Small and medium-sized enterprises (SMEs) are the engine of the European economy, accounting for 99.8% of total enterprises. They employ more than two thirds of the EU labour force, contribute to more than half of EU value added and have played an important role in the recovery since the financial and economic crisis. SMEs in the EU, however, face barriers and challenges that hamper their full potential for growth and job creation. For example, they suffer from a low capacity to compete and grow internationally as their small size as well as their lack of financial and human resources prevent... them entering new markets. They mostly operate in sectors which do not require intense scientific knowledge or intense technology so have limited research and development capabilities. In comparison to large enterprises, they have lower turnover and value added as well as limited strategic planning and managerial skills. The inclusion of a strong SME dimension in the EU policy is therefore of particular importance. However, to fully unlock SME growth potential requires a strong horizontal policy approach that helps them surmount existing barriers. Based on desk research and structured interviews with selected Local and Regional Authorities (LRAs) this report identifies key challenges currently faced by European SMEs, analyses the evolution of EU policy initiatives since the introduction of the Small Business Act (SBA) and formulates policy recommendations to strengthen the role of LRAs and SME policy in the post-2020 period.