I thank the joint committee for inviting me to speak about the competitiveness and SMEs programme 2014-20, COSME.
The EU budget for the period 2014 to 2020 is to be established within a multi-annual financial framework, MFF, in accordance with Article 312 of the treaty. The MFF sets out the overall level of EU budget expenditure on an annual basis and the amounts allocated to the expenditure headings. The European Commission recently published a detailed MFF for the next EU budget for the period 2014 to 2020. The total amount proposed for the period is €1,025 billion in constant 2011 prices. The details of the EU budget are contained in the Commission's communication, A Budget for Europe 2020 - (COM)2011 500 final. One of the initiatives included in the MFF is the COSME programme, for which the funding provided over the seven year period 2014 to 2020 has been provisionally set at €2.52 billion.
SMEs are a major source of economic growth and job creation in the European Union, accounting for more than 67% of private sector jobs and providing more than 58% of total turnover in the Union. There are approximately 23 million SMEs across the Union. They are an important contributor to growth and employment within it. If the Union is to deliver on its Europe 2020 strategy priorities of smart, sustainable and inclusive growth, competitiveness needs to be centre stage.
The European Union has an important role to play in unlocking the growth potential of SMEs, including through the targeted use of the EU budget. Activities in this area focus on addressing the key market failures that limit SME growth, for example, addressing the issue of access to finance where there are deficiencies in debt and equity markets in supporting research and innovation and growth. Banks and investors are also increasingly risk-averse. The European Union recognises the need to complement local and regional access to finance schemes for SMEs. Other factors include the significant gap between the demand for and the supply of loans and guarantees; scarce equity for early and growth stage start-ups; the need to build an integrated European venture capital market at the same level it was at in 1984; ensuring SMEs are able to take full advantage of the enormous potential of the European Single Market; and creating a business environment that is conducive to creating start-ups and generating growth by encouraging an entrepreneurial culture.
The European Union is working to improve the business environment and support the development of a strong and diversified industrial base capable of competing on a global scale. The Competitiveness and Innovation Programme, 2007-2013, CIP, provides funding to address these issues. The proposed competitiveness of enterprises and small and medium-sized enterprises, COSME, programme is essentially the successor programme to the CIP. In drafting the COSME programme the European Commission acknowledges that experiences from previous CIP measures show that any new initiatives must include simplified rules, a clear dedicated legal framework, visibility and transparency of instruments and increased coherence and consistency between instruments. All the research and innovation support to small and medium enterprises, including the innovation part of the CIP programme, will be included in the EU's Common Strategic Framework for Research and Innovation, commonly known as Horizon 2020. Accordingly, research and innovation support to SMEs will not be in the new COSME programme.
What will the competitiveness of enterprises and small and medium-sized enterprises programme cover? COSME will support actions across five headings, namely, improving the framework conditions to make for the competitiveness and sustainability of EU enterprises, including in the tourism sector; promoting entrepreneurship; improving access to finance for SMEs in the form of equity and debt; improving access to markets inside the Union and globally; and management of the new COSME programme. Under the first heading, activities to improve the framework conditions to make for the competitiveness and sustainability of EU enterprises, including in the tourism sector will be addressed by supporting coherence and consistency in implementation as well as informed policy-making at European Union level. SME policy will be developed and SME competitiveness promoted in line with the goals of the EU small business Act for Europe and Europe 2020 strategy.
EU actions will include reinforcing the use of the "think small first" principle in EU and member state policy-making, identifying and exchanging best practices to contribute to implementing the small business Act and supporting small and medium-sized enterprises in making the most of the Single Market's potential. The budget allocation for this heading is €384.4 million over seven years.
What does this mean in practice? Essentially, the European Commission is asking itself and member states to introduce coherent, consistent and informed policies which will place small businesses centre stage and share best practice experiences to allow us to learn from each other, particularly in promoting competitiveness and growth. For example, at national level, the Government has appointed the Minister of State with responsibility for small business, Deputy John Perry, in order that policy measures and concerns affecting SMEs are brought together on a whole-of-government basis. The Minister of State has also been appointed as Ireland's EU SME envoy under the small business Act for Europe.
We have also established the advisory group for small business and high level group on better regulation, both of which include representatives of business interest groups and relevant State agencies, which will hear at first hand the issues of concern to business. Both groups are chaired by the Minister of State, Deputy Perry. The advisory group for small business is based on the principle of facilitating structured dialogue as set out in the European Union's small business Act. A number of the recommendations contained in the report of the advisory group for small business, which was published last November, have fed into the recently published action plan for jobs.
