What can kick-start Europe's economic powerhouse?

The last seven or so years have been tough for Europe's small to medium-sized businesses(SMEs). In the midst of one of the worst financial crises in living memory, many European SMEs were forced to close, reduce staff numbers and drastically cut costs just to survive.

SMEs are crucial to the European economy. At the beginning of 2014, 99.9 percent of the U.K's 5.2 million private businesses were SMEs, according to the country's Department for Business Innovation and Skills.

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In the European Union, "some 21.6 million SMEs in the non-financial business sector employed 88.8 million people and generated €3.6 trillion in value added," according to the European Commission's Annual Report on European SMEs for 2013/14.

So when SMEs suffer, so does the European economy.

For Tom Thackray, Head of Enterprise at the U.K. business lobby the Confederation of British Industry, it is because SMEs are so important that their growth needs to be strongly encouraged.

"If you look at the scale of SMEs, then they're obviously going to be critical to the growth of any economy, whether that's the national [U.K.] economy or the European one – the majority of businesses are small businesses," he told CNBC.com in a phone interview. Thackray went on to say that, "The capacity of them to grow and deliver jobs is absolutely critical."

For Thackray, start-ups have been crucial to the U.K. over the last few years. "If you look at the… business make up since the financial crisis… one of the reasons we've managed to keep employment at a pretty good level is that there's been a massive rise in start-up businesses."

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In 2014, over 580,000 new British businesses were registered, according to StartUp Britain. It's all well and good starting a business, but for Thackray and the CBI, it's what entrepreneurs do once they have started trading that is key.

"The critical thing now is whether you can turn those start-up businesses into 'scale-up' businesses," he said. "Can you move them on from being one man band type outfits into ones that can actually create jobs on a bigger scale."

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However, there are other headwinds British businesses face. The U.K. is standing at something of a crossroads when it comes to its place in Europe. With a general election just over a month away, and a referendum on membership of the European Union looming if incumbent Prime Minister David Cameron wins a second term, the effect of a 'Brexit' is a hot topic.

Thackray was clear to point out that, "the referendum is… a political decision for the citizens," but went on to explain the benefits of remaining part of Europe.

"Whether you're a large or small business, it's access to a much larger market," he said. "There's very… compelling evidence to show that that single market has had a meaningful positive impact on the UK economy: your customer base is that much larger, so you know there are massive opportunities there for a small business, and actually the barriers to entering that market are much lower now."

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Immigration is another hot topic in the U.K.. "There is a debate about immigration in the U.K. which is not something we particularly comment on in terms of the political nature," Thackray said. " But… in terms of the talent base that is provided by a larger labour market, that is something that small businesses can benefit from as much as large businesses," he added.