Taking the Next Quantum Leap with SMEs

What policies will help SME recover from the COVID-19 pandemic? Banner image: Shutterstock/Aleksandar Malivuk
Taking the Next Quantum Leap with SMEs

This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

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As part of an OECD Forum series, the virtual event Empowering Workers, Delivering a Jobs-rich Recovery took place on 13 July 2021 —watch the replay below!

The prosperity of small- and medium-sized enterprises (SMEs) and a thriving entrepreneurial environment are strongly linked to the creation of jobs and the elimination of poverty. SMEs play a decisive role in Europe’s economy and society, ensuring social and regional cohesion.

COVID-19 has resulted in an unprecedented economic recession with a tremendous decrease in activities and significant income losses. This is the case for many self-employed SME owners and their employees, and especially those active in contact-intensive services and the retail sector.

Even though countries are gradually re-opening economic activities, many SMEs are still under financial stress due to increased debt. SMEunited calls for solvency support instruments to reinforce the equity base of small businesses. Moreover, specific mechanisms should be set up to offer impartial advice to companies in difficulties, and an incentivising “second-chance” policy should be developed for entrepreneurs who have faced bankruptcy. The surge of variants of the virus requires vigilance, with small businesses still investing substantially to comply with sanitary measures. Moreover, for specific activities like tourism and travel turnover remains below normal levels, and well-targeted emergency measures should kept in place as long as necessary.

Read the Social impact of Covid-19 report and  find out more about SMEunited 

Read the Social impact of Covid-19 report and  find out more about SMEunited 

Nevertheless, the pandemic has had positive effects as well. Fifty percent of SMEs adapted their business models during the pandemic, integrating new digital tools and solutions (OECD SME and Entrepreneurship Outlook 2021). Small businesses were forced to digitalise to maintain contact with their customers, and started implementing digital systems, especially linked to e-commerce, marketing and B2B and B2C interactions. Additionally, they improved their digital skills, increased online safety and security and started recognising the potential of these tools for their growth.

Now, it is key to consolidate these efforts and ensure that digitalisation finds its way to all enterprises. SMEs require different support measures according to their size, sector and level of digitalisation, bearing in mind that they can be users as well as developers and providers of digital services. SMEunited advocates for appropriate infrastructure, access to data, SME-friendly standards guaranteeing interoperability and skills development.

Read the full report: "OECD SME and Entrepreneurship Outlook 2021" and find out more about  the OECD COVID-19 Policy Response "One year of SME and entrepreneurship policy responses to COVID-19: Lessons learned to “build back better”"

Read the OECD COVID-19 Policy Response One year of SME and entrepreneurship policy responses to COVID-19: Lessons learned to “build back better”

Meanwhile, it became even clearer that steps have to be taken to tackle climate change. SMEs must be on board to achieve the ambitious environmental targets put forward in the European Green Deal. SMEunited emphasises that a Green transition with small businesses requires an enabling regulatory framework on the one hand and a facilitating environment on the other. The right legal framework provides certainty over a longer period of time and takes into account the investment timeframe of entrepreneurs. Moreover, legislation must be developed according to the Think Small First principle and not add unnecessary red tape or costs for SMEs.

Creating a facilitating environment to unleash the potential of SMEs demands a package of measures specifically addressed to them. First, they need tailored sectoral information and technical assistance at the local level to get a clear view on the best available technologies and options. Second, access to finance must shoulder the high upfront costs of going from a linear to a circular economy and developing sustainable innovation. Finally, standards fit for small businesses are important—not in the least for growing reporting requirements on sustainability.

Read the latest OECD Employment Outlook 2021: Navigating the COVID-19 crisis and recovery and find out more about the challenges brought about by the crisis and the policies to address them

Read the latest OECD Employment Outlook 2021: Navigating the COVID-19 crisis and recovery and find out more about the challenges brought about by the crisis and the policies to address them

A recurring challenge for SMEs, even now during the recovery, is the war for talent. Investing in skills development remains a priority. SMEunited recommends designing and implementing education and training curricula in accordance with the needs of the labour market in close co-operation with social partners. On-the-job training and specific systems for continuous training and lifelong learning at national and regional levels should be recognised.

To overcome the impact of the pandemic and tackle these imminent challenges, the European Union has agreed on a substantial support package of EUR 750 billion, the so-called NextGenerationEU. SMEunited insists that the national Recovery and Resilience Plans implementing NextGeneration EU combine investments with the necessary reforms. In this way, investment attractiveness, the quality of public services and the efficiency of administrations can be improved. The available instruments should provide the required financial resources for viable SMEs to recover, innovate and invest.

It is now time to move from words to action. The ambitious European goals are made a reality on the ground by SMEs. Crafts & SMEs are the heart of Europe: we must provide them with the appropriate framework and resources to put these objectives into practice.

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Related Topics

Tackling COVID-19 Future of Education & Skills Green recovery  Future of Work Digital Inclusion

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