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Capital Markets Union (CMU): delivering new opportunities for SMEs through venture capital

Date

18 Jul 2016

Sections

Euro & Finance
Innovation & Enterprise

EU experts debated how to create the right regulatory environment for the provision of private capital to SMEs at a recent joint ACCA, Barclays and UEAPME event in Brussels.

Small and medium-sized enterprises (SMEs) represent over 99% of businesses in the EU. They play a critical role in global economic development and are the backbone of the EU economy, it is therefore crucial to support them throughout their life cycle. The limits of the traditional debt financing model for SMEs have been exposed by the financial crisis, but changing a long standing culture of sole reliance on bank lending is not a simple process. This takes time and effort to promote and develop the range of complementary options necessary.

With this in mind, ACCA, Barclays & UEAPME organised a conference to discuss how to create the right environment for the provision of private capital to SMEs and what role it can play in moving us towards our Capital Markets Union (CMU) . Participants also heard some insights regarding the newly published EuVECA Commission proposal to boost venture capital markets.

Rebecca McNeil, Head of SME lending at  Barclays said :   “A diverse funding ecosystem, including crowdfunding, business angels, start-up loans, or investment firms, is emerging, widening borrowing options for SMEs. Banks like Barclays are learning from, and working with these new lenders. For example Barclays has an agreement with the European Investment Fund to finance lending to innovative SMEs in the UK up to €140m over the next 2 years. We now look forward to European initiatives to make Venture Capital finding more attractive on a cross-border basis. “

The debate revealed that the EU is very committed to pursuing the CMU agenda.  Access to finance for SMEs seem to be improving but there is still a lot more to do. Venture capital (VC) plays a determining role in stimulating entrepreneurship and young companies, but the current euVECA systems suffer from imperfections, such as barriers to use the European passport for venture capital funds introduced by certain Member States -like taxing registration charges- , a too rigid and prescriptive definition of what is an eligible SMEs, or a too narrow list of possible fund managers.

Panellists hoped that these issues would be addressed in the new proposal. It is important to develop an “equity culture” in Europe, and to ensure funding for start-ups, scale-up and high-growth companies to really foster growth in Europe. A better allocation of growth capital can be key for more successful IPOs of young, innovative growth companies in Europe.

Gerhard Huemer, Director of Economy Policy at UEAPME reminded however that SMEs are not homogenous. He explained: “there are all sorts of businesses, with different equity needs. Not all are fast growing companies willing to be listed, some SMEs may need equity or quasi-equity for issues such as innovation or business transfer. The appetite of SMEs for equity also depends on tax systems, which can be biased towards debt financing, with low equity rates, as it can be the case in some Member States.

Participants also heard that businesses should be kept in Europe where possible, but also that foreign investment could be a valuable opportunity. Entrepreneurs and investors need to think European and global and not only national. The EU has already put in place several tools such as the EU Single Equity financial instrument , Horizon 2020 and COSME, the European Fund for Strategic Investments and the pan-European VC Fund-of-Funds. But to optimise their use, it is also crucial to engage with entrepreneurs running businesses and to understand their needs. It is not just about finance, it is also about skills, mentoring, education. It was stressed that we need to help SMEs to help themselves. Decision-makers, banks and alternative finance providers, accountants, we all have the duty of care.

Rosana Mirkovic, Head of Small Business Affairs at  ACCA  added : “We should all  encourage a more entrepreneurial and risk-taking culture. Capital markets will not flourish across Europe unless SMEs and other investors are willing to embrace non-debt finance and be comfortable with the risks in doing so.  A pan-European venture capital fund could have a positive impact and send the right signal. But we need to lower the barriers for SMEs for venture capital funding and enhance the free flow of capital within the single market. We also need the political action and will to achieve this goal.”

Othmar Karas, MEP concluded There are many talented men and women in all regions and sectors. Our challenge is to provide them with the necessary economic framework to accomplish their visions. Besides the reduction of red tape and regulatory burdens, we need to focus on attracting more investment. Venture capital is one of the areas where Europe is in danger of falling behind, we need to develop a broader venture capital culture that could help SMEs and start-ups.

We also need to reassure young entrepreneurs that Europe is the continent where they will have the best chances for their future. We need a Europe which believes in itself and its economy. Brexit must be a warning sign for us. We have to go forward and implement what we decided, showing people the positive aspects of Europe and the single market.”

-Ends-

Notes to Editors

About ACCA

For media enquiries, contact: Cecile Bonino, tel: +32 (0) 2 286 11 37 or cecile.bonino@accaglobal.com

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. It offers business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 188,000 members and 480,000 students in 181 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 95 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. More information is here: www.accaglobal.com

About UEAPME

UEAPME is the employers’ organisation representing crafts, trades and SMEs from the EU and accession countries at European level. UEAPME has 80 member organisations covering over 12 million enterprises with 55 million employees. UEAPME is a European Social Partner. For further information please visit http://www.ueapme.com/ or follow @UEAPME on Twitter.

Jenny Manin, Press and Communications Officer, Tel. +32 (0)496 520 329, Email: pressoffice@ueapme.com

 

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