The Commission's Bold Prediction
When the European Commission published its impact assessment alongside the EU Inc proposal, one number captured headlines across Europe: 300,000 new companies. According to the Commission's modeling, the introduction of the EU Inc corporate form could stimulate the creation of 300,000 additional businesses within the first five years of implementation, generating an estimated 1.6 million new jobs and adding €47 billion to EU GDP annually.
These are extraordinary claims. But are they realistic? To answer this, we need to understand how the Commission arrived at these figures — and what critics say is wrong with the analysis.
How the Numbers Were Calculated
The Commission's impact assessment, prepared with input from economic modeling firms and academic experts, bases its projections on several key assumptions:
Barrier Reduction Effect
The primary driver of new company formation is the reduction of cross-border barriers. The Commission estimates that the EU Inc would reduce the administrative cost of establishing a cross-border business by 60-80%. Based on established economic literature linking business formation costs to entrepreneurship rates, this translates to a significant increase in new company creation.
Research by the World Bank's Doing Business project has consistently shown that every 10% reduction in business formation costs leads to approximately a 1.5-2.5% increase in new company registration. Applied to the EU's annual rate of approximately 2.8 million new businesses, even a modest impact produces large absolute numbers.
Latent Demand Unlocked
The Commission also accounts for latent demand — entrepreneurs who currently don't start businesses because cross-border expansion is too complex. A 2024 Eurobarometer survey found that 28% of Europeans who considered starting a business cited cross-border complexity as a deterrent. The EU Inc is expected to convert a portion of this latent demand into actual company formations.
The Multiplier Effect
New companies create demand for services from other companies — legal, accounting, technology, real estate. The Commission applies a fiscal multiplier of approximately 2.3 to estimate the total economic impact, including these indirect effects. The 1.6 million jobs figure includes both direct employment in new EU Inc companies and indirect employment generated through the supply chain.
The Skeptics Respond
Not everyone is convinced. Several prominent economists and business organizations have challenged the Commission's projections on multiple grounds.
The "Delaware Effect" Critique
Some critics argue that many of the 300,000 new EU Inc companies would not be genuinely new businesses but rather re-incorporations of existing companies. Just as many US companies incorporate in Delaware for legal advantages without creating new economic activity, companies might convert to EU Inc status without actually expanding operations.
"The Commission risks conflating legal restructuring with genuine economic growth. If 200,000 existing companies simply re-register as EU Inc entities, the real new company figure drops dramatically." — Bruegel Institute analysis
The Commission's impact assessment partially addresses this by distinguishing between "new formations" and "conversions," but critics argue the boundary is blurred.Implementation Quality Risk
The projections assume that the EU Inc will be implemented as proposed — with a fully functional digital registration system, seamless cross-border recognition, and effective integration with the European Business Wallet. But EU legislation often loses ambition in transposition.
The Bruegel think tank has pointed to the experience of the Societas Europaea, which was expected to be widely adopted but has seen only about 3,500 formations in 20 years — a fraction of initial projections. The SE's failure was largely attributed to complexity and the cost of formation, issues the EU Inc explicitly addresses but may not fully solve.
Uneven Geographic Impact
Economic modeling by the European Central Bank suggests that the benefits of the EU Inc would be unevenly distributed. Countries with already-efficient business formation processes (Estonia, the Netherlands) would see less impact than countries with high bureaucratic barriers (Italy, Greece). This raises concerns about whether the headline figure reflects reality for all member states equally.
Supporting Evidence
Despite the criticism, there is substantial evidence supporting the general direction of the Commission's projections, even if the specific numbers are debated.
The Estonian Precedent
Estonia's e-Residency program, which allows foreigners to establish Estonian companies online, has resulted in over 100,000 company formations since its launch — many of which are genuinely new businesses that would not have been created otherwise. If a single small country can achieve this, a pan-European equivalent should produce significantly larger numbers.
The UK Limited Company Boom
The UK's streamlined company formation process (online, £12, completed in 24 hours) has contributed to the country having the highest rate of new company formation in Europe — approximately 800,000 per year. This demonstrates the direct link between formation ease and entrepreneurship rates.
Academic Research
A comprehensive meta-analysis published in the Journal of European Integration reviewed 47 studies on cross-border business formation barriers and concluded that reducing administrative barriers by 50% leads to a 12-18% increase in cross-border company creation. Applied to current EU cross-border business formation rates, this supports the Commission's order of magnitude.
What Would Success Look Like?
Rather than fixating on the 300,000 figure, it may be more useful to define what successful implementation would look like:
- Year 1-2: At least 10,000-20,000 EU Inc formations, primarily from tech startups and cross-border freelancers — the early adopters- Year 3-5: Broad adoption by SMEs, with EU Inc becoming the default choice for any company with cross-border ambitions- Year 5-10: The EU Inc is as natural a choice for European entrepreneurs as the LLC is for Americans, with total formations potentially exceeding the Commission's projections ## The Jobs Question The 1.6 million jobs projection deserves separate scrutiny. This figure assumes an average of approximately 5 jobs per new EU Inc company within five years. Given that the majority of new companies start with 1-3 employees and many remain small, this may be optimistic. However, if even a small percentage of EU Inc companies achieve significant growth — the goal of the entire initiative — the aggregate employment effect could be substantial. ### Quality of Jobs Trade unions and labor economists have raised the question of job quality, not just quantity. If the EU Inc facilitates the creation of companies that offer precarious employment or use stock options instead of fair wages, the headline employment figure could mask deeper problems. ## The Verdict Is 300,000 new companies achievable? The honest answer is: it depends entirely on implementation. If the EU Inc is delivered as proposed — simple, digital, genuinely cross-border — the number is plausible and possibly conservative. If implementation is compromised by political negotiations, technical failures, or uneven member state adoption, the actual impact could be significantly lower.
What is clear is that the European economy needs the kind of boost the EU Inc promises. Whether the final numbers are 150,000 or 400,000, the direction of travel is right — and the cost of doing nothing is measured in continued decline of European competitiveness.
Originally published on EU Inc News
