Accountancy Europe’s latest factsheet provides an overview of the EU AI Act’s main provisions, with the main focus on the impact on SMEs
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The European Commission’s (EC) Annual Single Market and Competitiveness Report, assessing the EU’s economic competitiveness and highlighting strengths and weaknesses, was published on 29 January. It focuses on barriers to trade in goods and services and challenges in innovation, digitalisation, decarbonisation, and economic security.
For SMEs, regulatory burden is a significant issue, with 32% of firms citing it as a major investment obstacle. Additionally, 28% of SMEs allocate over 10% of their staff to regulatory compliance. Other challenges include payment delays, rising from 52 days in 2022 to 62 days in 2024, and difficulties in accessing finance. SME productivity is declining, from 68% of large enterprises in 2008 to 60% in 2024. Despite these struggles, SMEs remain key drivers of growth, with micro-enterprises creating nearly 4 million jobs in the past three years. Skills shortages and digital adoption issues further hinder growth, but the Single Market offers opportunities if barriers are addressed.
The EC published a Communication setting up a “Competitiveness Compass for the EU” on 29 January. It emphasises the need to boost Europe’s competitiveness through innovation and productivity, addressing barriers that particularly affect SMEs. The report identifies a lack of innovation and the failure to integrate new technologies into the industrial base as root causes of Europe’s lagging competitiveness. High regulatory burdens and energy prices also hinder European companies.
The Compass proposes a new competitiveness model based on innovation-led productivity. It highlights the difficulties faced by European start-ups and SMEs, including market fragmentation, limited access to venture capital, and regulatory barriers. To address these challenges, the EU will implement a start-up and scale-up strategy and establish a 28th legal regime for cross-border companies, to simplify rules.
Furthermore, the report notes that skills gaps and labour shortages significantly impact SMEs. A Union of Skills initiative will focus on up- and re-skilling and attracting qualified talent from third countries. The EC also re-iterates its targets for reducing reporting burdens, aiming for at least 25% reduction for all companies and 35% for SMEs. The report announces a new upcoming definition of small mid-caps to further tailor regulatory simplification for them. To further support SMEs, the European business wallet will create a seamless environment for companies to interact with public administrations.
The EC announced that it has decided to open infringement procedures by sending a letter of formal notice to Cyprus, Czechia, Spain, Malta and Portugal on 31 January for their failure to notify about the transposition of the inflation adjustments to the EU’s SME definition.
Member States had to ensure that the measures of the Directive are transposed into national law and to notify the EC by 24 December 2024. The Directive aims to increase the monetary size-criteria in the Accounting Directive for determining the size category of a company to adjust for the impact of inflation since 2013. This ensures that micro, small and medium-sized enterprises are not being made subject to undue EU financial and sustainability reporting provisions applicable to larger companies and is key to further reducing administrative burden. The EC is therefore sending letters of formal notice to the five Member States. They now have two months to submit their observations. In the absence of a satisfactory response, the EC may decide to issue a reasoned opinion.
The EC published a call for evidence – a high-level strategy document – outlining its plans for developing a so-called Savings and Investments Union (SIU). Stakeholders can provide feedback on it until 3 March 2025.
The SIU is one of the expected priorities of the EC for the next few years. It will build upon the successful completion of two action plans on Capital Markets Union (CMU) and progress on the Banking Union (BU). It aims to connect savings to the most productive investment, with a focus on the EU’s strategic objectives including innovation, decarbonisation, digital technologies and defence. It will focus on increasing returns on savings of EU citizens and widening financing opportunities for businesses – in particular SMEs, and improving the competitiveness of the EU.
The EC published its much-awaited work programme for 2025 on 11 February, outlining the legislative and non-legislative initiatives that it intends to undertake this year. Of relevance for SMEs, the following points should be noted:
For a full list of anticipated initiatives, the EC’s website contains all the relevant information and further details.
The EC’s 2025 work programme (see article above) was discussed in the European Parliament (EP) Plenary, with MEPs expressing mixed views on 12 February. The EC was represented by Commissioner Maroš Šefčovič, who underlined that their focus is on improving EU competitiveness, simplifying legislation, and fostering economic resilience.
However, some MEPs voiced concerns that simplification could lead to deregulation, potentially harming social progress. For SMEs, the Commissioner underlined reducing bureaucratic burdens and fostering innovation, including better access to capital and simplifying rules. The EC’s focus on competitiveness led some MEPs to argue that it must be balanced with social fairness and green policies.
The EP Plenary heard statements on 12 February from the Council and the EC on the recently published Competitiveness Compass (see article above). The Polish Minister underlined the need for structural reforms, horizontal enablers of competitiveness, access to finance, and technological developments. The EC’s Executive Vice-President Séjourné explained the objectives of the Competitiveness Compass and thought that as MEPs seemed to agree with the Letta and Draghi reports, they would also agree with the text of the Compass.
On the MEP side, the EPP and Renew Europe MEPs were largely in favour of the Compass and what it proposed, agreeing with the goal of simplification whilst maintaining the EU’s green objectives as well. The S&D and Green MEPs were worried about the route EC was taking, some noting that deregulation was not the way to make the EU more competitive. Among the other Groups, voices were split between thinking that the Compass was another useless exercise or that the Compass was not going far enough in its simplification goals.
With a focus on sustainability, digitalisation, and global competitiveness, the 2025 SME fund scheme of the EU’s Intellectual Property Office (EUIPO) was kick-started on 3 February. It will cover a range of intellectual property (IP) rights, including trade marks, designs, patents, plant varieties, and the IP Scan service. The upcoming SME fund scheme aims to:
EUIPO is organising a webinar on 18 February, providing detailed insights and guidance on maximising the benefits of the SME Fund 2025.
