July 29, 2013 – Australia is lagging behind in business creation, according to figures from global research by RSM, the seventh largest global network of independent audit, tax and consulting firms. RSM studied data on business ‘births’ and ‘deaths’ over the last five years in 35 countries across its international network. Australia ranks 23rd on the list, trailing behind other Asian countries like Hong Kong, China, Singapore, India and New Zealand.
Over the last five years*, Australia has seen a net gain of 58,000 businesses, an annual compound growth rate of 0.7 per cent. This puts Australia on par with the UK (0.7 per cent growth rate) and ahead of the US, which had only a 0.3 growth rate.
According to RSM, whilst some governments around the world have been looking for ways to stimulate entrepreneurship in the wake of the financial crisis, others have been slower to respond. The research clearly shows that with businesses around the globe facing a variety of challenges including regulation and compliance changes, tighter financing requirements and rising commodity prices, more needs to be done to boost business creation and survival.
Of the 35 countries sampled, Hong Kong has exhibited the fastest rate of new business creation over the last five years – 9.9% on an annualised basis, from 655,000 to 956,000 – while South Africa has seen the steepest decline in the number of active enterprises, – 3.8% per annum, from 956,000 to 817,600.
Other Asian countries with rapid growth included China (6.9 %), Singapore (4.8%), India (4.7%) and New Zealand (4.4%).
Number of active enterprises (in 000s), 2007-11
Compound annual growth rate
Jean Stephens, Chief Executive of RSM, comments: “While most countries have seen the number of active businesses increase over the last five years, for a significant number the annual growth rate is sub two per cent.”
“Business is vital to jobs and prosperity, but with many countries – particularly in the West – cutting public spending and raising taxes, creating and growing a business has become more challenging than ever before.”
She adds: “Governments can do more to encourage entrepreneurship and help businesses thrive. In many economies, lack of external finance is a major impediment to starting and growing a business. Since the financial crisis, banks have de-risked and come under pressure to hold more capital in reserve, which has hindered their ability to lend to businesses.”
Neil Cribb, Director of RSM Bird Cameron in Australia says: “Australia was relatively insulated from the global financial crisis, but with the mining sector slowing down, the outlook is a concern. Cuts to interest rates and a decline in the value of the Australian dollar are helping some businesses. However, the costs of doing business in Australia, including high income tax rates, high labour costs and low productivity and compliance costs are still major issues, in addition to the current uncertainty in the political environment. The corporate tax rate in Australia is 30 per cent, for example, whereas in Singapore it currently stands at 17 per cent and in Hong Kong it is 16.5 per cent. This remains one of a number of important factors when businesses are deciding whether to invest in Australia.”
* 2007-11 (most recent data available)
RSM is one of the world’s largest networks of independent audit, tax and advisory firms, encompassing over 100 countries, 700 offices and 32,500 people internationally. The network’s total fee income is US$3.9 billion.
RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. RSM International Limited does not itself provide any accounting and advisory services. Member firms are driven by a common vision of providing high quality professional services, both in their domestic markets and in serving the international professional service needs of their client base.
RSM actively engages in promoting and celebrating the very best in entrepreneurship, championing the role of the entrepreneur in today’s world economy and lobbying governmental and regulatory bodies to protect their interests.
RSM is a member of the Forum of Firms. The objective of the Forum of Firms is to promote consistent and high quality standards of financial and auditing practices worldwide.
About RSM Bird Cameron
RSM Bird Cameron is the largest mid-tier accounting firm in Australia with national ownership and profit sharing and offers a full range of specialist advisory services, including business consulting and advisory, assurance and advisory, taxation consulting, corporate consulting and turnaround and insolvency. RSM Bird Cameron is a core member firm of the RSM network.