Impacts of EU Commercial Law on Export and Imports for Small and Medium Enterprises (SME’s) in UK

April 13, 2016

The European Union began as a community of 6 nations but has grown to include 28 member states who share common policies towards politics, legal, social and business cohesion. Together the member states work towards serving the interests of 500 million citizens. The EU commercial law is applicable on all member states and their businesses, irrespective of their size. The international commercial laws for any country are governed by three main sources, the individual laws of the country, the laws which various countries agree upon as per trade agreements and the laws enacted by regional or worldwide bodies such as the United Nations Organization (Boom, et al., 2014). EU commercial law can be regarded as one of the regional laws governing the business climate within the European Union. The law tends to have its impact on various aspects of a business like, the procurement approach, sourcing strategy, manufacturing processes, volume, product or service quality and the import and export prices etc.

 

In the context of the impact of EU commercial laws on business houses, it is worthwhile to understand the nature of impact on small and medium sized businesses in the region. These SMEs generally work on a smaller scale, with less capital outlay and limited scale of operations. In most of the cases, paucity of funds and budgetary constraints drive the business strategy of these enterprises. According to EU Report (2015), the criteria for deciding as to what constitutes an SME is the staff headcount along with either the balance sheet total or turnover. The figure below illustrates the same.

 

Figure: Criteria for SME in the European Union (ec.europa.eu, 2015)

 

The European commission has a number of benefits planned for such enterprises in the form of funding programs, SME-specific competition rules, and other incentives towards promoting entrepreneurship, cutting red tape, allowing them access to new markets, making finance accessible to them etc. A closer comparison of the employment generation trends and the value addition done by SMEs and large enterprises is illustrated in the figure below.

 

Figure: Employment and value add trends of SMEs compared with large enterprises in EU (EC, 2014)

 

As can be noticed, since the economic crisis of 2008, when the employment levels in large enterprises declined, the SMEs continued to play a major role in providing job opportunities. In terms of opportunities, these enterprises have either been at par or ahead of most large enterprises since 2008. However, it is also crucial to notice that economic fluctuations tend to impact the value addition done by these enterprises. This shows the vulnerability of these SMEs to changing and uncertain business climate. Under such a scenario, it would be worthwhile to understand how the EU competition laws impact the import and export activities conducted by such SMEs and what steps could be recommended to boost the growth and productivity of such enterprises.

 

 

 

 

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