Clyde Blowers Capital chairman and CEO Jim McColl forecasts rapid...
1. A cultural revolution
This morning the Commission adopted the Entrepreneurship 2020 Action Plan.
Firstly, I would like to thank Vice-Presidents Vivian Reding and Nellie Kroes and Commissioners Michel Barnier and Laszlo Andor for their involvement in this initiative.
This is the first time that the Commission has presented a general strategy on entrepreneurship in order to bring about a genuine cultural revolution. We want to see entrepreneurs perceived in a positive light, as central to well-being and innovation, and we want the state to serve them, not to stand in their way.
Giving practical opportunities to those ready to take risks is the best way to deal with the main manifestation of the crisis, unemployment, which has reached intolerable levels: 11.8%, two points higher than in April 2011, with one quarter of young people unemployed, and more than 50% in some regions.
The crisis has also clipped the wings of many who wanted to try their luck. The Eurobarometer data on entrepreneurship presented today together with the Plan show that, over the last three years, the proportion of Europeans willing to start a company has fallen from 45% to 37%. That is much less than the 51% of Americans and 56% of Chinese.
It is certainly not because we lack courage or an entrepreneurial culture. It is simply that the crisis has made the already difficult conditions for potential entrepreneurs in Europe even more prohibitive. However, there are still tens of millions of would-be entrepreneurs, and many who could join their ranks, if only those willing to take the risk were put in a position to do so. It is therefore up to politicians to do their utmost to promote entrepreneurship and remove those obstacles. That is the best way to create jobs, innovate, restore competitiveness and emerge stronger from the crisis.
It is an illusion to think that jobs can be created by more government and an even more bloated civil service. Restructuring also requires a slimmer state. Moreover, only 15% of new jobs created in the private sector will be in big companies. The remaining 85% will come from micro companies or small and medium-sized firms. That is the real potential we have to exploit.
Each year new SMEs create 4 million jobs. If it is enough for each SME in Europe to employ just one person in order to create 23 million jobs, think of the millions of potential jobs that could be created by the 37% of Europeans who have said they are willing to give entrepreneurship a go.
2. Action to be taken
The strategy is based on three pillars, with action to be taken at each level, European and national: (I) entrepreneurial education; (II) removing the obstacles to business activity; (III) better opportunities for women, young people, older people and migrants.
The desire and ability to start a company do not stem only from personal disposition. Between 15% and 20% of pupils who take part in a minicompany programme in school go on to start their own company; a figure that is three to five times higher than the average. Such programmes demonstrate the key role of the education system in developing entrepreneurial attitudes. In addition, the creativity, tenacity and organisational ability needed to start a company are important for everybody.
For that reason, the Commission encourages the Member States to include in compulsory curricula teaching and programmes to promote entrepreneurial spirit. Together with the OECD, we have also drafted guidelines to put to universities and we will coordinate the exchange of best practices and the development of new teaching methods.
(II) A more favourable business environment
Starting a company is almost regarded as an act of heroism or an obstacle course made up of needless bureaucracy, a tax burden, difficult access to capital, late payments, jumbled procedures for business transfer and a lack of opportunities to start again after bankruptcy.
We have identified six areas in which greater efforts are needed to help new companies emerge and flourish: (i) access to finance, (ii) support to entrepreneurs in crucial phrases, (iii) use of ICT technologies, (iv) business transfer, (v) second chances and (vi) simplification.
Access to finance
The Commission is already implementing a strategy to improve access to finance based on more EU guarantee funds, a real venture capital market, and Basel III criteria adapted to SMEs. We need to continue down that road. It is the first nut to crack, since without access to capital there can be no new companies.
The Member States should allocate more of the EU Structural Funds to microcredit programmes for new companies. Information channels must be improved and the presence of suitable financial intermediaries encouraged at local level.
In addition, as part of the review of the MiFID Directive, we will propose measures to make it possible for SMEs to be financed not only through the stock market, but also through the bond market.
Support during the crucial phases of the life cycle
Around 50% of new companies fail within the first five years because of limited resources and experience.
In order to support entrepreneurs in that delicate phase, the Commission will identify and promote the best tax practices of Member States, support cooperation between business clusters and networks, further develop the Erasmus for Young Entrepreneurs scheme and encourage exchanges of young entrepreneurs between the EU and third countries.
Unleashing business opportunities in the digital age
SMEs that use information and communication technologies (ITC) in their business grow two to three times more quickly than other companies. Between now and 2016 the digital market will grow by 10% annually.
To increase the number of entrepreneurs taking advantage of the new opportunities offered by the Internet, the Commission will provide support to make potential entrepreneurs aware of market trends. IT skills in SMEs must also be promoted.
A second chance for honest entrepreneurs
Entrepreneurs who start again following a first bankruptcy grow more quickly on average, employ more workers and survive longer thanks to the experience gained. They are therefore a source of precious human capital for the economy.
The Commission will work with the Member States to reduce the duration and cost of bankruptcy procedures and to make it easier for honest entrepreneurs to start again.
Easier business transfers
Every year in the EU, 450 000 firms and 2 million employees are transferred to new owners. The legal, administrative and tax difficulties related to those transfers lead to the potential loss of 150 000 firms and 600 000 jobs on average each year.
The Commission calls on the Member States to facilitate such transfers and will draw up guidelines in that regard. It will also encourage action to remove the obstacles to cross-border business transfer.
The Commission is currently implementing a strategy to simplify life for micro and small companies and start-ups. Among the measures already in force, the SME test requires an assessment to be carried out of the impact of new EU proposals on SMEs, introducing the possibility of derogations and the reduction of costs and other burdens. The EU SME Envoys are real champions of small firms and take action at all levels to facilitate business activity.
All that is not enough, however. The Commission will follow up on last October’s consultation to identify the 10 most burdensome pieces of EU legislation and will propose further simplification. Similar initiatives should also be promoted at national and local level – where the main obstacles to business activity are often found. The aim is to go beyond the target of a 25% reduction in administrative burdens set out in the Small Business Act.
To that end, we will propose the abolition of all authenticity requirements for public documents needed to start a cross-border company.
The Member States must move more quickly towards the target for starting a business of three days and EUR 100 (the current average is 6.5 days and EUR 397). By 2015 we also want licences and other authorisations to be issued within one month of the creation of a company, for example by encouraging self-certification procedures.
(III) Better opportunities for specific groups
We wanted to target a number of actions at specific groups: women, young people, older people and migrants.
Women make up 52% of the population, but only account for one third of entrepreneurs. Older entrepreneurs can draw on their experience to help new entrepreneurs. Younger generations should increasingly regard starting a business as an opportunity to be explored in the search for employment.
Facilitating entrepreneurship also means attracting new resources and ideas from outside. Think of what happened, for example, in Silicon Valley, where migrant entrepreneurs brought fresh energy and development. For that reason, we will propose initiatives to facilitate access to Europe for potential entrepreneurs.
In closing, allow me to stress that the implementation of the Plan will require even closer cooperation between the Commission and the Member States. In fact, many of the measures provide for national reforms, which must be introduced if we want to relaunch our economy. We therefore need an entrepreneurial culture to spread rapidly, including among our leaders and Member State civil services at all levels.
10 January 2013
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