Competitiveness of SMEs a must for success

By Thomas Bustrup, Deputy Director General, Confederation of Danish Industry

While Europe has been struggling to fully recover and emerge from the persistent economic issues spurred by the financial crisis of 2008 and the following debt crisis of 2011, our competitors have not remained idle.

The European share of foreign direct investment has fallen by 40% since 2000 and by 2015 90% of world growth will be generated outside Europe. Such predictions are worrying as they imply a loss of competitiveness. Emphasis must therefore be on improving the competitiveness of European businesses, as this is the only way to boost growth and employment in Europe.

The economies of the Nordic-Baltic region have generally proved to be relatively resilient to the European economic turmoil. Although these countries also witness unemployment and modest growth, the region as a whole possesses a strong foundation for a lasting recovery.

Small and medium-sized enterprises (SMEs) are the backbone of the economies in the Nordic-Baltic region and thus major drivers of economic development. In Denmark, SMEs constitute more than 99% of the total number of companies and account for more than half of total Danish employment. Analyses show that the net inflow of new enterprises contributes significantly to productivity growth and that SMEs create more jobs than large enterprises. Consequently, enhancing competitiveness of the Nordic-Baltic region is inevitably also enhancing competitiveness of the Nordic-Baltic SMEs.

The success of the Nordic-Baltic region will largely depend on the scale and the speed in the adoption of new advanced technologies. This particularly applies to energy efficiency and new digital technologies for the production of goods and services responding to societal challenges such as climate change. Thus, policies should facilitate an entrepreneurial business environment allowing innovation to flourish among SMEs and encouraging the internationalisation of SMEs. In this, the first order of business should be to ease access to finance for SMEs.

Access to finance is a key determinant for companies to succeed in their drive to build productive capacity, to be competitive internationally and to create employment. Especially SMEs have identified limited access to finance as one of the major barriers to growth. Finance allows companies to acquire and absorb new technologies and expand in global markets. For these reasons, financing institutions such as the Nordic Investment Bank are important partners for Nordic and Baltic businesses and are often referred to as the missing piece of the puzzle when assembling a competitive financing package. It is therefore encouraged that international finance institutions put renewed emphasis in strengthening country competitiveness and to a larger degree engage and include companies in their strategy and work to secure the continued relevance of their products.

Looking forward the Nordic-Baltic countries should join forces to unleash the Nordic-Baltic potential. Competitive and innovative companies that create economic growth and employment are imperative to the future of the Nordic-Baltic region and for Europe as a whole.