Analysis: despite their huge economic contribution, micro enterprises face challenges such as access to public procurement opportunities
Across Europe, small and medium-sized enterprises (SMEs) pulsate with a vivacity that fuels the continent's market dynamics. A staggering 99% of the economy here is propelled by SMEs, a remarkable statistic that unveils the essence of entrepreneurial spirit prevalent across the lands.
At the core of this bustling activity are micro enterprises, the cosy, community-centric ventures that usually employ a handful of individuals, yet their cumulative impact is anything but micro. Between 2002 and 2007, the European continent witnessed the birth of over two million new SMEs, a testament to the invigorating entrepreneurial climate. These SMEs were the stalwarts of employment growth, championing a whopping 84% surge in job opportunities.
Fast forward to the present, and the micro enterprise sector in the EU continues to be crucial to economic activity and employment. Although diminutive in scale, micro enterprises play a crucial role in Europe's economy. As of 2023, approximately 3.36 million micro businesses operate across Europe, contributing significantly to the GDP and the local economies of European nations.
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From RTÉ Archives, Irene Duffy reports for Cúrsaí in 1987 on small businesses in Louisburgh, Co Mayo
Micro enterprises are veritable economic powerhouses. Despite their modest size, they contribute significantly to the GDP of European nations. Their nimble structures allow for quicker decision-making and adaptation to market changes, which is crucial in the fast-evolving global market arena, and represent a conduit for innovation, local development and social cohesion.
Besides job opportunities, they also nurture skill development and community engagement. A lion's share of the roughly 24.4 million SMEs in the European Union in 2023 is micro-sized, a significant portion of employment in the region.
Micro enterprises are often at the vanguard of innovation. Their size allows for a culture of creativity and flexibility, often translating into innovative products or services. Moreover, many micro enterprises are leading the charge towards a greener economy by adopting sustainable practices.
The European Union has been proactive in recognizing the potential of micro enterprises. Various policy initiatives aim to provide a conducive environment for the growth and sustainability of these enterprises. Access to finance, simplified regulatory frameworks, and initiatives to bolster innovation are some of the key areas of focus.
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From RTÉ Radio 1's Morning Ireland, Gill Stedman on why crowdfunding is a popular option for small businesses
But there is still one area that there needs to be further work done for these companies and that is public procurement. The landscape of public procurement in the EU, and specifically Ireland, has been undergoing notable shifts to foster a more inclusive environment for these SMEs and especially micro enterprises. The reshaping of public procurement policies is crucial to ensure these enterprises can fairly compete in the market, especially given their significant contribution to the economy.
Public procurement is a substantial segment of the economy, representing around 16% of the total EU GDP. This sector, governed by a myriad of policies and regulations, plays a pivotal role in ensuring value for money and delivering critical public services. However, the emphasis on cost-efficiency and stringent procurement processes often side-line micro enterprises, making it arduous for them to secure public contracts.
In a bid to fix this situation, the European Commission introduced a Code of Best Practice aiming to make public procurement more accessible to micro and small businesses. This sough to overcome common hurdles such as an overemphasis on price, protracted and late payment terms, administrative burden, and unclear tender specifications that often deter micro enterprises from participating in public procurement.
A number of amendments focused on reducing the administrative burden on micro enterprises and making the tendering process more transparent and accessible
Ireland has also been proactive in reforming its public procurement landscape to be more SME-friendly. Earlier this year, the Department of Public Expenditure in Ireland's Initiatives to Assist SMEs in Public Procurement circular aimed to facilitate micro and small firms in competing for public contracts.
A number of amendments were focused on reducing the administrative burden on micro enterprises and making the tendering process more transparent and accessible. These included (i) elevating the threshold for advertising all contracts for goods and services on eTenders from €25,000 to €50,000, and for works from €50,000 to €200,000, excluding VAT; (ii) reaffirming the principles underpinning all public procurement and promoting transparency; (iii) introducing specific measures to bolster SME participation in public procurement and (iv) reminding public bodies of their obligations around the use of central procurement arrangements.
A study by the Organisation for Economic Co-operation and Development (OECD) underscores the impact of centralized purchasing in Ireland and how effective public procurement can bolster the delivery of essential public services and value for money. The study is part of a broader endeavour to measure the impact of procurement policies and practices on SMEs and micro enterprises.
A more inclusive public procurement system is indispensable for the growth and sustainability of micro enterprises
In an Irish context, there are several agencies charged with supporting and promoting enterprise activity, including Enterprise Ireland, Local Enterprise Boards, SOLAS and Local Area Partnerships. These national agencies and the enterprise support services they provide work to nurture entrepreneurial activity across a range of sectors and indigenous business types. Their activities are consistent with EU enterprise policy and are financially supported by the EU in cases.
But despite some progress, the participation of micro enterprises in public procurement remains tepid. The traditional procurement policies often emphasize value for money, which inadvertently creates a bias towards larger enterprises with economies of scale. Thus, aligning procurement policies to support the inclusion of micro enterprises without compromising on value for money is imperative.
Despite their significant contributions, micro enterprises face challenges such as access to funding, regulatory hurdles, and the need for digital transformation. Addressing these challenges and providing robust support structures is imperative for unlocking the full potential of micro enterprises.
Fostering a more inclusive public procurement ecosystem is indispensable not only for the growth and sustainability of micro enterprises but also for driving innovation, local employment, and community development. The steps taken by the European Commission and Ireland are commendable but necessitate further reinforcement and perhaps a paradigm shift in procurement policies to ensure a level playing field for all market players, including micro enterprises
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
