The BRICS economies have registered the highest growth rate in business creation from 2007 to 2011, closing in on the seven largest economies in the world, according to a RSM International report.
The RSM International report entitled Rebuilding the Global Economy revealed that the BRICS countries, namely Brazil, Russia, India, China and South Africa, have registered a 5.8% combined annual growth rate in new business creation while the Group of 7 (G7) including Canada, France, Germany, Italy, Japan, UK and US registered a 0.8% increase.
RSM International chief executive officer Jean Stephens said: "Whilst our report highlights a convergence of new business growth rates between the G7 and BRICS economies, with the BRICS collectively showing much stronger growth, there is huge variation within the two groups."
Amongst the 38 countries surveyed, France recorded the strongest growth rate in business creation from 2011 to 2012 with a 16.7% increase. This is due to a government programme launched in 2009 entitle ‘Auto Entrepreneur’ encouraging company start-ups.
On the other end of the spectrum, Canada registered the highest loss in businesses with a 13.6% decrease in registered enterprises from 2011 to 2012. According to RSM International’s report this is due partly to a slow down in business investments and to "the impact of aggressive fiscal adjustment programmes at both federal and provincial levels".
Of all surveyed countries, China counts the highest number of registered businesses with over 13m operating enterprises. And the country leads the BRICS group in business formation with a reported 9.1% increase in businesses.
While China and Brazil both saw an increase in the number of registered businesses, Russia, India and South Africa have seen their numbers decrease. The report hinted that South Africa’s losses reflect the growing competitiveness of the rest of Africa.
The recent political development in Ukraine suggests that the coming year will be challenging for Russia in terms of business creation. On the other hand an expected boost of India’s GDP in the coming year could serve a resumption of new company formation in the Asian country, according to RSM International.
"Entrepreneurs all over the world are continuing to start businesses, the most active sectors being wholesale and retail trade, and professional services, which have relatively low barriers to entry," Stephens said. "However, nearly a third of the countries we reviewed exhibited a decline in the number of active enterprises. Creative destruction and the reallocation of capital to more efficient existing and new businesses will have a large part to play in this process but the global economy remains fragile."
"The watch phrase for the next year must be no more than cautious optimism as individuals and companies respond carefully to government actions and macro indicators," she concluded.