Business entry and business exit are natural processes that are inherent to European economic life. In fact, 50% of enterprises do not survive the first five years of their life and of all business closures, bankruptcies account in average for 15%. Even though today's failure can hold the germ of tomorrow's success, business closure is not yet seen as an opportunity for a more reinvigorated entrepreneurship and business activity. Despite their setback, failed entrepreneurs still prefer an entrepreneurial career to a salaried job after market exit. They learn from their mistakes and those that re-start have lower rates of failure and experience faster growth than newly established companies. Yet, even though only 4-6% of bankruptcies are fraudulent, public opinion makes a strong link between business failure and fraud. Many honest bankrupts feel discouraged to re-start due to the stigma and difficulties or discrimination faced after a bankruptcy. In addition, bankruptcy has an important secondary effect on entrepreneurship: many would-be entrepreneurs do not start a company because of their fear of the consequences of business failure. The latest data indicate that in the euro zone bankruptcies grew by 5% in 2010 after having grown by 46% in 20093. The deterioration in 2009 came on top of a severe increase in 2008, that saw bankruptcies grow in Spain (+187%), Ireland (+113%), Portugal and Denmark (+67%), Italy (+45%) and the UK (+31%). In terms of total numbers, corporate insolvencies grew 22% in 2009 to 185,111 for Western Europe (EU15 + Norway and Switzerland). This made it the worst year in more than a decade for countries such as Sweden (since 1996), the United Kingdom (since 1993), the United States and Norway (since 1992) and was an all-time negative record for countries such as France, Spain, the Netherlands, Belgium, Switzerland, Austria, Finland, Ireland and Portugal. The total number of insolvency related job losses in Europe in 2009 is estimated at 1.7 million (1.2 million in 2008). A second chance policy that enables formerly bankrupt entrepreneurs restart may represent one of the most promising and under exploited policy options for company creation and job growth.
