European
EU agreement on new € 3.6 billion “competitiveness and innovation programme” for SMEs
By Finfacts Team
Jun 1, 2006, 13:53

Today, the European Parliament has adopted the first “Competitiveness and Innovation Framework Programme” (CIP). Between 2007 and 2013, some 350,000 small and medium-sized enterprises (SMEs) will receive € 3.6 billion in EU support to invest in all forms of innovation and growth.

European Parliament President Josep Borrell

The new programme will support actions to help enterprises and industry to innovate. It will also boost energy efficiency and renewable energy sources, environmental technologies and a better use of information and communication technology (ICT). The final adoption in Council will follow in the coming weeks.

Jorgo Chatzimarkis, Rapporteur for the CIP of the EP committee on Industry, Research and Energy, said: “ Bringing CIP to take-off in a first reading agreement is the sunrise for innovation in Europe. CIP includes new ideas, less administrative burden, a broader scope of innovation and meanwhile manages to include the existing and well running programme parts.”

Commission Vice-President Günter Verheugen, responsible for enterprise and industry policy, said: “The CIP brings together a range of European actions into a single comprehensive programme .The programme has a clear objective: increasing European competitiveness and innovation. This is a direct response to the call of the Lisbon mid-term review for simpler, more visible and more targeted EU action to boost growth and jobs.”

The CIP has the following objectives:

• to foster the competitiveness of enterprises, in particular SMEs;
• to promote all forms of innovation including eco-innovation;
• to accelerate the development of a sustainable, competitive, innovative and inclusive Information Society;
• to promote energy efficiency and new and renewable energy sources in all sectors including transport.

Whilst eco-innovation will be a transversal theme of the whole programme, CIP is composed of three specific programmes:

(1) Start up and growth of SMEs: the “Entrepreneurship and Innovation Programme” with a budget of € 2.17 billion including € 430 million to promote eco-innovation, will facilitate SMEs access to finance, better integrate the existing networks of business support services (EuroInfoCentres and Innovation Relay Centres) and support innovation activities (INNOVA, Pro-Inno etc). More than € 1 billion will be devoted to boosting the highly successful financial instruments managed by the European Investment Fund (EIF), which co-invest in venture capital funds (covering early stage and expansion stage), and provide co-guarantees on loans.

(2) Information and communication technologies: the “ICT Policy Support Programme”, with a budget of € 730 million, will contribute to competitiveness, growth and jobs through stimulating a wider adoption and more efficient take up and better use of ICT. In particular, it will include support for pilot actions using innovative ICT-based services of public interest; for the development of digital content and for enhancing the security of, and trust and confidence in, ICT and its applications.

(3) Increased use of renewable energy and reduced energy consumption the “Intelligent Energy-Europe Programme” with a budget of € 730 million will support energy efficiency, new and renewable energy sources, and technological solution to reduce greenhouse gas emission cause by the transport sector.

Studies have shown the high added value in EU support for loan guarantees, with each euro from the EU budget resulting in a loan volume of € 72. In average every Venture Capital backed company maintains or creates more than 50 jobs. Success stories such as Skype Technologies SA have drawn attention to the impact of EU support for venture capital.

More information here.

CIP – Innovation and entrepreneurship, ICT and intelligent energy

CIP is a programme for SMEs bringing together several existing EU activities that support competitiveness and innovation The new CIP programme has a budget of € 3.621 billion, from 2007-2013. On an annual basis this represents an increase of 60% compared to 2006 under the various equivalent predecessor programmes. It is estimated, that more than 350.000 enterprises will benefit from the new Financial Instruments under CIP.

The CIP Budget 2007 - 2013

The CIP comprises three sub-programmes: The Entrepreneurship and Innovation Programme, the ICT Policy Support Programme and the Intelligent Energy Europe Programme.

Eco-innovation will be a transversal theme of the whole programme with a budget of € 430 million. (For example the Intelligent Energy programme will develop demand for energy efficient technology amongst a variety of private and public stakeholders and the Entrepreneurship and Innovation Programme and more specifically the SME financial instruments will enhance the supply of environmental technologies by making sure that innovative companies can access financing for the use and development of such technologies.)

Practical information

A handbook for users will be made available on the CIP web pages (link) in early 2007. It should in particular facilitate the participation of SMEs. The work programmes will be agreed with Member States authorities through their representation in three management committees: one for each sub programme.

CIP complements other EU programmes: CIP will complement other EU actions such as the cohesion activities, research activities, and the EU programme for lifelong learning. For example: CIP will help SMEs access the 7^th FP RTD and will leverage venture capital for innovative enterprises to help them bring their research results to market; CIP will identify and analyse examples of excellence which can be adapted and replicated in order to make regional interventions more effective in meeting cohesion goals; moreover CIP will help meet environmental goals by promoting sustainable approaches.

