Letta Report: digital SMEs ready to modernise the Single Market

  • The report by former Italian Prime Minister Enrico Letta sets a strategy for Europe to become a ‘creator and a maker of new technologies’ and calls for the “freedom of innovation”

  • In line with DIGITAL SME Manifesto calling for a European Digital New Deal, the Report places innovation at the centre of a modernised Single Market

  • As suggested by the Report, the EU shall leverage SMEs via public-private partnerships and innovation procurement for the twin transition to be a catalyst of the new Single Market

As Enrico Letta presents today his findings of the Single Market´s Report at the European Council, DIGITAL SME is keen to support the EU Institutions and make the new Single Market a game changer for Europe´s future, via integration, innovation, and competitiveness.

The Report upholds innovation at the centre of the new Single Market. An ambition shared  by the largest community of Europe´s most innovative companies: the digital SMEs. The Report calls for a  new pillar of a modernised European market, – besides the free movement of people, goods, services, and capital – with the fifth freedom of innovation, research, and education to be drivers of the Single Market. This is in line with a modern and effective digital strategy that would allow the Single Market and Europe to thrive and to achieve tech autonomy.

Much of the current research and innovation is evolving in the digital realm. If Europe wishes its IT sector to support competitive technology companies, it needs to allow its SMEs and start-ups more freedom to innovate and grow. The Single Market Report suggests the proper approach, by recognising that ´in recent years, the European Union has effectively implemented substantial digital regulations´. However, the Report also states that ‘relying solely on this strategy is inadequate for nurturing the level of innovation necessary to achieve Europe´s goals. That is the reason why the focus in the upcoming years shall shift towards implementation.

This approach mirrors the vision articulated in the Manifesto 2030 for a European Digital New Deal, an overarching public strategy to transform Europe from a user of technologies to a continent of leading developers. This strategy can only be implemented through a thriving ecosystem of digital SMEs and start-ups.

A cornerstone of this revolution is the promotion of public-private partnerships. Similarly to DIGITAL SME´s European Digital New Deal, the Report promotes the creation of a specific market for such partnerships, so to boost innovation and provide targeted support for SMEs and start-ups. This approach is particularly valid in innovation-intensive and high-risk industrial sectors such as the digital domain. It can be decisive in areas such as workforce’s upskilling and reskilling,  as witnessed by the success of the Large-Scale Partnership on Digital Skills. In addition, the development of public-private partnerships for the digitalisation of SMEs will also mobilise private investments for the growth of sustainable industrial ecosystems.

The Report encourages the EU institutions to prioritise mobilising private capital and savings (currently amounting to EUR 33 trillion), to promote investments that would help SMEs and start-ups in delivering EU&apos’s strategic needs. To the same end, the creation of an EU deep tech stock exchange would make it easier for large investors, like pension funds and asset management firms, to invest in European startups. Conclusions that are positively welcomed by DIGITAL SME.

These policies are instrumental to truly place ‘digital sovereignty at the heart of common public interest, with cybersecurity as one of its core dimensions. European cybersecurity starts with digital SMEs and with their capacity to master digital technologies such as AI and data-driven solutions. DIGITAL SME highlights that EU’s upcoming efforts should focus on facilitating the development of smaller vertical AI foundation models. 

The Report recommends that the green and digital transitions become catalysts for the Single Market. Innovation procurement is identified as a key lever in supporting start-ups and SMEs to develop new green and digital services. DIGITAL SME is pleased to acknowledge the Report suggests that procurement policies should direct public buyers towards products that are based on common and interoperable standards. Breaking out of legacy systems in public procurement, which accounts for 14% of the EU’s GDP, is a necessary step towards effective standards deployment across the Single Market – and a substantial leap towards a more interoperable European tech ecosystem.

We support additional recommendations to build a more harmonised legislative and SME-friendly framework across Europe, including the proposal of a European Business Code. As pointed out in the Report, only 17% of manufacturing sector SMEs export across European borders. Such low numbers showcase a cross-sectoral SME reality: in contrast with large companies, European SMEs tend to be effectively excluded from what the Single Market has to offer best: a consumer pool of 450 million inhabitants. The European Business Code, providing businesses with a ‘28th regime’,  is a welcome step for all digital SMEs to better operate across the Single Market.

DIGITAL SME calls on European Institutions to implement a European Digital New Deal, which is instrumental to attain the Report´s vision and realise a thriving, integrated, and innovative Single Market in Europe.

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