SMEs and entrepreneurs have suffered from the COVID-19 crisis and fallout from Russia’s aggression against Ukraine. They were disproportionately affected by liquidity shortages and supply chain disruptions, with some groups, such as women, youth, and the self-employed, particularly vulnerable. In this adverse environment, governments have stepped up and provided unprecedented support. However, supply chain disruptions, energy and food price volatility, and inflationary pressures remain. Building the resilience of SMEs and entrepreneurs to address the challenges of tomorrow is critical. Policies may need to evolve to support viable SMEs without compromising new entries, shift from blanket to targeted approaches, and aid small businesses transition to energy efficiency and adapt to an increasingly digital world.

Access to finance is critical to enable SMEs and entrepreneurs to start-up, invest, grow, and respond to shocks. SMEs were hit hard during the COVID-19 crisis due to weaker liquidity buffers. Many came out of the crisis with higher levels of debt. Macro-economic developments in 2022 and 2023, notably sluggish growth, inflation, and higher interest rates have weighed again on both debt and non-debt financing for SMEs. Going forward, Governments must continue to enable the diversification of financing instruments, including by leveraging financial technologies. The implementation of the OECD Recommendation on SME Financing will support these efforts.

SMEs and entrepreneurs are highly dependent on skills to remain competitive but face greater challenges than larger firms in accessing and retaining skilled labour. They are disproportionately affected by skills shortages which can result in a reduced capacity to buffer through re-organisation, outsourcing, or automation. The traditional challenges SMEs and entrepreneurs face in accessing skills is magnified by the scale and rapidity of structural transformations taking place. Rapid technological changes are creating new skills gaps, while the demand for soft skills is also increasing. Skills ecosystems, encompassing local entities like incubators, accelerators, education and training institutions, can help SMEs access expertise and knowledge.

Entrepreneurship and business development continue to be hampered by inequality of opportunities. These entrepreneurship gaps are costing economies in missed opportunities for job creation, growth, and innovation. Underrepresented and disadvantaged groups in particular face institutional barriers, limited access to finance, lack of skills, and small networks. Inclusive entrepreneurship policies have been implemented to address these gaps, but more government action is needed to unleash the untapped entrepreneurial potential in the population, including tailored support for underrepresented groups.

Governments face the challenge of managing immediate crises while driving long-term economic, societal, and environmental transitions. Given their sheer contribution to the economy and their collective environmental footprint, SMEs and entrepreneurs are crucial to this effort. However, they need to adapt their business models. The pandemic has presented opportunities for digitalisation, but SMEs face challenges such as skills gaps, limited financial access, and keeping pace with innovation, which are similarly encountered during the green transition. Governments should make them front and centre in their policy agendas. This involves adopting an SME and entrepreneur lens in the development of policies that affect the green and digital transitions, improving SMEs and entrepreneurs’ awareness of opportunities from the green and digital transitions and enhancing their access to support and strategic resources, such as finance, skills, advisory services, technology, and data. Digitalisation and greening should be addressed in tandem to capitalise on synergies.

Start-ups and scale-ups are vital for economic growth and job creation, but recent crises have decreased survival rates and weakened innovation, investment and networks. Recovery packages have focused on these firms. Going forward, policies need to target better high potential start-ups and scale-ups. At the same time, capturing the scale up potential of the wider business population – notably the vast population of non-high-tech businesses – requires informing policy making with better data on start-up and scale-up profiles and trajectories.

As Governments prioritise environmental sustainability after COVID, it is becoming urgent to engage the large and diverse SME and entrepreneur population in the efforts towards net-zero. It is especially important because of their sizeable collective environmental footprint and their potential to innovate and provide solutions to environmental issues. However, they face challenges in offering green products or investing in resource efficiency. Policies often side-line them and financing remains a challenge. A stronger focus on SMEs in climate policies and enhancing their access to sustainable finance is necessary for a successful green transition.

Current policy frameworks often fail to capture the diversity of SMEs and entrepreneurs by considering an average firm. This can result in significant complexity and administrative burden, as well as be ineffective in changing corporate behaviours. Delivering on ambitious recovery plans and long-term reform objectives requires crosscutting and coherent approaches across the diverse policy areas that influence SME prospects and outcomes. This means adopting an SME and entrepreneur lens in policy design and delivery, fostering policy coherence across levels of government, better evaluation tools, and active engagement with SMEs and entrepreneurs.

SME access to foreign markets is an important driver of growth and productivity in countries and regions, and their integration into global value chains a significant source of innovation and knowledge. However, not all SMEs have the capacity to tap into international markets. SMEs’ ability to engage in GVCs is constrained by internal capacity (e.g. managerial skills) and external factors (e.g. the quality of logistics services and infrastructure, and regulatory barriers). Governments have started rethinking smart specialisation and internationalisation policies with resilience in mind, aiming to protect strategic SMEs and reinforcing their positioning in GVCs, e.g. by keeping trade channels open and reducing costs of trading; intensifying export support measures; and reinforcing SME international business linkages.

The Chairs of the break-out sessions will provide a brief summary of the discussion and Ministers will be invited to adopt the Declaration on Enhancing SMEs and Entrepreneurship Policies for Greater Resilience and Successful Transitions.