While efforts to make it easier for Europeans to set up their own company are starting to pay off, a majority of EU citizens continue to hold back for fear of going bust. The Commission is now proposing taking action to reduce the stigma attached to business failure and encourage non-fraudulent bankrupts to make a fresh start.
After just two years, the EU’s SME policy is already showing signs of success, according to a Commission report published on 8 October.
The average cost of setting up a new company in the EU-15 has fallen from €813 in 2002 to €554 in 2007. Red tape has also been cut so that the time needed to deal with all the administrative procedures of registering a company has been reduced from 24 days in 2002 to about 12 days today – although it remains above the one week target set in 2006 (EURACTIV 26/03/06).
Despite this, Europeans remain reluctant to start their own business. A recent Eurobarometer poll shows that only 28% of Europeans are keen to become entrepreneurs, while 49% of EU citizens have never even thought of setting up a company – almost double the US figure.
Although attitudes towards entrepreneurship are more positive among the younger generation and in new member states, three quarters of EU citizens are doubtful of the feasibility of establishing their own company, due to a lack of available financial support and the complexity of administrative procedures.
Also, while less than one in five Americans are concerned about failure, nearly half of Europeans fear that their business might fail and they would lose everything.
In response to these trends, the Commission is proposing action to help entrepreneurs avoid bankruptcy, reduce the stigma of business failure and provide a second chance for non-fraudulent bankrupts.
The Commission communication “Overcoming the stigma of business failure – for a second-chance policy” invites member states to:
- Disassociate bankruptcy from fraud – seeing as only 5% of bankruptcies are fraudulent – and advertise the benefits of making a fresh start;
- modify bankruptcy law so that fraudulent and non-fraudulent bankrupts are treated differently, with legal proceedings made simpler and faster for the latter;
- provide early support for viable enterprises in difficulty, including affordable expert advice and financial support to prevent bankruptcies;
- adapt insolvency laws in order to provide the opportunity to restructure and rescue a company rather than focusing solely on liquidation;
- encourage banks to be less cagey towards restarters, especially regarding access to loans;
- ensure that public procurers do not discriminate against former non-fraudulent bankrupts in tenders, and;
- provide technical and psychological support for restarters.