SME update

• SMEs face skills shortages, Eurobarometer says
• EP and Council shield SMEs and SMCs under Digital Omnibus
• Co-legislators to implement the EU-US joint statement
• UK shields SMEs with unprecedented reform on late payments

Competitiveness Council backs 28^th regime, with reservations

EU Competitiveness ministers largely backed the proposal for a 28th Regime (EU Inc.) to allow entrepreneurs to set up a business online within 48 hours without start-up capital – missed out? Read the proposal, or let us explain it to you with our previous updates.

While praised for reducing Single Market fragmentation and boosting competitiveness, the EU Inc. proposal faces heavy criticism over security gaps. Where do Member States stand?

• Austria warned that the text lacks measures to combat money laundering, sanctions circumvention, and terrorist financing, while risking a race to the bottom for workers’ rights
• France questioned the 48-hour setup, pushing for a 15-day review period to allow effective fraud checks
• Benelux countries argued the proposal lacks ambition as a true supranational framework and demanded stronger safeguards to ensure compliance with national labour laws
• Germany supported the single market benefits but joined calls for stricter preventive controls.

Commissioner Michael McGrath reassured ministers that the proposal has safeguards on checks and measures against ‘letterbox’ companies – wondering what a letterbox company is? Let the European Labour Authority explain.

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Will the EU be among the winners of the AI race?

The European Commission’s DG Connect Roberto Viola claims Brussels will address the regulatory burden affecting smaller economic players, with the Digital Omnibus Package potentially saving businesses €5 billion by 2029.

Under this package, SMEs and SMCs get a single cybersecurity incident reporting system and expanded AI regulatory sandboxes for product testing.

However, Viola’s toolkit does not stop there. He highlights the Digital Package’s key deliverable: the European Business Wallet – missed that? Catch up here – creating a single digital identity for businesses to handle cross-border compliance.

Finally, Viola insists that Europe’s financial resources and human capital will place itself ‘among the winners’ of the AI race.

Read more about the interview

SMEs face skills shortages, Eurobarometer says

Eurobarometer reveals that 46% of European SMEs struggle to find workers with the right skills – see the full data annex. To fill these gaps, some companies are looking abroad, but recruitment outside the EU remains low. Only one in seven SMEs has tried it in the last two years, and 54% found the process difficult. The biggest hurdles are:

• complex immigration paperwork (31%) and
• language barriers (24%)

To tackle these shortages, the EU Talent Pool will be launched as the first EU-wide platform to directly match local vacancies with international job seekers.

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Startup & scaleup scoreboard now available

The EC has published its first European Startup and Scaleup Scoreboard (ESSS), proving that pro-startup policies drive real results – curious where your country ranks? Read the full dataset.

The scoreboard tracks 36 measuring indicators:

• front-runners like Estonia and Sweden score up to 60 percentage points above the EU average, excelling in venture capital and talent
• in-rising nations like Greece and Romania lag 30 points behind due to weak venture capital access, regulatory bottlenecks and brain drain.

These findings will shape the upcoming European Innovation Act, alongside initiatives like the EU Inc. Proposal, the European Business Wallet, and the EU Visa strategy to attract global tech talent.

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EP and Council shield SMEs and SMCs under Digital Omnibus

The European Parliament (EP) and the Council reached a provisional agreement on amending the Artificial Intelligence (AI) Act as part of the Digital Omnibus package.

The provisional agreement postpones the application of specific rules to allow for the finalisation of necessary support measures. Also, it draws a firm line by banning AI systems that generate non-consensual sexually explicit content or child abuse material.

But what is Brussels doing for smaller market players? The provisional agreement:

• reduces reporting obligations for SMEs and small mid-cap companies (SMCs) – need a refresh on SMCs?
• extends SMEs exemptions to SMCs
• gives priority access to AI regulatory sandboxes, also to SMCs and startups – Let’s translate bureaucratic speak, what are these regulatory sandboxes?

Final adoption of the agreement is scheduled before 2 August 2026.

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VDL calls for the completion of the Single Market

The EC’s President Ursula von der Leyen (VDL) took the stage at the EP’s plenary session to demand the completion of the Single Market.

She targeted internal trade barriers and national gold-plating – Gold-plating? Euro-speak translated into plain language – as key obstacles to business growth across Europe.

While the EC pushes for a fully functioning single market, the Members of the European Parliament (MEPs) cannot agree on the blueprint.

• right-wing leaning factions criticised the Green Deal for strangling industry
• left-leaning MEPs raised concerns over workers’ rights
• centrists called for integrated capital and digital markets.

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Co-legislators to implement the EU-US joint statement

The Council Presidency and the EP reached a provisional agreement on two regulations implementing the EU-U.S. Joint Statement. They dismantle customs duties on US industrial goods and reduce tariffs on select seafood and farm products – need a refresh on the 19 key terms of the joint statement?

While headlines celebrate a stable partnership, Brussels plays a game of trust-but-verify. The fine print contains a robust safeguard mechanism, a friction-busting insurance policy for European businesses:

• the EC may launch an investigation to freeze the deal if a sudden surge of US imports threatens domestic producers. This action can be taken on the EC’s own initiative or if requested by three or more member states, trade unions, or the EU industry
• the EC can suspend the agreement if Washington fails to respect the deal or disrupts the trade and investment relations with the EU
• a sunset clause guarantees the entire arrangement expires at the end of 2029, preceded by an assessment (with an SMEs-specific angle) before any extension is even considered.

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EUIPO and EIF to turn IP into bankable assets for SMEs

European SMEs may have untapped value in their Intellectual Property (IP), yet transforming trademarks and designs into bankable collateral remains a hurdle – want to see the real numbers behind the potential? Look at the projections of IP-mobilised finance.

The European Union Intellectual Property Office (EUIPO) and the European Investment Fund (EIF) have signed a Memorandum of Understanding (MoU) to turn these legal assets into actual liquid capital.

The partnership aims to standardise IP valuation approaches and de-risk financing for innovative SMEs. With the EIF increasingly using IP ownership as a benchmark of business strength, the MoU marks a step toward creating a financing ecosystem in which a company’s ideas can fund its growth.

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UK shields SMEs with unprecedented reform on late payments

The UK government has introduced the Small Business Protections Bill, hailed as the toughest crackdown on late payments in a generation. The crisis is acute: starvation of cash flow forces 38 small firms to collapse every day – see the full data breakdown in the official economic impact research – as bigger corporations refuse to pay on time.

To this end, the Bill introduces four key reforms:

• a strict 60-day cap on payment terms for large companies
• a mandatory 8% interest above the Bank of England base rate on late payments
• a ban on withholding retention payments under construction contracts
• major new powers to the Small Business Commissioner to investigate poor payment practices and hand out fines potentially worth tens of millions

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EC explains measures taken to shield SMEs from CBAM administrative burdens

• Question by MEP Galato Alexandraki (ECR/Greece)
• Reply by Commissioner Hoekstra