This year the European Union will celebrate 28 years of unity and one of the world’s largest single free markets. The success of the EU has played out across the world, as developing nations look to European countries as a beacon of hope regarding democracy and free trade agreements. Recent developments around the world considering the emergence of the novel coronavirus have pushed European leaders to rethink cross-border trade and government aid schemes for new upcoming businesses within the European bloc.
According to the European Commission, nearly 25 million small and medium-sized businesses currently represent 99% of all businesses in the EU. More so, these businesses create more than 80% of all new jobs, and currently generate a third of the EU’s value-added income.
Governments around the world are scrambling to find new innovative ways to help support small and medium-sized businesses through various government aid relief schemes. The EU has seen a progressive movement towards recovery, as the 27 member states garner their expertise to keep economies open, and businesses thriving.
Support Through Means of Localized Financial Institutions
A challenge that the member states had to resolve was how do they allocate money and funds to businesses across 27 different countries. Each country still houses its own laws, tax regulations, budgets, and policies. The EU Commission has created various branches that can assist businesses through means of localized financial institutions such as banks, lessors, microfinance providers, and venture capital funds support.
The outcome of whether the SME will receive financial support from the local government is left in the hands of the local financial institution. This means that the agreed-on amount, duration, interest rate, and additional fees, if any, are to be decided by the private financial institution.
It might sound simpler on paper, than in practice. What this means is that although financial assistance is largely available for SMEs, the channels through which the finances come are a long and tedious one.
Opening Opportunities of Free Trade and Single-Markets
The business landscape throughout the EU differentiates. Although a single market strategy has been incorporated, government leaders are focusing their attention towards assisting small to medium-sized businesses (SMEs) to improve the movement of goods.
What the Union is doing, and has done relatively well until now, is to eliminate hurdles in the trade and transport of goods coming from small businesses. This allows small businesses to have access to a larger clientele. With nearly 400 million EU citizens, this enables small businesses to move their goods and services seamlessly across international borders.
But this was the whole idea behind the introduction of the EU from the beginning. Creating an economic area, where free movement of people, goods, and services can be conducted without any barriers. The EU Commission has been working endlessly to keep these channels open and allow both business owners and their goods to be sold across the member states.
Although there may still lie the issue of incoming goods and services that might oppose local laws and jurisdictions. Improving support for industries in eCommerce, AI, supercomputing, tech, and other software, the Commission has enabled business owners to have better access to a single free-market economy.
Pan-European Funding Programmes
Even before the global pandemic, the European Commission has introduced the pan-European venture capital fund-of-funds programme.
The main focus behind this programme is to allow potential businesses to grow within the European bloc and globally. This fund which was established in 2018 aimed to raise nearly €2.1bn of public and private investment. In the long term, what the Commission in collaboration with SMEs and other business unions is trying to offset is an additional €6.5bn of new investment.
Larger investments like these and creating funding programmes backed by proper government support can help upscale businesses across the EU. Small investments, and seeking entrepreneurs and startup business owners who have the potential to increase venture capital in the European bloc allow for faster and more prominent business growth.
The business incorporation taking place in the EU can mean that the government will still assist privately owned businesses through government-sanctioned aid schemes. Although the stakes can be higher, as local laws and policies can hinder the success thereof, SMEs in Europe still receive more financial support from government schemes compared to other developed nations.