The United Kingdom has improved entrepreneurs’ access to finance through funding worth $4 billion and increased bank lending. Entrepreneurs can be a major contributor to job growth in all G20 countries…with 81% of entrepreneurs in G20 countries expecting to create new jobs.19
Recommendation 4: Remove barriers inhibiting entrepreneurs from starting and growing businesses
Promote jobs growth by removing barriers that inhibit entrepreneurs from starting and growing businesses.
Increase the ability of entrepreneurs to generate net jobs
Why It Matters
By making it faster and simpler to start a new business, hire and retain talent, manage performance, and foster innovative ideas, governments can create the conditions for entrepreneurs to thrive and grow as the driver of grass-roots employment.
Small and medium enterprises (SMEs) provide a majoity of formal jobs in both developed and developing countries and it is becoming clear that these young firms are contributing more to job creation than previously recognised.
During the crisis, jobs loss in most countries reflected the downsizing of mature businesses; while in young firms (five years old or less) net job growth remained positive. Young firms with fewer than 50 employees represent only around 11 percent of employment, but they generally account for more than 33 percent of total job creation in the business sector, with their share of job destruction at about 17 percent.20 In the next two years, 41 percent of entrepreneurs expect more than 8 percent per annum growth, and 81 percent of them expect to create new jobs.21
Although young, small firms alone cannot create enough jobs to solve the unemployment crisis, efforts to encourage more entrepreneurs to start – and critically, to grow – businesses will be of benefit across the G20.
The increasing reach of digital and mobile technologies will continue to enable opportunities for young SMEs to be created and grow outside traditional markets, and this in turn challenges mature businesses to respond with similar entrepreneurial and innovative efforts.
To be successful, young SMEs require additional, tailored support in areas such as access to financing, simpler (i.e. less time consuming and onerous) regulatory requirements, bankruptcy laws that do not overly penalise failure, training/mentoring, and forums for connecting with other growing businesses.
Countries can create the conditions for successful and sustained jobs growth through entrepreneurs and established businesses by: enabling a fair and competitive landscape supportive of private sector growth; providing adequate or better infrastructure to support new enterprises; and encouraging broad-based tolerance for failure.
Create a regulatory environment that enables greater access and obtainment of lending and financing to qualified new enterprises through channels such as:
- private funds
- local banks/national banks, public/private partnerships
- matching funds/co-investments
- new models of funding for star-ups such as crowd funding
Minimise “red tape” and streamline processes related to starting and growing businesses.
Remove barriers that deter businesses from taking on and retaining talent:
- Address legislation which places restraints on appropriate forms of remuneration such as offers of stock options
- Reduce taxes and burdensome regulations which directly create a disincentive to hire e.g. payroll taxes, investment earnings taxes
- Create specialised working visas for entrepreneurs hiring overseas talent
Revise bankruptcy and liquidation legislation to reduce punitive consequences and overly negative stigma of failed business to boost innovation and defuse the fear and perception of disgrace of failure.
Conduct Regulatory Impact Assessments to ensure burden of new regulation is not overly onerous, resulting in policy that omits the consideration of longer term business specific themes.
Support access to reliable, quality, low cost connectivity infrastructure.
Establish supporting networked for start-ups including business incubators, co- and shared workspaces, development clusters and sponsored forums/trade missions for networking and business connectivity.
What Can Be Achieved
A number of G20 nations are taking action to successfully support entrepreneurs, including Turkey.
Turkey’s Promoting Youth Employment Operation22
"Promoting Youth Employment Operation", an operation composed of technical assistance and grant project, designed to help young people to find jobs or set up their own businesses, was completed in October, 2013. Over the course of the two year technical assistance project, 326 young people benefited from entrepreneurship trainings under YES Model, 78 young people received individual coaching, 297 young people received KOSGEB certificate. Under grant component of the operation, entrepreneurs in 43 "less-advantaged" provinces of Turkey were provided internships, on-the job training opportunities, and individual coaching. Approximately 13,000 young people benefited from the project. Of these, 2,497 were hired, 218 started up their own business, 6,176 received vocational certificates and 2,768 completed an internship.