Despite efforts to improve the climate of doing business for entrepreneurs, Spain still lags behind other developed countries when it comes to setting up companies. Further efforts are required to facilitate the foundation and support of SME´s across Spain and the euro zone. That was the message from Dr. Joanna Drake who was speaking at the European Commission’s Italo-Spanish seminar in Madrid on Wednesday.
Fear of failure ranks as the main barrier to entry for those seeking to set up a business, while Dr. Drake stated that Europe needs to re-examine the very concept of failure in business. “In the US, if you fail within the first five years it can actually be seen as an asset. There is an acknowledgement that you are someone who is an entrepreneur who is willing to take risks. We don´t have that same kind of mindset in Europe. But business failure as well as creation is part of the dynamic.”
Dr.Drake added that the insolvency frameworks in place are stifling investment and business development. In Spain, the Corporate Insolvency Framework has somewhat improved the process, “but more needs to be done.” She called for insolvent businesses to be discharged of their outstanding obligations within three years, which would allow entrepreneurs to re-enter the marketplace with a clean slate.
Access to financing is also proving prohibitive for Spanish business, something which the Commission is attempting to rectify with the initiation of the COSME programme. Cosme will seek to provide funding to 300,000 SMEs between 2014 and 2020, with a budget of €2.3 billion. The initiative is already being employed in Spain, with the announcement in January that the EIB would facilitate a €100 million loan to Microbank under the terms of the scheme.
Spain currently ranks 77th in the global rankings in measuring the ease with which one can set up a business. While the number of days required to set up a business has been radically reduced since the start of the crisis, Spain’s figure of 13 days remains well above that of many European counterparts.
Later in the day, Bernardo Aguilera of the Spanish Business Federation said that while reforms had been introduced to improve the business climate for SMEs, there remained some difficult hurdles that have yet to be tackled or overcome.
Mr Aguilera cited the four different types of administrative strands businesses had to confront in Spain-European, national, regional and local. He stated that differing interpretations of directives and laws by different autonomous regions was a major drawback for the country. He also lamented a Spanish Constitutional Court ruling that decreed “market unity does not mean uniformity.” Thus business are forced to contend with a range of administrative red tape that businesses in other countries do not face.
Mr Aguilera said that although Spain had taken steps to reduce the bureaucratic process, the fact remained that Spain has introduced 32,000 different regulations since the arrival of democracy in 1978. Indeed in 2014, 706 new regulations were introduced- a rise of 2.6%.
Mr Aguilera claimed there were measures that could be employed to improve the situation. These included; making EU and national directives more binding on autonomous regions, ensuring greater enforcement of new resolutions, assessing the impact of new regulations and removing complexity within the law to cut down on the duration of legal challenges when they arise.