Finance · 1 October 2015

EU pledges red tape review to help boost small businesses

The European Commission wants to make it easier for investors and borrwers across the EU
The European Commission wants to make it easier for investors and borrowers across the EU
The EU commissioner for financial services, Lord Hill has outlined a range of proposals in an aim to cut back European regulations and help boost investment. He acknowledged that red tape is hindering small businesses from accessing finance necessary for growth.

He has announced a major review of 40 pieces of legislation that have been introduced since the financial crisis, as well as detailing plans for a Credit Market Union to relax the rules currently in place.

The Capital Markets Union Action Plan will aim to reduce firms’ reliance on banks and to match borrowers and savers more efficiently across the EU. Under the new scheme, it would become easier for VC funds to put money into new firms.

The 100, 000 minimum limit on investors’ contribution to venture capital funds could also be reduced, which could then prove an opportunity for smaller investors. The currentpassport scheme allows a business approved in one country to invest in the EU but only if the fund is smaller than 500m may also be changed, with the limit possibly removed or increased.

According to the Commission, companies in the EU get around 80 per cent of their funding from banks a stark contrast to the US, where the figure stands at around 20 per cent. Moving away from non-bank lending would be a particular help for small firms, which have typically struggled to get investment from banks since the financial crisis.

While Lord Hill said that the proposals didn’t mean the “big reforms” and architecture they had put in place after the crisis was wrong, he pointed out when 40 pieces of legislation are introduced in the space of five years common sense tells you that you are unlikely to have been able to work out all the consequences and interconnections?.

He also flagged up the issue of prospectuses for small firms in particular, calling them real doorstops, running to hundreds of pages and costing more than 100, 000?. He intends to draft up new guidelines to help bring them up to date and be affordable for SMEs to produce.


 
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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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