European Commission publishes new single market strategy to further develop the European market

The European Commission's new single market strategy was published on 21 May, the accompanying press release entitled "A simpler Single Market to make companies choose Europe". Its aim is to "create a more simple, seamless and strong European home market" and reduce existing barriers within it, help SMEs to operate and scale up, and boost digitalisation.

The strategy identifies and intends to tackle the "terrible ten" most harmful barriers reported by businesses, which include complicated business establishment and operations; complex EU rules; lack of common standards; fragmentated rules on packaging; lack of product compliance; restrictive and diverging national services regulation.

The Commission also adopted its fourth simplification omnibus, intended to reduce administrative costs for companies and ease compliance obligations for a new category of business, known as "small mid-caps" (SMCs): those with fewer than 750 employees and a turnover of up to €150 million or total assets of up to €129 million. 

The working document on this measure highlights that this will be on top of the simplification packages announced earlier this year to the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive and the Carbon Adjustment Mechanism (CBAM). Therefore this new definition, when agreed, will be applicable to these pieces of regulation in order to "benefit from tailored regulatory simplification in the same spirit as SMEs".

Corporate aspects

The strategy aims to simplify the process of setting up and operating companies across the EU, and particularly reduce the administrative burden on SMEs and SMCs.

'28th regime'

Of most interest to international businesses is the proposed introduction of what the Commission is calling a "28th regime" – common rules to facilitate the digital set up of businesses and their operations across the single market.

This regime will include an EU corporate legal framework, addressing insolvency, labour and tax laws, and aims to facilitate company establishment within 48 hours. There is an emphasis on the rules and processes being digital by default, which is welcome. It is not clear, however, how the 28th regime will interact with national laws or with already existing EU-wide corporate laws such as the Societas Europaea regime (an EU-wide corporate entity which it has been possible to incorporate since 2004).

A legislative proposal to establish the 28th regime is due to be published in Q1 2026.

Supporting SMEs and SMCs

Measures specifically targeted at SMEs include a digital "SME ID" tool to simplify SME status verification, improved access to sustainable finance and a voluntary SME standard for sustainability reporting so that SMEs do not have to comply with different reporting requests from their upstream customers.

To support the growth of SMEs, the Commission intends to extend certain SME benefits to SMCs, so that they enjoy a simplified administrative regime even after outgrowing SME status. SMEs and SMCs can expect simplified listing rules and reduced prospectus requirements and exemptions from some record-keeping requirements under GDPR as well as from some sectoral rules (for more on this, see below).

The Commission also intends to consider the impact on SMCs of the implementation of recent acts, such as the Ecodesign for Sustainable Products Regulation and the Packaging and Packaging Waste Regulation, as well as how they will be affected by future acts (such as the Digital Omnibus which covers the AI Act, Data Act, Data Governance Act, and Open Data Directive), with the implication that the compliance burden will be reduced for them.

There will also be an update in Q4 2025 to last year's review of how business transfers are conducted within the EU, but the strategy does not contain proposals to take the recommendations forward.

It remains to be seen whether the overlay of additional or exceptional regimes in the name of simplification will achieve its aim of reducing barriers when it comes to the operation of businesses across the EU.

Lightening the GDPR record-keeping burden

The proposal aims to simplify the EU GDPR record-keeping obligations. Currently:

• Article 30(1) of the GDPR is the obligation to maintain records of processing.
• Article 30(5) exempts SMEs and other organisations with fewer than 250 employees (with some exceptions).
• The exemption applies only if processing is only occasional, is not likely to result in "a risk" to people's rights and freedoms, and does not involve special categories of personal data or data on criminal offences.

The main changes to Article 30(5) would extend the exemption to SMCs and other organisations with fewer than 750 employees, unless the processing is likely to result in a "high risk" to rights and freedoms. 

A new recital would clarify that processing of special categories of personal data in accordance with Article 9(2)(b) (legal obligations in employment, social security or social protection law) would not, as such, trigger the record-keeping obligation.

The European Data Protection Board and the European Data Protection Supervisor have confirmed their preliminary support for the proposals.

Properly implementing a register of processing activities and keeping it up-to-date can be a real burden, so the proposed change and clarification – modest though they are – will be welcomed, especially by small businesses. Yet completely refraining from maintaining such register means also doing away with an effective accountability measure, so might in fact come at the price of a bigger liability exposure.

Of course, these proposals are only for the EU GDPR, and not the UK's version, so businesses in the UK whose processing is caught by the EU GDPR will still have to comply with what would then be more onerous UK GDPR obligations.

Intellectual property

In its focus on supporting SME growth in the single market, the Commission states that there will be "more intense" use of intellectual property rights to help improve their access to finance and assist in their scaling up. For example, the Commission and the European Union Intellectual Property Office (EUIPO) will also extend the SME Fund to 2026, or potentially 2027, which will allow more SMEs to access the grant scheme designed to help them protect and commercialise their IP rights and geographical indications.

Patent package and Unitary Patent system

The Commission also notes that the finalisation of the Patent Package and the Unitary Patent system would go "a long way" to completing the single market for IP, which has already been achieved for trade marks, designs and geographical indications.

With respect to the Unitary Patent (UP) and the Unified Patent Court (UPC) system, the Commission commits to issuing a report on the functioning of the UP and to engaging in targeted outreach to encourage all Member States to join the system – currently only 18 of the 27 EU Member States are participating in the UPC. However, no timeline for these activities is given.

Despite mentioning the Commission's desire to finalise the Patent Package, there is no detail in the report about how or when this would be achieved.

