Europe is better geared towards entrepreneurship, but major obstacles remain
Entrepreneurship has a better image among Europeans and more Member States are moving to remove the barriers for more European entrepreneurs, but the EU still lags behind the USA in the field. This is the conclusion of the results of the European Commission's enterprise policy scoreboard 2001, which gauged the EU's progress in seven specific areas which influence the growth of entrepreneurship. These are access to finance; the regulatory and administrative environment; open and well functioning markets; innovation and knowledge diffusion; entrepreneurship; human resources and new technologies. Areas of progress include the move to make the regulatory environment easier for entrepreneurs. A small decrease was recorded in those who reported this as being an obstacle. More Europeans are open to the idea of being self-employed. And European SMEs (small and medium sized enterprises) are increasingly turning to the Internet as a business. Greater openness of economies was recorded, with some economies such as that of Belgium recording a 60 per cent level of openness in its trading. The Swedish and Finnish records on R&D (research and development) investment as a part of GDP (gross domestic product) outshines the US equivalent. The EU outscores the USA in tertiary education records in the fields of healthcare, engineering, manufacturing and construction. But the scoreboard also concludes that much remains to be done, both in the short and the long term. Despite improvements, the EU population still shows more signs of risk aversion than its US counterparts, appoint commented on by Erkki Liikanen at a press conference on 22 November. 'If you have the choice between becoming an employer, an employee or self employed, most people in Europe want to become employees,' said Mr Liikanen, although he added that entrepreneurship is more common in the EU's southern members. Mr Liikanen argued that the main reason for a lack of entrepreneurship is a fear of taking risks. 'We need to address the stigma of failure and create an environment for entrepreneurship,' said Mr Liikanen. 'In Europe the cost of failure is so high that taking a risk is more of a threat than a challenge,' he added. Access to finance for those who do make a move is more limited than in the USA. 'At present the scale and scope of these [financing] activities is inadequate,' says the paper. Setting up a company can vary in cost and time enormously across the Member States, but systems such as Greece's where minimum costs to register as a sole trader are 750 euro and limited companies are required to pay 23,500 euro in do not compare favourably with the US, or even with other Member States such as Ireland, where the comparable figures are around 100 euro and one euro respectively. While there has been an attempt to address the regulatory burden placed on European businesses, four areas still stood out as troublesome: health and safety, restrictions on working hours, employment-related taxes, and social security and pension requirements. Where there has been progress in proposed actions from the European institutions, there have been delays in transposing these into national law. The long term goals need to focus on the number of skilled workers available, the base for further innovation and the increased focus of companies on ICT (information communication technologies). The paper concedes that there is no quick fix to some of these issues. 'Success in the area of innovation and knowledge diffusion cannot be achieved in a short period of time,' it says. It highlights some of the necessary elements necessary to succeed. 'These require a reliable science base as well as a network of scientific and research clusters where new and innovative ideas can be nurtured.' In order to address the issue of enhancing the EU's skills base, more skills upgrading is required, as this only takes place with around 10 per cent of 25 to 64 year olds, and a proportion of the same age group with tertiary education needs to be closer to the higher level found in the USA (33 per cent). In addition, more women need to become involved in entrepreneurship - the figure for this in the EU actually decreased in the period 1990 to 1999. Finally, further progress is needed on accessibility to and use of Internet resources by the EU's SMEs. Although the percentage of connected SMEs has risen sharply in recent years, the number of those using broadband is still significantly lower than in the USA and the cost of connecting to the Internet is still proving an obstacle to more widespread use.