Europe must be friendlier to entrepreneurs

The European Commission (EC) has told Member States they should do more to help entrepreneurs and reduce barriers to growth.

A series of reports and papers published by the Commission over the last few weeks presents a raft of evidence of the key problems faced by small start-ups. The information was gathered from individual submissions by Member States and countries hoping to join the EU.

One of the reports - the EC Green Paper on Entrepreneurship - showed significant differences across the European Union in attitudes towards entrepreneurship, with a relatively higher propensity towards self-employment in Southern Europe, Ireland and the UK.

Figures showed the incidence of actual entrepreneurs ranged from six per cent in Denmark and Luxembourg to more than 18 per cent in Greece and Italy.

"The Government is having a limited influence in convincing people they will not be unduly penalised for setting up a business" - Paul Reynolds, Professor of Entrepreneurship

The EC hopes a concerted drive to encourage entrepreneurship amongst citizens of all member states will help to reverse a trend that has long shown US citizens as far more likely to start and grow a successful business.

Research published last month by a top London business school showed the UK business start-up sector was in steep decline despite a plethora of Government initiatives designed to encourage growth.

Paul Reynolds, Professor of Entrepreneurship at the London Business School and co-author of the study, said at the time: "The [UK] Government is having a limited influence on encouraging people into enterprise. It is failing to convince people that it is worth setting up a business and that they will not be unduly penalised if they do."

Last year's 'Eurobarometer' survey on entrepreneurship provided conclusive proof EU citizens are less inclined to become entrepreneurs and are more 'risk averse' than their American counterparts.

The rate of employment expansion for start-up businesses in the EU is also well below corresponding figures for businesses in the US.

The Commission launched the Green Paper to stimulate debate on the future agenda for entrepreneurship; to address structural economic changes that it says are turning Europe into a knowledge-based economy and to bring down barriers to small business development and growth.

Erkki Liikanen: SMEs are the backbone of the EU economy

'The competitiveness of Europe's firms, not just those in high-tech sectors, depends on tapping into creativity, innovation or technology. To enable the necessary influx of new ideas, a higher degree of entrepreneurial initiative and dynamism is needed,' the paper said.

In the Paper, the Commission outlined three 'pillars' for action:

• bringing down barriers to business development and growth;
• balancing the risks and rewards of entrepreneurship;
• creating a society that values entrepreneurship.

Another report, published prior to the new Paper, showed consultation between Government and Small and Medium Enterprises (SMEs) had become 'very poor' in many Member States, with a focus on suiting the needs of larger organisations first.

Erkki Liikanen, the European Enterprise Commissioner, said: "SMEs are the backbone of the EU economy and we must therefore do more to take account of their situation when legislating and setting policies in the future."

Candidate countries were also told to review their financial sectors to look at SME lending as a source of opportunities, rather than risks.

"The Candidate countries have a major role to play in creating a friendly environment for the start-up and growth of enterprises to make Europe more competitive," Mr Liikanen said.