Markus Ferber MEP
“The European Parliament is proud to support SME financing through dedicated SME Growth Markets”
Foreword by Markus Ferber MEP, EPP Coordinator, Vice-chair, Economic and Monetary Affairs committee, European Parliament
Small and medium-sized enterprises (SMEs) lie at the heart of Europe’s economy, and they are the key to economic growth, innovation and job creation. London Stock Exchange Group’s third annual edition of 1000 Companies to Inspire Europe profiles inspirational examples of all the EU member states, including Germany. These risk-taking innovative companies are growing dynamically and supporting the economy, demonstrating European entrepreneurial spirit at its best.
With the proper support, the companies you read about in this report will grow to help assist the European economy and become world leaders in industry. But they will only be able to fulfil their potential if they have access to the necessary financing sources. Indeed, whether or not SMEs are able to access investment, and how they are capitalised, influences if they succeed or fail. Equity is a suitable form of finance for high-growth firms with significant expansion plans, but venture capital and private equity tools, for example, are vastly underdeveloped in Europe compared to the US.
Encouraging these potential alternative investors is therefore key, and the European Parliament is proud to support SME financing through dedicated SME growth markets; a new category of financial markets introduced by Markets in Financial Instruments Directive II. This new sub-category of markets is specifically designed to facilitate greater access to capital for SMEs. Through this development and, in addition, a common regulatory standard for these markets, we hope to see further development of specialist markets that cater for the specific needs of smaller and medium-sized issuers.
The journey to greater SME financing does not stop here, however. This is part of a bigger Capital Markets Union project. Currently, financing in Europe remains heavily reliant on banks, and there are significant differences in financing conditions between EU countries. This means shareholders and buyers of corporate debt rarely go beyond their national borders when they invest, starving SMEs of crucial financing opportunities. Once completed, the Capital Markets Union will complement bank financing with deep and developed capital markets, unlocking capital around Europe to give SMEs the funding they require to grow. However, so far the Capital Markets Union, which has been one of the flagship projects of the current Commission, has not reached its full potential and more ambitious proposals are needed to really get this project off the ground.
The seminal 1000 Companies to Inspire Europe report proves how diverse, innovative and dynamic European companies are. What is also clear is that the regulatory environment must have SME financing at the heart of its objectives, and the European Parliament is delighted to support that objective.