EU to cut red tape for small businesses?

New proposals put forward by the EU Presidency could see the red tape burden for small firms cut dramatically.

Under the plans, small businesses in European Union (EU) member states could be given the option to become European Private Companies. These companies would be able to register and submit accounts centrally, further harmonising the treatment of private limited companies across the EU.

Regulation would also be streamlined and new rights granted to ensure small businesses are paid promptly.

The proposals were put forward by the Czech Republic in the first weeks of their six-month presidency of the EU. The country’s pro-free market government has placed economic reform at the heart of its programme for leadership.

New rights, fewer responsibilities

European Private Companies would be allowed to conduct business across European Union borders without needing to register subsidiary companies in each country they operated in. Larger companies have been allowed to work in this way since 2004.

Small companies would also only need to file a single set of reports and accounts, instead of submitting information to several government agencies.

The presidency hopes these changes will encourage companies to explore the potential for growth through cross-border operations.

Faster payment

The legislation could also bring in new rights to ensure smaller firms are paid on time, as well as a streamlining of existing regulations. EU agencies have been urged to “think small first” when looking at the legal demands on small firms

Czech prime minister Mirek Topolanek, reported in businesszone.co.uk, said that his economic strategy will aim “to enhance consumer confidence, but also the confidence of small and medium-sized enterprises”.

A survey by the Forum of Private Business recently suggested that a number of small firms are struggling to cope with the fallout from the economic downturn. It found that 33 per cent of the 6,000 small businesses questioned applied for funds in the fourth quarter of 2008. Of these, 27 per cent were rejected outright, while a further 20 per cent were partially rejected.

Smarter regulation

A source from the Czech government, quoted in the Daily Mail, explained the reasoning behind the new proposals: “We want to make life easier for small firms. We see them as the cornerstone of economic activity.

“The current economic crisis is an opportunity, social and economic, for Europe. We are not simply saying there should be no regulation, but we would like better regulation.

“Everyone thinks it simply passes new regulations, but it is now taking a critical look at the regulations that exist already.”

The European Commission is believed to support the proposals, and the source said the government was “in close touch” with them.

The Czech presidency will continue its focus on small and medium-sized enterprises throughout its tenure, with a European SME week planned for May 6th to 14th. This joint conference with the European Commission will focus on reducing administrative bureaucracy a promoting entrepreneurship in Europe.

The first two weeks of the year brought further good news for SMEs as the government announced plans to guarantee in bank loans to small and medium-sized companies.

British measures

Proposals include a one-year expansion of the Enterprise Finance Guarantee, which means that the government will guarantee 75 per cent of loans worth up to £1 million for companies with a turnover of less than £25 million.

Business secretary Peter Mandelson told Bloomberg: “We have struggling companies out there who need help now … It’s a relatively small sum of taxpayers’ money to get a relatively big benefit.”

The Federation of Small Businesses has backed the move, but national chairman John Wright warned: “The onus is now on bank branch managers to actively promote this money to its small business customers to ensure their survival and the revival of the economy. The banks now have no excuses and we will be encouraging our members to apply for these funds”.