Brian Hayes MEP
"We must continue to broaden the range of financing intrustments that are available to SMEs and entrepreneurs"
Commentary by Brian Hayes MEP, Vice-chair, Economic and Monetary Affairs Committee, EPP
Small and medium-sized businesses (SMEs) are the driving force behind the European economy. As economic conditions start to improve in Europe, policymakers must nevertheless still face the reality that SMEs continue to struggle to get access to their necessary financing needs.
London Stock Exchange Group’s 1000 Companies to Inspire Europe report demonstrates the great benefits that SME businesses bring to the European economic ecosystem. It also shows the challenges and barriers that they face in ensuring their high-growth potential.
In 2014, European policymakers from the Parliament, Commission and Council set out on a task to deliver a functioning Capital Markets Union (CMU) for Europe that would harness the needs of SMEs and address Europe’s investment gap.
Four years later and with an improving economy, European capital markets have not made the enormous leap that we would have hoped for. There is still an over-reliance on bank financing for European companies, which means that they are vulnerable to the tightening of bank lending. Clearly, bank financing can never be replaced, but we must continue to broaden the range of financing instruments that are available to SMEs and entrepreneurs, in order to address their diverse financing needs.
Alternative forms of financing must become a key part of our toolkit to help European companies to flourish. We must recognise that things like equity finance, venture capital, peer-to-peer platforms and crowdfunding can all provide valuable sources of funding for growing businesses.
In Ireland, over half of SMEs say that access to finance is a growing problem. If we had a truly functioning CMU, SMEs would have the means to source the funds needed to propel their business forward.
The EU has delivered on many of the goals it has set itself on the CMU project and has taken some radical regulatory action, but change on the ground is slow in coming. There needs to be dedicated follow up to the policies that have been put in place and to ensure that they are implemented adequately. In the next mandate of the Commission and Parliament, there must be a clear commitment to turn CMU into a reality for businesses.