Towards further simplifications to start a business in the European Union
Europe needs more entrepreneurs. This is a long-term objective for economic growth and sustainability in all the Member States of the European Union. To encourage potential entrepreneurs to start a business, there are several factors and areas of influence. An important one is, of course, education and training as a basis for innovation and more openness towards entrepreneurial culture. Another important factor are the administrative requirements, i.e. policies and procedures that need to be followed in setting up a new firm. This article will consider the attempts and the progress made in eliminating obstacles for business start-ups.
The creation of an environment where entrepreneurs can flourish and grow, is one of the three pillars in the Entrepreneurship 2020 Action Plan, which is a blueprint for decisive action to promote entrepreneurship in several areas. A study on “Business Dynamics: Start-Ups, Business Transfers and Bankruptcy” from 2011, confirms the impact of reducing regulatory framework complexity on entrepreneurial activity. One recommendation for the EU and the Member States in their policies concerning small and medium-sized enterprises, is to simplify procedures as much as possible throughout the whole enterprise life cycle. Policies should focus on both – increasing the number of new entrepreneurs and also on keeping the “stock of entrepreneurs”, i.e. keeping existing entrepreneurs active. According to this study the administrative procedures in the enterprise life cycle include licensing, business transfers to new owners, bankruptcy and the conditions for re-starting a business – the “second chance” for unsuccessful entrepreneurs.
Facilitating business start-ups mainly refers to time and costs in starting a business. There are also other elements taken into consideration by the EU, e.g. the simplification of administrative procedures to obtain licences, permits and authorisations. However, over a longer period of time, there are ongoing attempts within the EU to reduce the costs and to speed up the start of a new company – with sustainable progress made! In 2001 the average time to start a company in the EU was 22 days and the average costs € 827. Twelve years later the average time amounted to 4.2 days and the costs to € 315. The target set by the Competitiveness Council in 2011 was even more ambitious: Until 2012 the start-up time should have been reduced to 3 working days and the costs to only € 100. Although the time target was accomplished by 12 countries, only 7 countries achieved the cost target. Furthermore there are several countries that to-date do not comply with all the objectives.
Removing barriers to business creation is one way in better realising the EU’s entrepreneurial potential as expensive and time-consuming procedures and regulations, discourage many would-be entrepreneurs. Some countries made progress in loosening administrative burdens in start-up procedures with the effect: Cheaper and faster start-ups lead to more start-ups in number!
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