The World Bank’s “ease of doing business” rankings is an annual leaderboard that compares all of the countries around the world to see which ones are the easiest to start and succeed in business in. The index has been going for 12 years now, with the top countries seeing few shifts in the rankings for 2018.
The countries which are most friendly to global business continue to be a few small East Asian states, the US, and several Northern European countries. The biggest surprises in this year’s rankings come from over in the Baltics and the Caucasus, where Georgia and Macedonia have skyrocketed up the ladder to bag the 9th and 11th places respectively, up considerably from the year before.
The business rankings are determined by a wide variety of factors, including starting costs, bureaucracy, electricity prices, taxes, corruption, and the entrepreneurial culture of each of the 190 countries assessed. Several EU countries have dominated the top tier of the rankings since the index was first launched. These are Denmark, the UK, Sweden, Estonia, Finland, and Ireland.
These countries are long-time strong performers and continue to attract some of the highest levels of foreign direct investment (FDI) on the planet, for reasons we will discuss below. Other major European economies, however, are languishing.
Belgium, France, Italy, and Spain are among the worst performers in the developed world, with entrepreneurs often finding it exceedingly difficult to conduct business in these countries. Read on to explore how and why these huge regional disparities exist within the European Union, and what can be done to rectify this.
Denmark (3rd Place)
The Scandinavian nation of Denmark once again came out on top as the best European country to do business in, owing largely to a lack of corruption, flexible labor market, and a very high level of tech-readiness. Denmark ranked very highly in the “dealing with construction permits”, being the best country in the world for those wishing to build.
This and the high levels of personal freedom are the results of a spate of initiatives taken by the Danish government to attract entrepreneurs and foreign capital, including the generous welfare and savings initiatives that have resulted in the average Danish household having a net worth equal to 497% of net disposable income. The country still has room for improvement, however, with entrepreneurs citing the heavy tax burden as the main source of difficulty.
United Kingdom (7th Place)
The UK has always ranked highly, having been famously welcoming to businesses for the past two hundred years. The country has some of the lowest starting costs in the entire world, with the cost of registering a new business being only 14EUR, compared to about 650EUR in the United States. The UK also ranks top for personal freedom, entrepreneurial culture, and access to funding.
The country has, however, been marked out for criticism in a number of areas. Rising costs have been a dampener on business activity recently, with the costs of construction, labor, and electricity rising considerably. New businesses in the UK are recommended to use platforms such as Business Electricity Prices in order to find the most competitive rates, as fuel costs are projected to keep rising in 2019.
Estonia (12th Place)
The tiny Baltic nation of Estonia has been the EU upstart of the decade, having completely overhauled the economy to become one of the most technologically advanced countries in the world. Their E-residency program has succeeded in attracting high-tech companies and entrepreneurs from across the world, while the lack of bureaucracy and strong government support for small businesses have helped cement Estonia’s place as one of the best countries to conduct business on Earth. Estonia’s digital economy also makes it easy for businesses to register, file taxes, get credit and acquire permits entirely online.
France (31st Place)
France has seen some big improvements in the past couple of years but Europe’s 3rd largest economy still remains a difficult place in which to conduct business. Analysts have highlighted the particularly high corporation tax burden which is thought to be discouraging businesses from operating in France (although President Macron has pledged to lower this).
France also has famously strict labor laws, which make it difficult for smaller companies to attract or fire workers, resulting in an extremely inflexible labor market. As noted, however, France’s position is moving up the ranks quickly, as Macron enacts a spate of business-friendly reforms. FDI into the country is up 16% year-on-year and looks to increase as France nets gains from Brexit.
Italy (46th Place)
Italy has never been a strong contender in the ease of doing business rankings, for a number of reasons. By far the most pressing issue is Italy’s vast bureaucracy, which requires people starting a business to fill out dozens of different forms for various local and state-level government offices, as well as having to deposit huge amounts of capital with Italian banks before being able to start trading.
Moreover, levels of corruption are much higher than the EU average, although this varies massively across the country. The average amount of time it takes a business to get electricity is 100 days – the longest in the EU. It’s also estimated that business owners spend around 269 hours a year dealing with taxes, of which 15 separate payments must be made each tax year.
Belgium (52nd Place)
Belgium may be one of the wealthiest countries on Earth, but it ranks behind Russia, Mexico, Kosovo, and Moldova when it comes to doing business, making it one of the worst performers on the continent. While funding levels are high, the biggest challenges are taxation, payroll, and registering, which are all highly complicated and costly processes. Obtaining the various permits required to operate can take months or even years, owing partly to an overstretched and poorly trained local government.
While the EU remains a great place for the world to conduct business in, it’s clear that it isn’t working for everyone. Stronger efforts must be made to bring those languishing at the bottom of the league tables up to scratch. This must be an effort supported on an EU level, and not left solely to national governments.
