Support for SMEs is high on the EU's list of policy priorities. European SMEs make up 99 per cent of all enterprises, provide around 75 million jobs, and are therefore vital to delivering stronger growth and more and better jobs - two key components of the re-launched Lisbon agenda.

Several documents have explicitly dealt with SME needs, and they were a topic of conversation at the Spring European Council in 2006. The European Council acknowledged the utmost importance of creating a more favourable business climate, especially for SMEs, and reiterated that the 'think small first' principle needs to be systematically applied, and become a guideline for all relevant legislation.

However, despite such political will, the paper 'Towards an SME friendly IST programme. Lessons learned from FP6 and policy recommendations for FP7 with special emphasis on the situation in the new member states', finds that the experience of SMEs on the ground suggests that there is still room for improvement. Reviewing feedback from SMEs that participated in the Sixth Framework Programme (FP6), the paper identifies several issues which it says need addressing.

The paper finds that SMEs faced many financial difficulties in FP6. This was due in part to the cancellation of exploratory awards, which in previous framework programmes (22,500 in FP5, 45,000 in FP4) were a way for SMEs to offset the cost of both finding partners and preparing a proposal using experienced third parties. In FP6, the cancellation of these awards, coupled with huge over-subscriptions and the reduction of overhead claims from 80 to 20 per cent, resulted in many SMEs considering it too expensive, and too much of a risk, to bid. The paper also points to the reduction in FP6 of the IST budget, which, it says, also has an impact upon the actual funding available for research and development (R&D) in SMEs.

SMEs that were not already involved in consortia from previous framework programmes found it hard to find projects to join, according to the paper. Even when SMEs did participate in consortia like those for Integrated Projects (IP), they were often left out of the core management team. Coming late to a project, the paper says, also meant that SMEs had to conform to the terms and conditions already laid down by the core team, and in particular the coordinator.

In addition, in the initial calls there was a misplaced impression that large IP consortia were being favoured, and that the funding would be much greater than was eventually available. This resulted in many cases of SMEs writing major parts of a proposal and even being the originators of many innovative ideas, only to find them dropped from the proposal at the last minute. Unfortunately it was rare that SMEs were able to get some written assurances, on joining a consortium, that they would not be dropped, the policy paper reports.

Other key barriers highlighted by the paper include insufficient integration of SMEs in the policy-making process, partially suitable instruments, SMEs' weak and often subordinate position in negotiations and project execution, and some disadvantageous evaluation criteria. The paper finds that may of the problems identified were encountered particularly by SMEs from the new EU Member States participating in the IST programme of FP6. In addition to more general barriers, SMEs from new Member States lacked R&D orientation or were disinterested or sceptical about European collaboration. These SMEs also reported having insufficient funds for co-financing and negative previous experiences, or indeed insecurity due to a lack of previous experience.

In order to overcome these barriers, the paper makes several policy recommendations:

• better integration of SMEs in the policy making process at EU level, either by funding a high tech SME representation or by encouraging existing SME organisations to deal with participation barriers;
• increase resources for IST priorities of interest to SMEs;
• enhanced coordination between SME support projects and within the relevant Commission services;
• re-introduction of suitable instruments for SMEs, such as 'Take Up Actions' and 'exploratory awards';
• take into account the financial situation of SMEs by introducing a higher overhead rate, improving their cash flow, clarifying the financial rules and access to management, and by exploring how to facilitate subcontracting to SMEs.
• better integration of SMEs in consortia core teams;
• establishment of an SME ombudsman office to tackle any issues arising in project execution. A code of conduct should be established.
• simplification of the rules and procedures and development of innovative ways in which the bureaucratic burden for SMEs could be lightened.

EFPConsulting and Empirica Communication and Technology Research, which drafted the policy paper, are partners in the EU funded projects, 'IST financial training and web portal fro new Member States (FINANCE-NMS-IST) and 'stimulate the participation of SMEs from NMS in IST activities' (EPRI-Start).

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