Small and medium-sized enterprises (SMEs) are the backbone of Europe’s economy, accounting for over 99% of all businesses in the EU and contributing significantly to job creation, innovation, and economic growth. Given the key role of SMEs, it is crucial to ensure that policy decisions at the national level consider their unique needs and challenges. One crucial tool in this regard is the SME Test — a systematic analysis conducted to evaluate the effects of proposed legislation on SMEs.

The recently published National SME Test report, carried out by the SME Observatory of the SME Directorate of the Federal Public Service Economy of Belgium, and commissioned by the SME Envoy Network and the European Commission, evaluates the effectiveness of national SME Tests in 20 of the 27 EU member states. It provides a detailed analysis of how SME Tests are currently implemented, identifying areas where improvements are needed to better serve and support SMEs across Europe. To obtain its findings, the report relied on two surveys: one for member states and another for national SME stakeholders.

Challenges faced by SMEs and recommendations to address them

SMEs face several key challenges when new legislation is introduced, including financial costs, administrative burdens, and inconsistent application of regulations across the member states. To address these issues, the report interrogates member states about a series of mitigating measures that can be incorporated into national SME Tests such as reduced fines and fees based on enterprise size, simplified, reduced reporting obligations for SMEs, temporary exemptions, tax reductions or direct financial aid, among others.

The need to raise awareness and knowledge-sharing of SME Tests

One of the key findings is the need to raise awareness about the existence and benefits of SME Tests. The report highlights that while the SME Test is a valuable tool, its potential is not fully realised due to a lack of awareness and inconsistent application across member states: while 19 out of the 20 respondent states had an SME Test at the national level, only 58% of the respondent SME stakeholders knew about the use of their national SME Test. To address this, the report recommends enhanced knowledge sharing between national administrations and the European Commission, ensuring that best practices are disseminated and adopted more widely.

Towards a harmonised definition of SMEs

Another significant finding is the need for a more consistent and harmonised definition of SMEs across the EU within the framework of the national SME Tests. The report points out that the current variation in SME definitions among member states can lead to disparities in how policies are applied, potentially disadvantaging certain SMEs. To mitigate this, the report recommends the adoption of a harmonised SME definition across the EU. A common ground in regards to what defines an SME seems crucial to achieve a more equitable application of policies and could ensure that all SMEs benefit equally from supportive measures.

Read the full report to explore its recommendations for addressing the challenges faced by SMEs when new legislation is introduced.