Entrepreneurs hoping to start a business would do well to start it in Britain, according to a survey on capital markets from the
a private research center in California. The annual report also gives high marks to Hong Kong and Singapore.
The survey measures more than 50 variables, from a country's legal environment to the stability of its exchange rates and the existence of alternative sources of funding, in addition to banks.
On most measures, the United Kingdom does very well, says Jim Barth, a senior fellow with the Milken Institute and co-author of the study.
"In particular, the UK is a terrific institutional environment. That is, it has a great rule of law. One knows that one can get contracts enforced in the UK. One knows that basically you have all the legal factors in place to contribute to the extension of credit to businesses, both startups and existing firms that want to grow," he noted.
Report authors say the Asian enclaves of Hong Kong and Singapore have created a business-friendly climate with strong access to capital. They rank second and third in the survey. The United States ranks fourth, rising from sixth place last year because of its growing and more stable equity market.
The report covers 121 countries, and co-author Glenn Yago says in some, bond and equity markets provide important new channels of capital for people who want to start or expand a business.
"Just like you need information technology or you need modern technology in medicine, you need modern financial technologies in order grow an economy," said Mr. Yago. "And securitization, the ability to diversify and diffuse risk through the financial system and not have it concentrated in key institutions or large banks that can fail easily, is one of the hallmarks of a modern economy."
Jim Barth says the expanded use of credits cards, to cite just one example, can be good for business.
"In the United States, we find a lot of individuals that want to start a business rely on their own personal credit cards," mentioned Mr. Barth. "So other countries can benefit by making credit cards available to individuals that want to start a business. They can actually use their personal credit card and then, ultimately, lenders will eventually provide credit cards for small businesses targeted directly at them."
Researcher Glenn Yago says some emerging European economies, such as Estonia, are moving up the list because their governments are working to improve their financial systems. He says New Zealand, Argentina, Mexico and Bulgaria, while far from the top of the index, showed the greatest improvement in the past year.
"And then one of the great areas of concern is if we look at the bottom tier of 120 some-odd countries we have ranked here is the really dismal performance of African economies, and the real need to build financial infrastructure, just as we build telecommunications and highways, for African countries to be able to grow," added Mr. Yago.
The country with one of the world's fastest growing economies, China, ranked 38th on the list. The economists say it would be higher but for the lack of a well-developed bond market, an important source of capital for business.