Small firms hit hardest by EU’s ‘breathtaking’ corruption

Corruption across the European Union (EU) is “breathtaking”, according to a major new report from the European Commission (EC) which claims the problem costs the bloc almost £100billion (€120 billion) a year, while smaller businesses are the hardest hit by the scourge.

Three-quarters (76 per cent) of Europeans think that corruption is widespread, while 40 per cent of firms think corruption harms their business, with nepotism and patronage a worrying problem for companies. The smallest businesses are the worst affected by the issue, the report said.

EU home affairs commissioner Cecilia Malmstroem wrote in Sweden's Goeteborgs-Posten daily newspaper that the extent of the problem was “breathtaking”, although Sweden is among the countries with fewest issues.

In a release accompanying the report, she added: “Corruption undermines citizens' confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states from much-needed tax revenue.

“Member states have done a lot in recent years to fight corruption, but today’s report shows that it is far from enough.”

The report breaks down the levels and perceptions of corruption in each of the 28 EU member states. Portugal, Italy, Greece and Slovenia were among some of the worst affected, while Sweden, Finland and Denmark were the best performing nations. The UK produced the best result for bribery, though 64 per cent of respondents thought corruption in a broader sense was widespread.

Problem areas

Although evident at a central level, corruption risks tend to be higher at regional and local levels, where checks and balances and internal controls “tend to be weaker”, said the report. Construction was one sector mentioned specifically as a high-risk industry.

For businesses the problem is very real. Across Europe, more than four out of ten companies consider corruption to be a problem for doing business. Patronage and nepotism were also mentioned as being prevalent and obstructive.

Half of construction firms asked said corruption is a “serious” problem for doing business. The same was true for one-third of IT and telecoms companies.

Worryingly, smaller firms are among the worst hit. According to the study the smaller the company, the more often corruption and nepotism is a barrier to growth. Corruption is most likely to be considered a problem when doing business by companies in the Czech Republic, Portugal Greece and Slovakia.