Part I.: The “Entrepreneurship and Innovation” Programme

This programme will continue actions from the Multiannual Programme (MAP) for SMEs, innovation actions from RTD/FP6, activities for Industrial Competitiveness and eco-innovation actions. Through a single source, CIP will improve the conditions in which innovation happens. Unlike the previous MAP programme, SMEs may also benefit from direct funding from CIP.
Whilst building on tried and tested programmes, CIP also includes many new elements such as:

• a risk capital instrument for High Growth and Innovative Companies
• securitisation” of banks’ SME loan portfolios
• enhanced role for innovation and business support networks.

These new (and the continued) financial instruments are described below in more detail.

1. Financing start-ups and growth of SMEs: Community financial instruments

a. The High Growth and Innovative SME Facility

Venture capital triggers success: Studies show, that on average every VC backed company maintains or creates more than 50 jobs. For example, the predecessor programme MAP made the success of Skype possible: The acquisition of Skype Technologies SA, by the online marketplace eBay in summer 2005, highlights how spectacular technological and commercial breakthroughs can be reached from small beginnings through venture capital investment in start-up companies.

Promoting venture capital financing is operated by the European Investment Fund (EIF). It will:

• support the establishment and financing of SMEs and reduce the equity and venture capital market gap, which prevents SMEs from exploiting their growth potential;
• support innovative SMEs with high growth potential, in particular those undertaking research, development and other innovation activities;

CIP (GIF1) will cover early stage (seed and start up) investments , while CIP (GIF2) will also cover expansion stage investments.

A proportion of the funding will be earmarked for venture capital funds investing in SMEs active in eco-innovation.

b. The SME Guarantee Facility

To raise the level of SME debt financing. Experience demonstrates that every 1 EUR from the EU budget invested in such guarantee schemes attracts a total loan volume of 72 EUR. This Facility, also operated by the European Investment Fund, will provide counter-guarantees or co-guarantees for guarantee schemes and direct guarantees for any other appropriate financial intermediary.

c. The Capacity Building Scheme

This measure will be operated in co-operation with international financial institutions, including the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the European Investment Fund (EIF) and the Council of Europe Development Bank (CEB) comprising:

The Seed Capital Action, which aims at improving the investment and technology expertise of funds investing in innovative SMEs or SMEs with growth potential.

The Partnership Action, which aims at stimulating the supply of credit to SMEs by enhancing the credit appraisal procedures for SME lending. It will provide grants to financial intermediaries to cover the cost of technical assistance to improve their credit appraisal procedures for SME debt financing, with the aim of stimulating the supply of finance to SMEs in Member States with low banking intermediation.

2. Networks in support of business and innovation

A network based on the previous Euro Info Centre and Innovation Relay Centre networks will offer integrated services based on the “no wrong door; no closed door” principle. Their role in providing feedback for developing EU policy will be enhanced, as will their role in improving SME access to EU programmes and in particular to the framework programmes for research. The new network partners will provide: information, innovation and services.

The Commission intends to launch a single, open call for proposals to deliver Business and Innovation support services. The publication of the call is foreseen within the year. It will remain open for three months.

3. Innovation activities
Actions may include the support of poles of excellence and to the provision of services to enterprises. For example through: 

• fostering sector-specific innovation, clusters, networks of excellence, public-private innovation partnerships and cooperation with relevant international organisations, and the use of innovation management;
• supporting national/regional programmes for business innovation;
• supporting the demonstration of innovative technologies;
• supporting services for trans-national knowledge and technology transfer and for intellectual and industrial property management;
• exploring new types of innovation services;
• facilitating technology transfer through data archiving and relays.

4. Eco-Innovation activities

Actions in relation to eco-innovation may include:

• supporting the take-up of environmental technologies and eco- innovative activities;
• co-investment in risk capital funds that provide equity also for companies investing in eco-innovation;
• fostering eco-innovation networks and clusters, public-private partnerships in eco-innovation and developing innovative business services, facilitating or promoting eco-innovation.
• promoting new and integrated approaches on eco-innovation in fields such as environmental management and the environmental-friendly design of products, processes and services, taking into account their whole life cycle.

5. Entrepreneurship and innovation culture and policy development
Actions may include:

• encouraging entrepreneurial mindsets, skills and culture, and the balancing of entrepreneurial risk and reward, in particular for women and young entrepreneurs;
• encouraging a business environment favourable to innovation, enterprise development and growth;
• supporting cooperation between actors, including trans-national cooperation of national and regional programme managers, in particular with a view to fostering the SME- friendliness of programmes and measures
• encouraging the creation and transfer of enterprises.
• collecting data, analysing and monitoring performance, and developing and coordinating policy;
• contributing to the definition and promotion of competitiveness strategies related to industry and service sectors;
• supporting mutual learning for excellence in national and regional administrations.

Part II: The “ICT Policy Support” Programme

The ICT pillar of CIP will promote the opportunities and benefits that ICTs bring to citizens and businesses falling under three thematic headings.

