Number of business startups in The Netherlands increasing faster than most European nations
Research by UHY, the international accounting and consultancy network
The number of business startups in The Netherlands is increasing faster than most other major European nations, reveals new research by UHY, the international accounting and consultancy network.
UHY Professionals studied data on new business registrations over the last five years in 20 countries across its international network, including the G8, as well as key emerging economies, including the BRIC nations (Brazil, Russia, India and China).*
The research shows that the number of business startups in The Netherlands has increased, on average, 4.8% per annum over the last five years, compared to an average of 0.4% for non-BRIC nations. This means that The Netherlands has the eighth fastest rate of new business creation among the 19 countries studied. 50,351 new businesses were registered in The Netherlands in 2010, compared to 41,666 in 2006.
However, the increase in new businesses in the Netherlands has slowed to 3.1% in the last year.
According to UHY, policymakers around the world have been taking measures to encourage greater entrepreneurial activity during the financial crisis, but the research highlights the need for some countries to do more to help new business startups, which in many countries are struggling with low demand and restricted access to bank finance.
While in some countries the number of new businesses being created has increased by double digits over the last five years, in others the number of new business startups has declined by a double digit percentage.
The country with the fastest increase in new business startups is Russia, one of the so-called BRIC nations, which has seen a 25.6% annual increase in the rate at which new businesses are being created over the last five years. Nearly 3.2 million new businesses were registered in Russia in 2010, compared to 1.3 million in 2006.
The country which has seen the biggest slowdown in the rate of new business creation is Spain. The annual growth rate over the last five years is minus 14.6%. 76,622 new companies were created in Spain in 2010, compared to 143,859 in 2006.
Paul Mencke, Partner of Govers Accountants/Consultants in The Netherlands, member of UHY comments: “The difference between developed countries and the emerging economies is quite staggering, with the number of new startups created decreasing for about half of the countries in our study. The BRIC nations are all in the top half, while among the G8, only Canada, France and Russia have seen an increase in new startup formations over the last five years.”
“The economy of The Netherlands has fared well in comparison to other eurozone countries over the last five years. This is reflected in the increase in new business startups during that period. While this is encouraging, there are still obstacles in the way of business creation that the government could remove.”
He adds: “Small businesses are seen as the engine of growth and employment, so are critical to economic prosperity. Many governments – particularly in the West - are under pressure to increase tax revenues to reduce public deficits. Unlike large multinationals, which can shift economic activity to low tax jurisdictions, the tax burden falls disproportionately on small businesses.”
The research shows that, among the G8, France has the highest growth rate for business startups. This is due to a new structure for small companies called ‘Auto Entrepreneur’ which was introduced in 2009. These are micro businesses with turnovers under € 80,000 for industrial enterprises and under € 32,000 for services.
Auto Entrepreneur companies are exempt from business taxes for the first two years, and have considerably lighter compliance requirements than other companies.
Govers Accountants/Consultants suggests that the environment for small businesses in The Netherlands could be improved in the following areas:
• The availability of finance facilities
For handling reasons financing parties, such as banks and informal investors, prefer larger financing arrangements over smaller ones. For future prosperity we consider it essential that small companies remain access to external finance facilities.
• The quality, awareness and availability of R&D
The quality and availability of R&D facilities should be further improved. Companies should be made more aware of the R&D facilities. As an example, many investors are not fully informed about the possibilities of the innovation box. It’s also not easy to determine the allocation of profits in the innovation upfront. Furthermore, the cooperation between universities, companies and the government should be improved in order to make R&D facilities more effective.
• Employment law
Some companies consider the high costs of labour and inflexible labour legislation as obstacles for investing in The Netherlands. Temporary employment contracts are possible for three years (four years if employees are younger than 27), the labour market could still be more flexible, which would help small businesses take on staff.
• Inconsistent tax legislation
The tax legislation has to be more consistent. More consistent tax legislation makes it easier for companies to make an estimation of the tax consequences of investments in the Netherlands during a longer period of time.
• Minimum capital
The minimum required share capital to found a company (€ 18,000) can act as an obstacle to new business creation. Especially in the current situation it is hard to finance the minimum capital, both by banks and informal investors. However, new legislation has been announced from July 1st 2012. No minimum will be required, which should boost company formation.
* Figures obtained from official sources. In the majority of countries, data is only collected on incorporated entities. The five most recent years of data for each country was obtained, 2006 to 2010.
