Creating a business: conditions vary across Europe

Joshua Jampol. Journalist

28 March 2003

Europeans have distinctly different attitudes when it comes to entrepreneurship.

According to a Dec. 2002 poll by France’s Agency for Enterprise Creation, only 27 percent of the French want to start their own companies. Nearly 180,000 firms made their debuts last year – 270, 000 if you count re-startups or start-throughs.

French entrepreneurs blame high taxes, heavy social charges and endless red tape.

France lags far behind the U.K. and the U.S. when comparing favorable conditions offered entrepreneurs, but manages to hold fourth place among the 15 European Union members. The proposed Dutreil law (see separate story) on economic incentives would trim taxes, undo administrative hassles and offer more fiscal incentives to help finance new businesses.

Despite administrative complexities, Spain boasts Europe’s most developed entrepreneurship class, with 350,000 created in 2001. A recent Ernst & Young survey found that for every 10,000 inhabitants, 88 founded businesses in Spain. Followed the British (66), Italians (64) and French (30). Surprisingly, the U.S. was last, with 21.

The U.K. offers entrepreneurs attractive fiscal terms (including a tax break up to nearly €50,000). A Loan Guarantee Scheme lets entrepreneurs borrow as much as £250,000. The capital-risk sector is quite healthy, another reason entrepreneurship thrives across the Channel. Low social charges (12 percent for employers) and a flexible labor market also help.

Italy likewise supports business creation and innovation. Companies created in the south of the country by the young unemployed can obtain non-refundable stipends of as much as €15,000, as well as low-interest loans. The government also encourages innovation and development of small and medium businesses, offering tax credits of up to 37 percent for investments in innovative products. Other measures incite financing in R&D. On the other hand, income tax and social charges for employers are high (35 percent for both).

The U.S. is often called the haven for entrepreneurs. It encourages small and medium entreprises through an attractive economic environment, an income-tax ceiling at 42 percent, a flexible labor market, little bureaucracy and widely available private financing (nearly $100 billion), of which one-third comes from capital risk. Government policy gives small and medium businesses priority, thanks to the powerful Small Business Administration. This group offers young entrepreneurs information, advice and financing, including guaranteed large-sum loans (85 percent guaranteed up to $750,000) and direct loans in case of bank refusal.

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