In order not to restrict unduly the usefulness of applying the definition, it should be updated to take account of changes in both prices and productivity. (5) The turnover ceiling refers to enterprises engaged in very different types of economic activity. Thus the turnover criterion should be combined with that of the balance sheet total, a criterion which reflects the overall wealth of a business, with the possibility of either of these two criteria being exceeded. However, it would not be desirable to use turnover as the sole financial criterion, in particular because enterprises in the trade and distribution sector have by their nature higher turnover figures than those in the manufacturing sector. (4) The criterion of staff numbers (the 'staff headcount criterion') remains undoubtedly one of the most important, and must be observed as the main criterion introducing a financial criterion is nonetheless a necessary adjunct in order to grasp the real scale and performance of an enterprise and its position compared to its competitors. (3) It should also be made clear that, in accordance with Articles 48, 81 and 82 of the Treaty, as interpreted by the Court of Justice of the European Communities, an enterprise should be considered to be any entity, regardless of its legal form, engaged in economic activities, including in particular entities engaged in a craft activity and other activities on an individual or family basis, partnerships or associations regularly engaged in economic activities.

In view of the number of amendments now requiring to be made to Recommendation 96/280/EC, and for the sake of clarity, it is appropriate to replace the Recommendation. Apart from the need to adapt Recommendation 96/280/EC to economic developments, pursuant to Article 2 of the Annex thereto, consideration must be given to a number of difficulties of interpretation which have emerged in its application, as well as the observations received from enterprises. (2) Recommendation 96/280/EC has been applied widely by the Member States, and the definition contained in the Annex thereto has been taken over in Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises(2). In addition, it was considered that the application of the same definition by the Commission, the Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF) would improve the consistency and effectiveness of policies targeting SMEs and would, therefore, limit the risk of distortion of competition. It means that situations in which the Community focuses its action on a given category of SMEs and the Member States on another must be avoided. The pursuit of such an approach is all the more necessary in view of the extensive interaction between national and Community measures assisting micro, small and medium-sized enterprises (SME), for example in connection with Structural Funds or research.

Following the logic of a single market without internal frontiers, the treatment of enterprises should be based on a set of common rules.

Commission Recommendation 96/280/EC of 3 April 1996 concerning the definition of small and medium-sized enterprises(1) was based on the idea that the existence of different definitions at Community level and at national level could create inconsistencies. (1) In a report submitted to the Council in 1992 at the request of the 'Industry' Council held on, the Commission had proposed limiting the proliferation of definitions of small and medium-sized enterprises in use at Community level. Having regard to the Treaty establishing the European Community, and in particular Article 211, second indent, thereof, THE COMMISSION OF THE EUROPEAN COMMUNITIES, (notified under document number C(2003) 1422) Concerning the definition of micro, small and medium-sized enterprises

Medium definition