Common economic area provides planning security in these current uncertain times
The European single market is of highest importance for Mittelstand industrial enterprises, both as procurement and as sales market, surpassing all other foreign markets. Following behind with great distance are markets in other European countries and in China.This was revealed by an IfM survey of over 1,800 executives in the industrial Mittelstand conducted in 2023.
EU single market offers numerous advantages
Companies benefit from both the size of the single market and the largely harmonised regulations. This leads to a reduction in transaction costs for trade relationships within the EU. Additionally, companies gain cost and productivity advantages due to economies of scale effects as they are able to produce and sell larger quantities within the EU. The reduction in transaction costs and the productivity advantages enhance the competitiveness of companies both within and outside the European Union.
“In addition to all these advantages, the EU single market offers comprehensive legal certainty and reliable framework conditions, which, especially in the face of growing global risks, hold significant value for Mittelstand enterprises. Therefore, the common market is of key importance for the procurement of raw materials and intermediate products as well as for the sale of their own products for the vast majority of German industrial companies," explains study director Hans-Jürgen Wolter.
Furthermore, the harmonised framework conditions of the EU single market help to connect the multiple entrepreneurial (idea) potentials across the EU member states. This fosters the innovative capacity of companies as they can jointly develop better, more innovative products and services.
Hence, fundamental EU skepticism should be questioned as vigorously as demands for a Dexit. A cautionary example is the Brexit: Since the United Kingdom left both the customs union and the EU single market, according to our survey, trade with the United Kingdom has significantly diminished due to the emergence of new non-tariff and tariff trade barriers," reports Hans-Jürgen Wolter.
In anticipation of the upcoming EU legislative period, Hans-Jürgen Wolter hopes that the economic policy for small and medium-sized enterprises (SMEs) will be less fragmented and that instead, a more ordoliberal-oriented European SME policy will be initiated: "Thereby, attention should be paid to a balanced relation between centralisation and decentralisation advantages. A large part of the legal framework in EU member states originates now directly or indirectly from EU law. It is therefore all the more important that entrepreneurs perceive the regulations as proportionate, meaningful, and implementable. Otherwise, there is a risk that they will conduct autonomous bureaucracy reduction, which undermines the rule of law and the overall acceptance of the EU.
