Support under the European Regional Development Fund (ERDF) 2014-2020 has not had the desired effect on the competitiveness of SMEs, despite the considerable sums committed, amounting to €40 billion over the last budgetary cycle, according to the auditors of the European Court of Auditors in a report published on Wednesday 1 June.
“EU funds stimulated SMEs’ willingness to invest, but their impact and effectiveness on competitiveness were rather limited, to the extent that most supported SMEs did simply not derive any real benefit from the EU support”, scathingly said the auditors. They urge both the European Commission and Member States to “make better use of EU funding” to support SMEs.
The complaints of the auditors are manifold. They recall that the ERDF was expected to directly support 800,000 SMEs (out of 20 million in the EU) by the end of 2019. However, in its 2014-2020 version, the ERDF did not require Member States to define strategies to strengthen the competitiveness of their SMEs. “Making it difficult to ensure that the EU funding targeted those businesses and areas with the highest growth potential”, the auditors note.
Additionally, €42,000 was granted per ERDF beneficiary SME. “But this figure masks significant differences between Member States”, they say, noting that some Austrian projects could be awarded nearly €400,000, while in Ireland the amounts could fall to less than €1,000.
Worse, the audit shows that ERDF-funded projects “generated only limited spin-offs” and even “harmed the economic prospects of competing SMEs that had not received any support”. The auditors regret the lack of a truly holistic approach taking into account the quality of the workforce and administrative burdens, for example. Some projects receive “considerable” sums, they note, without improving the overall competitiveness of SMEs.
Other shortcomings identified by the auditors included a lack of ambition in project selection. In conclusion, they question the added value of the EU in the field of SME competitiveness, pointing to the deadweight effect generated by this type of support.
Therefore, the Court recommends that by the end of 2023: - the design of ERDF calls should be reviewed; - the selection procedures for awarding ERDF grants should be reviewed; - use of repayable grants should be prioritized to support the competitiveness of SMEs.
The recommendations were generally well received by the European Commission, except for some proposals on the selection process.
To view the report: https://aeur.eu/f/1wj
To read the Commission’s response: https://aeur.eu/f/1wk (Original version in French by Pascal Hansens)