there are three main burdens for setting up a business: the direct and indirect taxes, access to finance and the administrative burdens.

Better Regulation and Red Tape.

For many years (decades...) business organisations and their members have pointed to red tape as a mayor hurdle to running a business. So, it is not corresponding to reality that it is particularly the enterprises who want to operate and grow within the Internal Market, as the Green Paper stated, that are suffering from red tape. Regulation and red tape affects disproportionately smaller enterprises. For years UEAPME has advocated the "think small first" approach. But the "think small first approach" has nothing to do with establishing exceptions for SMEs or providing administrative services to support them, as the Green Paper seems to suggest (III.B.i). Indeed SMEs are the rule, as they represent 99.7 % of all enterprises, not the exemption!! This should finally be reflected in the regulatory framework. "Think small first" means that any regulation or legislation should be developed taking into account the characteristics of SMEs and their way of operating. Central to this are real business impact assessments, targeted to small and micro-enterprises.

Red tape is one of the most cited problems entrepreneurs have to deal with. In spite of hundreds of studies, in spite of uncountable public declarations of government officials, red tape is still increasing, and hinders entrepreneurs in dealing with their main job which is running a business. The level of Red tape demonstrates the need for a stronger understanding of SMEs within European, national, regional and local decision making structures..

Representation and consultation.

A lot of red tape and difficulties to implement legislation in SMEs can be avoided through a real consultation process of the representative business organisations. UEAPME regrets that their role is not mentioned in the Green Paper.

As already stated in previous UEAPME position Papers,[1] attention should be paid to the important role which representative horizontal and sectorial business organisations play as intermediaries between enterprises and the European institutions. Indeed, their role is not simply to register or collect the opinion of their members, but also to find a common position that reflects the opinion of the different counties or economic sectors. As such, their opinions are more than a simple sum of all the opinions from single enterprises. They are the result of a democratic consultation and decision-making process. Regulations based on collectively agreed positions will also be more easily respected. It means also the application of the subsidiarity principle.

A culture of consultation and dialogue requires not only a consultation but engagement and follow-up on specific proposals. It constitutes a compulsory part of the whole decision-making process as well as the consultation and involvement of the parties concerned during the whole preparatory process. The European Charter for Small Enterprises[2], as well as the European Parliament[3] and the ECOSOC[4]called on the Commission to initiate and increase consultation with the representative organisations, particularly those representing small businesses.

Business Impact Assessments.

UEAPME supports the idea of creating “Better Regulation Units” (as already suggested in the BEST report in 1998) within the European Commission, the Council and the European Parliament in order to co-ordinate regulatory review, to assist in improving the clarity and effectiveness of each of their contributions to EU legislation, in deciding whether legislation is actually necessary or whether there are alternative courses of action and to ensure that the consequences of any legislative proposals for SMEs have been assessed and fully taken into account.

These units should be responsible for promoting good regulatory practice in operational departments, including establishing that proposed legislation is really necessary, that appropriate consultation takes place, that sufficient information is provided and that regulatory impact assessments have been properly carried out. These units should help improve the quality of legislation and promote clarity, simplicity and coherence. They should also ensure that the final form of legislation has taken proper account of the effect on small businesses, for instance, by checking that amendments to legislative proposals have also been subject to impact assessment.

The impact of legislation on small business must be an important consideration in determining its form and content, therefore UEAPME suggest the following measures to be promoted:

• The staff in European, national and regional public administrations should be encouraged to be more aware of the circumstances of Small Businesses through specific training measures, information and awareness raising campaigns.

• The ‘think small first’ approach should be the guiding principle and best practice should be identified and subsequently adopted in relation to:

­consulting small businesses through their representative organisations before the introduction of new regulatory instruments, deploying financial resources to enable the participation of their experts in meetings when necessary.

­developing regulatory impact analysis and instruments for evaluating compliance costs and administrative burdens, such as impact index cards which indicate the cumulative effect of regulations;

­allowing reasonable time frames for the implementation of legislation, especially for Small businesses;

­conducting effective information campaigns regarding changes required by new legislation;

­consulting businesses before the introduction of new administrative practices including new forms and questionnaires, to ensure that enterprises can provide the information, and that it is not already available elsewhere. For instance, information required for statistical or other similar administrative reasons should be limited and separately identified.

­In the case of directives being transposed into national legislation, care should be taken to avoid adding undue complications and ‘gold plating’ should be resisted and eventually eliminated. Meanwhile, it should be made clear when additional provisions are being made. These should be identified and evaluated separately.

­setting coherent, transparent and clear understandable criteria for administrative and legal procedures, e.g. to get access to Community funds or to comply with EU competition legislation ( more legible regulations on vertical restrains or on horizontal co-operation agreements)

Concluding remarks.

- The independent spirit of the entrepreneurs has to be recognised.

-The Green Paper analyses the issue of entrepreneurship by comparing Europe and the United States. An analysis of the national data shows that a comparison of the different national data is actually rather impossible, due to the fact that at national level different definitions have been used of start-ups, SMEs, self-employed, More statistics and data concerning SMEs should be available, without increasing the red tape for these enterprises.

-It is absolutely necessary and of utmost importance to coordinate the different initiatives at European level. The measures, which will eventually be taken in the framework of the green paper and the objectives of the European Charter for small enterprises, have to go together, strengthen each other and have to be complementary. In any case specific attention should be paid to small and micro enterprises.

-It would be very useful to develop an instrument to facilitate the analysis of the long-term evolution of entrepreneurship. An indicator, which reflects the level of entrepreneurship in each Member States, could be developed. A regular evaluation of this indicator should inform about the positive or negative evolution of entrepreneurship. (more criteria and a uniform definition)