Funding, finance and efficiency – three critical factors for entrepreneurial success in Europe

A guest blog by Robert Coles, European Regional Leader, RSM International

report published by RSM and The Business and Information Technology School (BiTS) in Germany, has revealed flaws in Europe’s business infrastructure, which are inhibiting growth on the continent. The report, based on the responses of 356 partners from RSM member firms across fourteen European countries, highlights that inefficient bureaucracy, inappropriate tax structures, and poor access to growth funding, are fundamental burdens to business growth.

Only 10% of RSM partners view their country’s level of bureaucracy as good or very good, and just 16% said their country’s tax structure is appropriate. On financing, 16% of respondents rated the availability of bank loans in their country as good or very good; only 12% said the same about risk financing. The financing situation is at its worst in Spain, where 88% of RSM partners rated the availability of bank loans as poor or very poor. Conversely, 62% of Swedish respondents rated their access to bank loans as good or very good. 

BiTs ranked the 14 European countries for business infrastructure as follows:

Top group: Ireland, The Netherlands, Norway, Sweden

Slightly above average: Austria, Belgium, Germany, Poland

Slightly below average: Hungary, Portugal

Crisis and recovery countries: Bulgaria, France, Greece, Spain

A business-friendly tax system and a high-quality education infrastructure are key reasons why Ireland is in the top group, despite the difficulties Irish businesses have with access to bank loans. Approach to knowledge, innovation and tax rates are the main contributors to the Netherlands’ positioning, while Norway’s ranking in the top group is due primarily to good access to bank loans and organisational investment in employees. Sweden is rated above average in almost all indicators, giving it the best overall business infrastructure of the 14 countries reviewed.

The report, which is the first in a series of three, illustrates that the favourability of political conditions and strength of the institutional culture of companies are interdependent. In countries with weak justice systems, unstable governments or inefficient tax systems, the culture of mistrust in the government often spreads into the business sphere and the relationship between employers and employees. Spain and Greece score poorly on both political conditions and the institutional culture of companies.

Across the European countries reviewed, the study shows that internationally focused companies are more growth orientated than their domestically-orientated peers. One measure of difference is that companies with a domestic focus tend to exhibit less product diversification and differentiation than organisations with global approach.

It is clear that there are many fundamental issues to resolve in Europe to enable its business to become more competitive, not only domestically and within the continent, but on the global stage. These concerns need to be resolved or Europe’s businesses will feel increasing heat from more agile, efficient and customer orientated organisations from other parts of the world.