Regions and cities want less regulatory burden to boost SMEs competitiveness and support local economies

Local and regional leaders have called for a lightening of the EU's regulatory burden in order to boost the competitiveness of SMEs and promote regional value chains. In a set of recommendations adopted on 20 February, they advocated for promoting the local economy in the Union to ensure a more sustainable and resilient business environment.

During the plenary session of the European Committee of the Regions (CoR), regions and cities adopted an opinion drafted by Oszkár Seszták (HU/ECR), President of the County Council of Szabolcs-Szatmár-Bereg Vármegye, which highlights the crucial role of small and medium-sized enterprises (SMEs) in local and regional economic development. In the context of increasing protectionism, global competition, technological development and the war in Ukraine, members advocated diversifying supply chains and relocating production to local markets to strengthen regional economies and ensure sustainable EU growth.

Local leaders emphasised the essential role of SMEs in the regional economy, driving innovation and sustainability, creating high-value jobs, and generating local purchasing power. However, they warned of the challenges affecting SMEs' competitiveness, such as excessive regulatory burdens, rising energy costs, and labour and skills shortages. To strengthen the competitiveness of local SMEs and promote regional value chains, members defended the reduction and simplification of EU legislation, as suggested in the reports by Mario Draghi and Enrico Letta, and the application of the ‘think small first’ principle.

The CoR stated that it is crucial to reinforce the presence of SMEs in regional and European value chains and foster closer collaboration between innovation ecosystems. For this purpose, they advocated for easier access to EU funds, such as Horizon Europe and the Digital Europe Programme. Strengthening SMEs resilience helps reduce regions' dependence on a few large employers and mitigates risks during crises.

Regions and cities stressed that a strong proximity economy with short value chains, especially in rural and peripheral areas, is fundamental for sustainable growth, EU autonomy, and social cohesion. They highlighted how digitalisation can reinvigorate the potential of proximity economy and enhance its growth, though many small SMEs and micro-enterprises operating in local ecosystems need further support and guidance to turn the digital challenge into opportunities.

Finally, members said that empowering local authorities is crucial to creating a business-friendly environment and ensuring EU initiatives align with the economic realities of local communities.

Quote:

Rapporteur Oszkár SESZTÁK (HU/ECR) President of the County Council of Szabolcs-Szatmár-Bereg Vármegye: "Creating better conditions for local SMEs in regional value chains should be an integral part of Europe's strategies to enhance economic resilience and territorial cohesion. These, often family-run SMEs are the cornerstone of local communities and their success and prospering mean growing economies and jobs in our regions and towns. For this to happen, the EU must lower the regulatory burden, strengthen the Single Market, and provide tailored support for these businesses. Their value to local economies should not be underestimated but rather tapped in to exploit their full potential."

More information:

• Video and photos from the debate.
• In the mission letters sent to the Commissioners-designate, the President of the European Commission called for reducing notification obligations for SMEs by 35 percent.
•  Shock-proofing European regions: Strengthening local and regional economic resilience in the strategic evolution of the Single Market” (CoR opinion 2024).