A recent report by the World Bank entitled ‘Doing Business – 2010’ serves to emphasize how far Spain lags behind other developed economies in easing the path of entrepreneurs in starting and running businesses and by implication, how important it is to have access to specialist legal and financial advice.

The World Bank report compares 181 countries using a model of setting up and running a small general commercial business in a new industrial unit with up to 20 employees. 

The report ranks Spain at number 146 in ease (or rather difficulty) of starting a business and at 62 in ease of running a business.   According to the report, the easiest country in the world to start a business is New Zealand, while the UK is ranked at number 16, and to run a business the easiest country is Singapore, and the UK is ranked at number 5. 

Following the model business through 10 stages in its life-cycle from forming the company, buying and building premises, employing staff, enforcing contracts through the courts, through to finally closing the business down, the report finds that Spain scores well when it comes registering ownership of property, paying taxes and closing a business down, but the bureaucratic burden drags the score down in most other respects.

The burden of administration drags the hardest in the fields of obtaining permits for building and opening businesses, hiring and firing staff, and pursuing your rights through the courts. 

Obtaining building permits is reckoned to take an average of 233 days compared with 25 days in the fastest country, Singapore, and 93 days in the UK, putting Spain in 53^rd place. 

The complexity of hiring staff to work in the company’s new premises once they have been built and opened, and then possibly having to sack them later puts Spain in 157^th place.  

Should the company need to fire any of those staff the average number of weeks salary payable as compensation for dismissal is 56 as compared with New Zealand and Australia where the average amount of compensation payable is nothing, and the UK where the average amount of compensation is 22 weeks’ salary.   Here in Spain there are strict procedures to be followed when dismissing staff and failure to do so can result in the former employer incurring heavy penalties, should the disgruntled employee take their former employer to the labour tribunal.

In any business sooner or later there is going to be a dispute with a customer, or supplier.  The World Bank compared the steps required and time taken to bring court proceedings to recover money owed for goods sold and the overall cost of those proceedings relative to the amount owed.   In Spain they found that a court case required 39 different procedures, took an average of 515 days and costs ate up 17.2% of the claim.  Within the scale of the 181 countries studied Spain ranked 52^nd.  In first place was Luxembourg, with the UK at 23^rd where the average time taken for the type of dispute used as a model was 399 days but costs swallowed 23.4% of the debt.  The worst of the developed economies was Italy which ranked at number 156 where the average time involved was 1,210 days and costs amounted to 29.9% of the amount involved.

The complexity of doing business and protecting your rights in Spain heightens the need for qualified professional advice, whether you are embarking on a new business venture or need to enforce your rights if you become involved in a dispute.