Spain: Recent growth in entrepreneurial activity

Experts acknowledge the success of Spanish measures to encourage self-employment, but argue that many unemployed people have decided to set up their own businesses only because they cannot find a job, and that necessity-driven new businesses have lower survival rates. They say entrepreneurship should be supported with long-term measures adapted to entrepreneurs’ actual needs.

Introduction

Spanish workers still face difficult conditions in the labour market resulting from the economic crisis. This is reflected in the high unemployment rate of over 25% and more than 4.5 million unemployed. The difficulties experienced by unemployed people in getting a job have led many to set up their own businesses. This is particularly so with young people who have never had a job and among workers aged over 50 years-old.

Support for entrepreneurs

Public and private entities are increasingly supporting entrepreneurship and, during the last couple of years, the government has also approved several measures promoting self-employment and entrepreneurship, such as discounts in social security contributions.

For example, the Strategy for Entrepreneurship and Youth Employment adopted by the government in February 2013 (in Spanish) includes measures such as:

  • a flat-rate social security contribution of €50 for new self-employed entrepreneurs;
  • aids to help young people become self-employed;
  • harmonisation of unemployment benefit with the start of an entrepreneurial activity;
  • capitalisation of unemployment benefits into one single payment;
  • a second chance for failed entrepreneurs;
  • initiatives to foster an entrepreneurial culture;
  • advice and guidance in employment offices.

The success and acceptance of the flat rate social security contribution, which had been designed primarily for people under 30 years-old, led to it quickly being extended to all new self-employed people regardless of their age. Since its approval, more than 290,000 entrepreneurs have benefited from this reduced contribution, of which 113,000 were under 30 years-old. Also, in the past 12 months, the  membership of the special social security regime for self-employed workers increased by 80,753 people; this increase was 2.7% more than the growth in the general social security scheme and the best result since October 2008.

Discussion

However, these positive results should be analysed with some caution. According to the 2013 Global Entrepreneurship Monitor (GEM) report for Spain (in Spanish), the proportion of total entrepreneurial activity linked to necessity (such as lack of work opportunities in the labour market) increased from 25.6% in 2012 to 29.2% in 2013. Before 2010 this group of entrepreneurs represented only 15% of such activity. Entrepreneurial activity associated with business opportunities fell from 72.3% in 2012 to 66.8% in 2013. The GEM report suggests that this could be a cause for concern, as necessity-driven new businesses tend to have lower survival rates. This is generally because their strategies might not be so well planned, or because the entrepreneurs may simply close their businesses if they find a better job opportunity.

Similarly, according to the Observatory of the Entrepreneurial Climate's 2013 Report (in Spanish, 2.2 MB PDF), one of the main reasons why Spanish entrepreneurs have decided to set up their own business is the lack of opportunities in the labour market (cited in 35% of cases). Here, entrepreneurship is seen as an option to overcome the problematic employment situation rather than a ‘vocational’ choice.

Some experts are pointing to a possible ‘entrepreneurial bubble’ with entrepreneurship being encouraged in a somewhat irresponsible way, because the actual basis for solid new business often does not exist. Experts want more funds to invest in new ideas, training and projects, with the idea that then there will really be opportunities to create solid enterprises. While acknowledging the many success stories, they also argue that:

  • not everybody is prepared for entrepreneurship;
  • business mortality rates and the lessons that can be learnt from business failure should also be considered.

Nevertheless there is a positive side, as the entrepreneurial environment in Spain is much more developed now than it as a few years ago. There are more training programmes and support, and public funds are available to help entrepreneurs define their business plans better and to be more realistic and competitive.

In an article (in Spanish) on the website of the Entrepreneurs' Forum of the Employers’ Organisation in Gipuzkoa, the forum's president Xabier de al Maza explained that, sometimes, entrepreneurship is ‘sold as something too beautiful’, linked to positive and even idyllic values. However, he added that setting up a business is tough, particularly in the current crisis, when it is so difficult to obtain external financial support. On the whole, most public support measures are helpful and effective, but it is important that public authorities apply only sensible and long-term measures which will guarantee new businesses’ competitiveness. 

Trade unions such as those in the Confederation of Workers Unions (CCOO) have an ambivalent view of this phenomenon. They  welcome the job creation that new entrepreneurs can create, but insist on the need for additional public support measures to guarantee the viability of new businesses, as well as job quality.  

Commentary

Promoting entrepreneurship improves employment creation and a country’s economic activity. However, the aim is not just to create businesses, but also to ensure they are profitable and sustainable, and run by entrepreneurs who are competent enough to make their enterprises survive.

According to an article in the CincoDías business newspaper (in Spanish), published on 2 September 2014, authorities should ensure that they are promoting ‘responsible entrepreneurship’, offering entrepreneurs not just an initial boost, but also financial and legal support for several years afterwards. At the same time, entrepreneurs must have the knowledge required to face the challenge they are taking on and to produce a thorough and strategic analysis of real market needs. Moreover, public incentives granted must be sensible and long term, guaranteeing the competitiveness of new businesses.

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