1. The development of a Single European information space
Actions will aim at:

• ensuring seamless access to ICT based services for rapid, appropriate and effective take up of converging digital communications with particular emphasis on interoperability, the use of open standards, as well as security and trust aspects.
• improving the conditions for the development of digital content with a special emphasis on multilingualism and cultural diversity;
• monitoring the European Information Society, through data collection and analysis of the development, availability and use of digital communication services, access to and take-up of broadband as well as developments of content and services.

2. stimulating innovation through the wider adoption of and investment in ICTs
Actions will aim at:

• promoting innovation in processes, services and products enabled by ICT, notably in SMEs and public services, taking into account the necessary skills requirements;
• facilitating public and private interaction as well as partnerships for accelerating innovation and investments in ICTs;
• promoting and raising awareness of the opportunities and benefits that ICT and its new applications bring to citizens and businesses, including strengthening confidence in and openness to new ICT, and stimulating debate at the European level on emerging ICT trends and developments.

3. developing an inclusive Information Society
Actions on developing an inclusive information society and more efficient and effective services in areas of public interest as well as improving quality of life will aim at:

• widening ICT accessibility and digital literacy;
• reinforcing trust and confidence as well as support of ICT use, addressing in particular privacy concerns;
• improving the quality, efficiency and availability of electronic services in areas of public interest and for ICT enabled participation, [including interoperable pan-European or cross-border public services as well as developing common interest building blocks and sharing good practices].

Part III: The “Intelligent Energy Europe” Programme

The IEE pillar of CIP will contribute to achieving the three general objectives of the EU energy strategy: improving energy diversification and supply security in the EU, enhancing the competitiveness of EU companies and protecting the environment. Support will be provided to encourage the wider uptake of new and renewable energies and improve energy efficiency, and to foster compliance with our energy regulatory framework. This pillar aims at accelerating action in relation to the agreed EU strategy and targets in the field of sustainable energy, increasing the share of renewable energy and further reducing our final energy consumption. It includes knowledge and awareness raising actions to:

• increase the uptake and demand for energy efficiency,
• to promote renewable energy sources and energy diversification, and
• to stimulate the diversification of fuels and energy efficiency in transport.

The programme will also help to increase the level of investment in new and best performing sustainable energy technologies and bridge the gap between the successful demonstration of innovative technologies and their effective introduction to the market to achieve mass deployment. Furthermore, it will strengthen the administrative capacity in the EU Member States both to develop strategies and policies and to help implement existing regulations

Three specific fields of action:

Energy efficiency and rational use of resources (SAVE),

will mainly include improvement of energy efficiency and the rational use of energy, in particular in the building and industry sectors.

New and renewable resources (ALTENER),

will mainly include promoting new and renewable energy sources for centralised and decentralised production of electricity, heat and cooling and thus supporting the diversification of energy sources, including integrating new and renewable energy sources into the local environment and the energy systems.
 

Energy in transport (STEER),

will mainly include supporting initiatives relating to all energy aspects of transport, and the diversification of fuels and promoting renewable fuels and energy efficiency in transport.

Actions may also integrate several of these specific fields.

More information on the CIP programme:

Annex – Success stories under the CIP predecessor programmes 

• 340 new jobs were generated by the investments of Dr. Neuhaus Techno Nord, a Hamburg-based seed-capital fund focusing on the early-stage IT sector, in 14 companies. 250 jobs were created by a single company that sells pharmaceutical products by mail. The fund has successfully exited four investments, releasing re-investment of over € 3m. The fund was co-financed to the tune of € 300,000 by the Commission through its CREA pilot action. The fund's success has attracted the EIF to sign up as an anchor investor, with a share of € 30m.
• The innovation initiative PAXIS has helped Latvian mobilizing € 15 m of public resources in Latvian Venture Capital funds and € 30-40m in Slovakian Venture Capital funds. Both invest in early stages of start-up creation. In Latvia the funds are expected to be matched by € 10-15 m of private investments and the creation of 3 funds are expected in the next year. These will invest in around 30 high-growth innovative companies.
• Environmentally friendly production of rechargeable long-lasting lithium-ion button cells: this type of battery has a number of environmentally benefits. LIFE helped finance the large-scale production of this type of battery. This is an excellent example of innovation and improved competitivity.
• With Check in Craft SME, an easy-to-use free-of-charge tool is helping SMEs in different sectors (carpenters, bakers, bricklayers, glass producers, food and meat producers) to identify and tap the often substantial and easily realisable energy saving potentials within their companies. About 100 energy checkers within SMEs will have been trained and 300 SMEs audited by the end of the project duration.
• Netc@rds for eEHIC (eTen programme): Since the European Health Insurance Card (EHIC) was introduced in 2004, European citizens can access health services much more easily as they travel around the EU. To improve this even further, Netc@rds for eEHIC promotes interoperable electronic European Health Insurance Cards and supports the administrative changes to permit full electronic support of transborder access to health services. Ten countries are taking part. Successful trials started at the Olympics and Paralympics and will continue in the Football World Cup this summer, and in some of the most attractive tourist destinations in Europe, e.g. Paris, Venice.