Small Business Act for Europe promises reduction in red tape

New EU legislation has been proposed which will make it easier for small businesses to operate and develop.

The recently published Small Business Act for Europe sets out a number of measures designed to reduce the barriers to trade facing many SMEs.

The Act plans action in four areas that particularly affect SMEs.

A new General Block Exemption Regulation will simplify the process of state aid, making it easier for SMEs to benefit from help for training, research and development and environmental protection.

A new statute for a European Private Company will allow SMEs to start up and operate according to the same company law provisions throughout Europe. The idea is to make it cheaper and administratively easier for firms to engage in cross-border trade and to exploit the single market.

A new proposal on VAT will offer member states the option to apply reduced VAT rates for locally supplied services, including labour intensive services, which are mainly provided by small and medium-sized enterprises like independent shops.

Lastly, the European Commission is planning changes to the Late Payments Directive, which will help to ensure that smaller firms are paid within the 30-day time limit stipulated.

Other measures include: reducing the time needed to start a new company to no more than one week; introducing set dates each year for implementing regulations that affect businesses; offering small firms help in winning public procurement contracts; the possible exemption of small firms from new directives where appropriate; and simplifying access to finance, research and development and innovation.

Phil Orford, the chief executive of the Forum of Private Business (FPB), said: “The Act addresses the majority of the FPB’s concerns, which were outlined in our submission to the consultation in March.”

Mr Orford added: “In particular, it highlights the key issues of improving access to public procurement for small firms, reducing rates of VAT, and tackling the scourge of late payment, which is a perennial concern for many of the UK’s smallest firms needing to maintain a healthy cash-flow in order to survive.”

However, the British Chambers of Commerce (BCC) criticised the Act as not being sufficiently radical.

David Frost, the BCC’s director general, said: “The desire to think small first is a welcome development but this publication is unlikely to produce the shift in policy we were led to expect.

“This is a mish-mash of watered down proposals and initiatives with a questionable amount of political will attached to it from the member states. There are some useful aspects here, such as a dedicated test for small firms in all EU impact assessments, but there’s very little else.”