Starting her own online art gallery in London this year took Gina Cross about a week and cost £70 (€82), about the average for entrepreneurs in the United Kingdom.
Likewise, in Bulgaria, France and Ireland, registering a new business costs less than €100 and takes less than a week.
"It’s quite easy," said Cross, founder of A Little Bit of Art, a small company which sells printed artworks.
But in Poland and Spain, entrepreneurs still wait about a month for their initial paperwork to be approved. In Italy, Luxembourg, Greece and the Netherlands, the process is faster but expensive – more than €1,000.
That discrepancy highlights the challenges facing efforts in the European Union to jumpstart the economy. When it comes to economic initiatives the EU has no powers to enact rules with teeth. They host meetings, promote programmes and share best practices, but at the end of the day their recommendations are only as strong as the political will to enact changes at the national and regional level.
"Certain member states moved on certain elements, but not all […] There’s definitely space to push further. We’re very much aware of that," said Marko Curavić, head of unit for entrepreneurship in the European Commission.
Four years ago, leaders from all 27 member states set a 2007 deadline for their own countries to create one-stop-shops for setting up a company quickly – ideally within a week. Start up fees, the European Council concluded, should be as low as possible, and hiring the first employee shouldn’t involve more than one public administration point.
Clearly many countries are years behind schedule.
But why does that matter?
Small and medium-size businesses create 80% of new jobs in Europe. That means entrepreneurs and small and medium businesses will play a critical role as Europe recovers from the economic and financial crisis. So anything that hinders new businesses hinders growth.
This is especially important now because while the unemployment rate in the EU averages around 10%, and it’s double that for job seekers under the age of 25, according to research published last week by the Organisation for Economic Coordination and Development. The highest youth unemployment rate was in Spain, followed by Ireland, Slovakia and Greece. Only Germany posted a slight decrease.
Small Business Act: Did it deliver?
To foster small businesses the EU adopted the Small Business Act two years ago. The goal was to focus national governments on "the growth and innovation potential of small and medium-sized enterprises." The 10 principles in the act ranged from improving access to financing to helping entrepreneurs who faced bankruptcy get a second chance.
Next month, the Commission will present a report card on progress under the initiative. They are braced for criticism from small business advocates like Andrea Benassi, secretary general for a lobbying group of European craft, trade and small- and medium businesses (UEAPME).
"Policymakers have raised the bar of our expectations very high in the last years," he said. "Unfortunately, they have largely failed to deliver so far, with many concrete measures still pending or unapplied due to national governments’ lukewarm commitment. We are very, very far from where we should be in terms of results."
Last week, Eurochambers, an association representing chambers of commerce in Europe, released a survey of businesses in 18 European countries. It showed a variety of familiar obstacles, such as regulatory burdens, difficulties getting financing and inflexible labor markets.
"Crisis or no crisis, the results reveal a depressingly familiar list of bottlenecks," said Alessandro Barberis, president of EuroChambers in Brussels. "The outcome would probably have been similar had this exercise been conducted five, 10 even 20 years ago"
Some progress
Of course, some important steps have been made on a pan-European level and at the local level. Last month, the European Parliament approved a new directive to crack down on late payers, for example, which now must be endorsed by the European Council.
"A lot of things have been done in the last two years. Could more be done? Always," Curavić said. But he insists "the glass is half full."
He hopes the review and proposed amendments will refocus political leaders on creating an entrepreneurial culture and the business conditions to help them thrive. Areas in need of more muscle, he said, include access to finance, education, mentoring and women entrepreneurs.
In America, Curavić points out, young people dream of being the next tech success, following in the footsteps of Bill Gates, Steve Jobs or Michael Dell. Where as in Europe, he says, the only cool, high-flying entrepreneur is founder of Virgin Group Richard Branson.
Studies repeatedly show the majority of Europeans prefer low-risk jobs, such as government institutions and big corporations, rather than working for themselves. In America, the reverse is true.
That cultural gap is a threat to European competitiveness, according to research by Bruegel, a Brussels-based think tank. In the EU, just one in five leading innovative companies was created after 1975. In the United States, more than half are that young, and they are focused in fast-growing sectors like health and information technology.
Here are some examples of what is being done around Europe to help companies get started and grow faster:
Slovakia
The Operational Programme Competitiveness and Economic Growth is the main tool for strengthening the competitiveness of SMEs, especially within the EU.
Companies with 10 or fewer employees are exempt from accounting requirements. Entrepreneurs are granted exemptions from double entry accounting if they are the sole employee and earn less than €170,000. Expenses can be written off according to the principles of ‘bookless accounting.’
Self-employed people can register within five working days for a standard trading license. Limited liability companies can register within 10 days. The cost is about €335, according to the European Commission.
In 2007, the government published a document called "Better regulation in the Slovak Republic: Action programme for reducing administrative burdens in Slovakia 2007–2012" with an ambitious goal to cut red tape by 25% by 2012.
According to the latest measure of bureaucracy, administrative burdens for entrepreneurs cost €91 million a year. The ministry reviewed 48 laws in 12 areas, including accounting, taxation, commercial law and intellectual property.
"Even though we tabled around 50 recommendations to ease administrative burdens, we are preparing the second" round, said Jozef Hudák, director of the business environment department, Ministry of Economy. After all are approved, the Slovak government plans to put them into action.
The internal market services law was adopted last January and went into effect in June. For small and medium-size businesses that want to enter the Slovakian market, they can contact a district office of the Department of Entrepreneurship and present their licenses. These offices collect information, such as criminal records from the SME’s home country, and within three days will send a request for authorization.
So far, they have provided information about doing business in Slovakia to almost 950 foreign companies from many sectors, including retail, wholesale, services, construction, food, direct or telephone consulting, recruiting and technology.
The most common questions concerned authorisation for doing business, accepting foreign skills certificates, tax obligations and credits, and health and social insurance.
The next step will be an e-government system that would not require new businesses to go in person to an office, Hudak said. The government has allocated more than €2.3 million for this year and next to complete that phase.
Czech Republic
The new Czech government, formed in the summer 2010, has made some ambitious steps to promote start-ups and make life easier for SMEs. The Minister of Industry and Trade, Martin Kocourek, said reducing paperwork and improving the legal environment were his main goals.
The Ministry of Industry and Trade, for example, aims to reduce annually the number of bureaucratic requirements for SMEs. This year it proposed eliminating around 20 requirements. Another goal is to designate specific days in the year for new legislative changes. This would make it easier for SMEs to know exactly when new legislation will be enacted.
The Ministry is also working on integrating different databases, even in small villages, to make administration easier for SMEs. Kocourek also announced recently plans for a special venture fund to invest in small business projects.
The Czech Republic has already established a network of 15 one-stop-shops to serve every region of the country. Entrepreneurs usually contact these points to get more information about neighbouring countries and their markets.
Currently, it takes about 15 days and costs an average of €345 to set up a business, according to the Commission.
France
Two years ago, France passed a law to modernise the economy (loi sur la modernisation de l’économie), which included several measures to facilitate the creation of SME's. Business start ups fees average €84 and the process takes about four days, according to the European Commission. The law also simplified the management of SME's in order to reduce bureaucracy.
The new law also developed and enhanced the use of micro-credit. It is now open to everyone without social criteria. Moreover, the French government has facilitated the creation of industrial and commercial patents.
In 2009, under the EU’s Services Directive, France set up a one-stop-shop called the "Guichet entreprise". It aims at facilitating the creation of companies in France sector by sector.