The Department of Transport, Tourism and Sport, which has responsibility for the tourism sector, has stated:
From Ireland's perspective, Tourism is an important sector at national and EU level, which should be explicitly recognised and this is welcome in the COSME proposal. Our priority is that any measures at EU level should be clearly additional to national efforts and should have a clear impact on the tourism industry here. The tourism elements in the proposal are quite high-level and general to date and further detail will be required to assess whether they would be beneficial to Irish tourism businesses. We are also conscious that tourism can benefit from a range of different EU programmes, including regional and social funds and also from rural development funding and so Ireland intends to look at tourism opportunities under the Multiannual Financial Framework in the round, rather than just in COSME.
The second strand of the COSME programme is promoting entrepreneurship. Activities in this area will include simplifying administrative procedures, developing entrepreneurial skills and attitudes, especially among new entrepreneurs, young people and women, and promoting second chances for entrepreneurs. The total budget for this heading over seven years is €86.8 million. The actions will be undertaken primarily by the European Commission through initiatives such as the Erasmus placement programme for young entrepreneurs.
Improving access to finance for small and medium-sized enterprises is the third strand of the COSME programme and relates to providing financial instruments for growth, including new equity and debt platforms to provide equity facility and loan guarantees. These will be designed to help SMEs to access funding more easily through the banks. First, an equity facility for growth phase investment will provide SMEs with commercially orientated reimbursable equity financing, primarily in the form of venture capital through financial intermediaries. A budget of €690 million will be provided for this purpose over seven years. Second, a loan facility will continue to provide SMEs with direct or other risk sharing arrangements with financial intermediaries to cover loans up to a cap of €150,000. A sum of €746 million will be provided for this purpose over seven years.
Under the CIP programme the loan guarantee facility has mobilised €9.4 billion for 155,000 small and medium-sized enterprises across the European Union. The high growth and innovation equity facility has mobilised €1.9 billion in venture capital funding for SMEs across the Union. The proposed budget for this heading is €1.436 billion, which accounts for 59% of the proposed total budget for the COSME programme.
Under this fourth heading, improving access to markets inside the European Union and globally, the Enterprise Europe Network will continue to provide information on funding and support services to growth orientated businesses to facilitate their expansion in the Single Market and beyond. This fourth element of the programme will also provide SME business support in markets outside the Union. Support will also be available for international industrial co-operation, particularly to reduce differences in regulatory and business environments between the European Union and its main trading partners. The total budget for this action line is €535.5 million.
I propose to outline the work of the Enterprise Europe Network in Ireland, which was established under competitiveness and innovation programme. The Enterprise Europe Network in Ireland is organised by Enterprise Ireland in partnership with Chambers Ireland members in Cork, Dublin, Galway, Sligo and Waterford. The network helps companies by raising awareness of EU legislation, CE marking, etc., EU funding programmes, technology transfer and business partnerships for which it has a database of up to 14,000 live business and technology opportunities into which Irish companies can tap. In its first three years in operation the Irish network had 34,000 interactions with Irish SMEs looking for support under the CIP framework. The network organised 225 events for SMEs resulting in nearly 10,000 participants. It also works with all other business support organisations in Ireland, including Enterprise Ireland, the county and city enterprise boards, Chambers Ireland, the Small Firms Association and the Irish Small and Medium Enterprises Association. Its services are free of charge. As part of the new COSME programme, the Irish Enterprise Europe Network will assist all Irish SMEs to access the new supports available to them, including the new SME instruments made available through the Horizon 2020 programme.
The fifth and final strand of the COSME programme deals with the management of the programme, which will be largely outsourced to external bodies, in particular, the EIB Group for the financial instruments for growth and the successor of the Executive Agency for Competitiveness and Innovation for other activities related to SMEs. The total budget for this heading is €79 million.
I will outline what are the next steps in the process. Negotiations on the COSME Programme are already under way, under the Danish Presidency, in the Council working group, competitiveness and growth. The Danish Presidency, expects the draft Regulations to be adopted in their Presidency ending in June. However, I should advise the committee that the proposed budgetary allocations for the COSME Programme are at this stage, very much provisional, as the final figures allocated will have to be agreed as part of the Multi-annual Financial Framework 2014-2020. These broader negotiations are, I understand, likely to be agreed by the Council and Heads of State and Government during Ireland's EU Presidency in the first half of 2013.
We welcome the proposals to establish a dedicated €2.52 billion programme for industrial competitiveness and SMEs which will provide targeted financial support for SMEs. In particular, we welcome the proposed equity facility for growth-phase investment which will support the development of the EU wide venture capital market, as well as the loan facility which will provide direct or other risk sharing arrangements with financial intermediaries to cover loans for SME's
The COSME Programme will cover early stage investment and will focus on SMEs in the growth-expansion stage. The final beneficiaries will be growth-orientated SMEs, via financial intermediaries. This programme is not like the Framework Programme where the money goes directly to businesses per se and they must compete on a call per proposal basis. Such projects would be merit-based funded. The main bulk of the funding will come through financial intermediaries on the second strand, which has 59% of the total funding. I hope members have found my presentation helpful. We will try to answer any questions committee members may have.