Top European Countries for Doing Business
Posted under Entrepreneur

europe

The world bank has published its Doing Business in 2006 report, with interesting results. The conclusion is that the best way out of poverty is starting businesses; starting businesses = low unemployment rate. A view that is not currently shared in some countries; in France the equation is protect workers = low unemployment .

The list of european countries ordered by their world ranking of business friendliness is shown below. Compared to the GDP ranking, European countries are one of the least business friendly environments in the world:

World Rank         World Rank
Norway
Denmark
United Kingdom
Ireland
Iceland
Finland
Sweden
Switzerland
Belgium
Germany
5
8
9
11
12
13
14
17
18
19
Netherlands
Spain
Austria
Portugal
France
Poland
Bulgaria
Italy
Romania
Greece
24
30
32
42
44
54
62
70
78
80

The table shows a distinct north-south divide, same as for GDP and wealth per capita. Continental Europe, specially southern Europe lags behind in the rankings.

What are the Factors

1. Starting a Business: Procedures, time, cost and minimum capital to open a new business
2. Dealing with licenses Procedures, time and cost of business inspections and licensing
3. Hiring and firing workers Difficulty of hiring index, rigidity of hours of index, difficulty of firing index, hiring cost and firing cost
4. Registering property Procedures, time and cost to register commercial real estate
5. Getting credit Strength of legal rights index, depth of credit information index
6. Protecting investors Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
7. Paying taxes Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit
8. Trading across borders Number of documents, number of signatures and time necessary to export and import
9. Enforcing contracts Procedures, time and cost to enforce a debt contract
10. Closing a business Time and cost to close down a business, and recovery rate

Where is hiring and firing easy—and where not?

One of the biggest factors bearing on startups is the ease of hiring and firing. Also the area hardest to reform. Below is the league table of countries according to hiring and firing difficulty

Difficulty of Rigidity working Difficulty of Cost of Cost of
hiring  hours Firing Hiring Firing
Spain  67 80 50 66 32
Greece  78 80 40 66 30
Germany 80 40 55 21 67
France 80 40 66 47 32
Turkey  44 80 40 55 22
Italy  61 80 30 57 33
Austria  11 80 40 44 31
Hungary 80 20 37 34 34
Sweden 60 40 43 33 24
Finland 60 40 48 22 24
Netherlands 60 60 49 16 16
Ireland 40 30 33 11 52
Poland 60 40 37 26 25
Norway  44 40 30 38 14
Belgium  11 40 10 20 55
Iceland 60 0 31 12 13
Switzerland 40 10 17 14 12
Denmark  11 40 10 20 1
UK 11 20 10 14 9
US 0 0 10 3 8

Discussing this with my partners, we feel the staff count of the companies we are involved with would rise by 20% if labour laws were more flexible in southern Europe. We recruit in the shadow of potential layoffs far into the future. A far cry from Google's we hire three people a day policy, or Microsoft's 65,000 employees.

Food for thought.

[The report was highlighted by Guy Kawasaki.]

Comments

As you said "starting businesses = low unemployment rate. A view that is not currently shared in some countries; in France the equation is protect workers = low unemployment", protecting entrepreneurship or protecting workforce, sounds like the old dialectics, socialism vs capitalism.

Alvaro, yes it is the old debate, the debate, the problem is not finished. I think, though, all agree radical socialism does not work long term

I personally find it frustrating, specially in the technology sector, how liberal market oriented economies are creating world beating competitors. While the rest of us in Europe are still arguing old dialectics.

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