The number of business startups in The Netherlands is increasing faster than most other major European nations, reveals new research by UHY, the international accounting and consultancy network.
UHY Professionals studied data on new business registrations over the last five years in 20 countries across its international network, including the G8, as well as key emerging economies, including the BRIC nations (Brazil, Russia, India and China).*
The research shows that the number of business startups in The Netherlands has increased, on average, 4.8% per annum over the last five years, compared to an average of 0.4% for non-BRIC nations. This means that The Netherlands has the eighth fastest rate of new business creation among the 19 countries studied. 50,351 new businesses were registered in The Netherlands in 2010, compared to 41,666 in 2006.
However, the increase in new businesses in the Netherlands has slowed to 3.1% in the last year.
According to UHY, policymakers around the world have been taking measures to encourage greater entrepreneurial activity during the financial crisis, but the research highlights the need for some countries to do more to help new business startups, which in many countries are struggling with low demand and restricted access to bank finance.
While in some countries the number of new businesses being created has increased by double digits over the last five years, in others the number of new business startups has declined by a double digit percentage.
The country with the fastest increase in new business startups is Russia, one of the so-called BRIC nations, which has seen a 25.6% annual increase in the rate at which new businesses are being created over the last five years. Nearly 3.2 million new businesses were registered in Russia in 2010, compared to 1.3 million in 2006.
The country which has seen the biggest slowdown in the rate of new business creation is Spain. The annual growth rate over the last five years is minus 14.6%. 76,622 new companies were created in Spain in 2010, compared to 143,859 in 2006.
Paul Mencke, Partner of Govers Accountants/Consultants in The Netherlands, member of UHY comments: “The difference between developed countries and the emerging economies is quite staggering, with the number of new startups created decreasing for about half of the countries in our study. The BRIC nations are all in the top half, while among the G8, only Canada, France and Russia have seen an increase in new startup formations over the last five years.”
“The economy of The Netherlands has fared well in comparison to other eurozone countries over the last five years. This is reflected in the increase in new business startups during that period. While this is encouraging, there are still obstacles in the way of business creation that the government could remove.”
He adds: “Small businesses are seen as the engine of growth and employment, so are critical to economic prosperity. Many governments – particularly in the West - are under pressure to increase tax revenues to reduce public deficits. Unlike large multinationals, which can shift economic activity to low tax jurisdictions, the tax burden falls disproportionately on small businesses.”
The research shows that, among the G8, France has the highest growth rate for business startups. This is due to a new structure for small companies called ‘Auto Entrepreneur’ which was introduced in 2009. These are micro businesses with turnovers under € 80,000 for industrial enterprises and under € 32,000 for services.
Auto Entrepreneur companies are exempt from business taxes for the first two years, and have considerably lighter compliance requirements than other companies.
Govers Accountants/Consultants suggests that the environment for small businesses in The Netherlands could be improved in the following areas:
• The availability of finance facilities
For handling reasons financing parties, such as banks and informal investors, prefer larger financing arrangements over smaller ones. For future prosperity we consider it essential that small companies remain access to external finance facilities.
• The quality, awareness and availability of R&D
The quality and availability of R&D facilities should be further improved. Companies should be made more aware of the R&D facilities. As an example, many investors are not fully informed about the possibilities of the innovation box. It’s also not easy to determine the allocation of profits in the innovation upfront. Furthermore, the cooperation between universities, companies and the government should be improved in order to make R&D facilities more effective.
• Employment law
Some companies consider the high costs of labour and inflexible labour legislation as obstacles for investing in The Netherlands. Temporary employment contracts are possible for three years (four years if employees are younger than 27), the labour market could still be more flexible, which would help small businesses take on staff.
• Inconsistent tax legislation
The tax legislation has to be more consistent. More consistent tax legislation makes it easier for companies to make an estimation of the tax consequences of investments in the Netherlands during a longer period of time.
• Minimum capital
The minimum required share capital to found a company (€ 18,000) can act as an obstacle to new business creation. Especially in the current situation it is hard to finance the minimum capital, both by banks and informal investors. However, new legislation has been announced from July 1st 2012. No minimum will be required, which should boost company formation.
* Figures obtained from official sources. In the majority of countries, data is only collected on incorporated entities. The five most recent years of data for each country was obtained, 2006 to 2010.
