According to a recent study by UHY International, new business creation in the USA is trailing behind the global average, with the number of new businesses created up just 11% since 2010,* shows a new study by UHY, the international accounting and consultancy network.
The global average increase was 26%, between 2010 and 2014.
The research revealed that the number of new companies created in the USA increased from 505,473 in 2010 to 561,488 in 2012, the last year for which figures are available.
UHY says that this rate of acceleration is slower than in many of its G7 rivals.
China came top in the study, with start-up growth almost doubling (up 98%) in 2014 since 2010 despite its economic slowdown. The United Kingdom was ranked second, with a 51% increase in the number of start-ups, with India third (with a 46% increase).
The BRIC economies (Brazil, Russia, India, and China) averaged a 42% increase in the number of new businesses created over the same period, while the G7 averaged a 31% increase.
UHY’s study shows that Western European economies tended to see a bigger increase in the number of new business ‘births’ compared to other developed economies. The UK, Italy, Germany, and France all had increases in the number of new businesses higher than the G7 average.
By contrast the increase in new business creation over the period was 7%. Australia also beat the G7 average, with a 41% increase in the number of new businesses created.
UHY says that bureaucracy, regulatory hurdles, and restricted access to bank funding are behind the low rate of new business creation.
UHY adds that the US Government has, however, begun taking steps to alleviate the pressures facing new businesses and reduce business taxes. In June 2015, it launched the “Start Up in a Day” scheme designed to shorten the amount of time needed to start a business.
UHY says that policymakers in the USA could learn from steps taken by many European countries to encourage business creation after the financial crisis and recession. Common measures included changes designed to reduce the amount of tax due from start-ups and small companies, and to simplify the bureaucratic burden.
Many countries have also experienced an explosion of alternative finance providers, which has helped improve start-ups’ access to finance. It is estimated that non-bank funding now accounts for 30% of finance provided to companies across Europe.** An estimated €3 billion of European non-bank funding now takes the form of peer-to-peer lending, crowd-funding and other new models.
UHY points out that to sustain growth in the number of new businesses being created, as well as to manage the global impact of the slow-down in the Chinese economy, governments cannot afford to slow the introduction of more business-friendly policies.
Comments from UHY member firm UHY Advisors: “The next few years are not going to be without their own challenges, and governments both here and globally need to find ways to help these new start-ups to grow into successful businesses and even the next generation of multi-nationals.”
“In many Western economies there is still a long way to go in cutting down on bureaucracy. In the USA, for example there is a need to look at simplifying the occupational license system, so entrepreneurs and employees are not deterred by the potentially high costs of obtaining a license.”
“Significantly, the slower rate of acceleration in the USA also reflects the fact that the country has always been a free enterprise economy. In contrast, China is playing catch-up in business creation as the Government begins to open the market up.”
“Alternative finance has been a major bonus to start-ups. As it grows in importance and profile, regulators face the significant question of how to find a balance in their regulatory approach to the sector that gives confidence to potential investors, but does not stifle innovation.”
*2013, the latest figures available
**AFME (Association for Financial Markets in Europe)
***2012, the latest figures available
Number of New Businesses 2010
Number of New Businesses 2014
Rep. of Ireland