SEP regulation

Although there have been recent advancements in reaching (at least a provisional) agreement on an EU-wide compulsory licensing scheme for crisis management, the Patent Package was also due to include a regulation on Standard Essential Patents (SEPs). However, the Commission withdrew the draft SEP regulation back in February stating that "no foreseeable agreement" could be reached.

A number of countries are in support of the reviving the draft regulation, including Germany and France, and Commission Executive Vice President Stéphane Séjourné has told the European Parliament's Legal Affairs Committee that there is still time to save the bill. The Commission will give both the European Parliament and Council six months to express an opinion on the proposal before he considers whether to formally reprieve the draft regulation, scrap it completely, or come up with new ways to move the ideas of the text forward.

Given the controversy and criticisms that surrounded the draft regulation, if the Commission does decide to move forward with the SEP proposal, amendments seem likely in order to break the lack of agreement among the Member States and this is unlikely to be a quick process.

Product regulation

The single market strategy and the fourth simplification omnibus introduce significant changes for businesses in the retail and consumer sector, particularly concerning product regulation. Key updates include the digitalisation of product compliance documentation, the introduction of common specifications, and the postponement of battery due diligence requirements.

Digitalisation of product compliance documentation

One of the most impactful changes is the shift towards digitalisation of product compliance documentation. Businesses will no longer be required to provide product compliance documentation in paper format. Instead, they can opt to provide instructions digitally.

The Commission is proposing a "digital by default" principle for product legislation, including documents such as declarations of conformity and instructions. The Digital Product Passport (DPP), set to first become operational for batteries by 2027 and progressively rolled out to other product categories, will serve as a digital container for essential product information. Additionally, QR codes will be permitted for use by businesses. This digital transformation is expected to streamline processes, reduce administrative burdens, and significantly cut costs for businesses.

Modernising product legislation

The Commission acknowledges that the New Legislative Framework, which provides the principles for harmonised product legislation, requires improvement. This includes defining the responsibilities of economic operators involved in product circularity, embracing digital solutions, and aiming to align enforcement actions across the EU, potentially establishing an EU Market Surveillance Authority.

Introduction of common specifications

The simplification proposal aims to introduce common specifications for products as a legally recognised fallback option, marking another major development.

Harmonised standards are the primary method for businesses to demonstrate product conformity with essential EU requirements. However, when these standards are unavailable, businesses face costly and complex conformity assessment procedures. The new common specifications will provide an alternative means for demonstrating conformity. The Commission hopes that these changes will enable businesses to operate efficiently even in the absence of harmonised standards, avoiding unnecessary delays and costs.

Delay of battery due diligence requirements

The simplification proposal looks to delay the due diligence obligations under the battery regulations from 2025 to 2027. Guidelines on these obligations will be published a year before the requirements take effect, giving businesses time to prepare.

The Commissions hopes that these changes will streamline compliance processes, reduce costs, and enhance the efficiency and competitiveness of businesses.

Regulatory harmonisation in life sciences

The European Commission’s 2025 Single Market Strategy Communication outlines broad priorities aimed at strengthening the EU internal market by addressing regulatory fragmentation, administrative burdens, and enforcement inconsistencies. While the document is framed in general terms, its core objectives are pertinent to sectors such as medical technology and pharmaceuticals.

Medtech and pharmaceutical industries are among the most heavily regulated in the EU. Their regulatory framework is consistently shifting, both in terms of medicinal products and medical devices. Divergent national rules and varying interpretations frequently delay patient access and increase compliance costs.

The strategy’s commitment to reducing fragmentation, enhancing cooperation among national authorities, and simplifying administrative procedures offers the prospect of a more predictable and streamlined regulatory environment for these sectors. It further aligns with key takeaways from the European Commission's comprehensive report on the future of European competitiveness.

Digital health and patient access

The strategy advocates for digital tools, including digital product passports and streamlined conformity assessments, which have the potential to facilitate cross-border trade and improve transparency within medtech and pharmaceutical supply chains. Furthermore, the emphasis on fostering innovation ecosystems and supporting SMEs aligns well with the needs of companies developing advanced medical devices and innovative medicines.

By promoting regulatory coherence and reducing barriers, the strategy indirectly supports swifter access to novel health technologies and medicines for patients across the EU. This is essential for maintaining Europe’s competitiveness and strategic autonomy in health-related industries.

Construction sector

The Construction Services Act, announced by the European Commission on 21 May 2025, is a key initiative aimed at strengthening the internal market in the construction sector. Its goal is to dismantle major regulatory barriers long known as the “Terrible Ten” – including poor recognition of professional qualifications, inconsistent national regulations, and burdensome permitting procedures – all of which significantly hinder cross-border construction services.

The Construction Services Act is intended to directly address these issues by promoting regulatory harmonisation, expanding digital processes, and improving professional mobility. The initiative aims to reduce regulatory fragmentation by harmonising national rules and simplifying administrative requirements. Key measures include the improved mutual recognition of professional qualifications, the development of standardised digital procedures and greater legal clarity for temporary cross-border service provision. These steps are intended to lower entry barriers, particularly for small and medium-sized enterprises.

While the effectiveness of the Act will largely depend on how thoroughly Member States implement the expected new regulations, it holds strong potential to alleviate many of the “Terrible Ten” obstacles. In a fragmented sector like construction, this could represent a major step toward a true European single market for this sector. The Construction Services Act thus marks an important milestone for boosting competition, efficiency and fairness in the EU construction industry.

The Commission has announced that a legislative proposal for the Act is scheduled for 2026.