Rethinking the SME Definition

Executive Summary

• The current definition of small and medium-sized enterprises (SME) under European law is based on the Commission Recommendation 2003/361/EC, which has subsequently been embedded in EU binding law by being included in the Commission Regulation (EU) No 651/2014.
• Under this legal framework, SMEs that are mainly or entirely owned by public authorities —also known as the ownership criterion— do not fall under the European definition of an SME. This non recognition has negative consequences on:
  • their access to financing opportunities, by limiting the scope of funding and financial programmes available to them; and
  • their right to benefit from administrative simplification measures, leading to distorted conditions of competition for public SMEs.
• SGI Europe therefore considers that private and public SMEs are not accorded equal treatment. In fact, this definition contradicts the principles of the Treaty on the Functioning of the European Union by discriminating among Member States, based on the ownership criteria.
• This situation particularly affects Local Public Services Enterprises (LPSEs), by restricting their ability to fulfil their mission of general interest as public services and services of general interest providers. Given their strategic role in the European territories, these public SMEs need to be supported, particularly in the context of economic recovery following the Covid-19 related crisis.