Risks, cost, time: What keeps Europeans from setting up business

In a series of high-level talks, the Commission and the Council discuss how to get the EU out of the doldrums concerning starting new businesses.

The Spring Summit agreed on a number of measures to ease the burden for people throughout the EU wanting to set up a business. In its conclusions, the following measures are outlined:

  • Member States agreed to make dealing with the administration easier by establishing, by 2007, one-stop-shop (or arrangements with 
    equivalent effect), for setting up companies in a quick and simple way. 
  • The same applies to the recruitment of a company’s first employee, which should not require visiting more than one public administration point. 
  • They agreed reducing the average time for setting up a business (typically an SME) anywhere in the EU to one week by the end of 2007.

At a Conference on 28 March 2006, experts discussed the deterrent effect that the risk of insolvency has on people otherwise willing to set up a business. Participants agreed that the fact of having gone bankrupt is exceedingly stigmatised in Europe and that the fear of ending up broke keeps many people from starting a business of their own. They debated possibilities of making risky investments and ventures more acceptable in society, but also chances of preventing insolvency by using early warning mechanisms and helping companies in distress, e.g using state aid. In the conference’s final session, participants discussed possibilities of enabling and encouraging entrepreneurs who have taken the risk of insolvency and gone bankrupt to give it another try. Most of the conference’s presentations are available on-line

At their March 23 - 24 Spring Council, one of the issues that heads of state and government were discussing was the crucial role that small and medium-sized enterprises play in creating jobs and growth, and Europe's relatively bad record in setting up companies over the last years. Setting up business takes an average of 24 working days in the EU; in Italy it even takes 35 days. 

In its conclusions, the Austrian Presidency said: "There is a need to develop comprehensive supportive policies for SMEs of all types, as well as a regulatory environment that is simple, transparent and easy to apply." The Council identified a number of key elements which are to blame for the low level of entrepreneurship in Europe and accordingly invited the Commission "to bring forward specific provisions to encourage SME growth and development, such as longer transition periods, reduced fees, simplified reporting requirements and exemptions."

Some EU member states have already taken decisive steps towards easing the administrative burden of setting up a new business. Portugal, a country which used to have a reputation of a particularly ineffective administration, started a much-discussed service called Empresa na hora ('Business within an hour'). Under the new scheme, which brings the country to the top of the charts in setting up business swiftly, it will soon be possible to start a new company entirely online, at a total cost of no more than 360 Euro.

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