Supporting small and medium sized enterprises at European level – Joint letter from M. Nicolas Sarkozy, President of the Republic, and Mr Gordon Brown, Prime Minister of the United Kingdom of Great Britain and Northern Ireland, to the European Presidency¹

London, 30 April 2008

Dear Prime Minister,

We are writing to you to express the high priority that we attach to Europe promoting the growth of small and medium sized enterprises. SMEs are a vital sector of the economy and are often at the cutting edge of innovation. Their continued success is key to the future prosperity of the European economy.

SMEs will only continue to flourish if the broader European policy framework recognizes their particular needs and they have access to appropriate finance. We, therefore, strongly endorse the Commission’s proposals to bring forward an ambitious Small Business Act. It is vital that we create a policy framework that:

· improves SMEs’ access to the single market and to export markets - only 8% of SMEs report turnover from exports outside their own country. SMEs still encounter barriers in trying to access and take advantage of the Single Market and its 490 million potential customers. We should be seeking to increase European SME exports both within and outside the Union. In this regard we look forward to engaging on the expected proposal on the statute on European private companies; · · recognizes the need to better take into account the possible disproportionate impact regulation can have on SMEs - in 2007 36% of European SMEs reported that regulations acted as a constraint or had presented difficulties in the previous two years - by making their life easier including through common commencement dates and reduced late payments; · · enhances the competitiveness of EU SMEs in the face of challenges of emerging economies by concerted EU action to modernize and augment the skills of their workforce and improving SMEs’ access to EU innovation programmes. Including measures aimed at developing SMEs’ growth potential; measures aimed at developing SMEs’ growth potential would help some of them, in particular innovative SMEs. · · helps SMEs compete for public contracts without compromising value for money principles – public procurement represents an estimated one-sixth of total GDP in the EU and potentially offers significant opportunities for SMEs; and · · encourages entrepreneurial activity in all segments of our societies, starting at an early stage at primary education level – for instance in the EU women have low rates of entrepreneurial activity, in particular in comparison with the US, where women are three times more likely to become entrepreneurs. · It is important that the Small Business Act has firm proposals for action and gives firm commitments. We welcome the Commission’s intention to bring forward a communication, including appropriate proposals, in June and look forward to taking this issue forward under the French Presidency starting on 1 July.

SMEs’ ability to access finance at the right time is a key element in enabling them to grow and flourish and we remain concerned that there are areas where SMEs’ access to commercial loan finance and venture-capital is sub-optimal. The market alone does not provide sufficient finance for the start up or expansion of innovative high-growth businesses. This difficulty in accessing commercial finance has been made worse by recent developments in the financial markets.

The EIB is already undertaking a review of SMEs’ access to its products, an initiative we welcome. In particular it is reviewing its Global Loans Facility which disburses €4 billion/£3 billion a year. It has always been a key role of multilateral lending institutions to facilitate access to the credit markets by those who may otherwise have difficulty raising finance. In our view there is a compelling case for EIB action to improve the provision of finance to SMEs who are finding it more difficult and more expensive to access the credit they need to finance their longer-term strategic investment plans. We look forward to seeing proposals on this important issue put to the Banks’ Governors and Directors as soon as possible.

We are writing in similar terms to Jose Manuel Barroso and are copying this letter to Philippe Maystadt at the EIB and to other Council colleagues./.

¹ Source of English text: 10 Downing Street