The European Commissioner for Justice, Michael McGrath, has unveiled a wide-ranging proposal on Wednesday that will not, on its own, change the direction of the EU economy, but is an important step in improving competitiveness.
The initiative, known as EU Inc, enables a new company to incorporate in another EU member state within a period of 48 hours for a fee of €100 under a single regime that has a common set of regulations and tax rules.
A company must be under 10 years old and focused on the hi-tech and innovation economy. Previously, if a company wanted to expand in another member state, it faced 27 different regulatory regimes and application processes.
The objective of EU Inc is to foster an innovation culture across the bloc that makes it easier for companies to scale up and raise investment. As it stands, far too many EU startups migrate to Silicon Valley in the US because there is a much deeper pool of investors and opportunities.
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Interestingly, the EU Inc plan chimes with the recommendations of a new report, written by Alan Ahearne, a professor of economics at the University of Galway, which was commissioned by the Collison brothers – the founders of Stripe.
It underlines the heavy reliance of the Irish economy on US multinationals to drive technological progress and productivity. But it warns that geo-political shifts mean that the Government cannot rely on future flows of US investment similar in scale to the past. Therefore, more needs to be done to develop the domestic economy, so that it becomes the engine of growth in the future.
In Ireland, as across the EU, there are a range of barriers to growing SMEs, including difficulties in accessing funding to allow them to scale up and roadblocks in entering other EU markets. EU Inc is a useful step forward but the EU also needs to make progress in other areas, too, including completing the Savings and Investment Union and removing remaining barriers in the Single Market. To date, national interests and inertia have combined to keep these key developments stuck.
