A new report from technology magazine Wired has suggested that an increasing number of UK start-ups are heading for emerging Europe.
With Brexit negotiations still ongoing and uncertainty as to the the impact the final deal will have on businesses, tech start-ups are increasingly concerned about future access to talent.
“Generally, in tech, people didn’t want Brexit to happen,” Melissa Morris, founder of healthcare workforce management company Lantum, told ZDNet. “Most people voted remain, and there’s definitely a kind of resentment towards the way that it all went. At the end of the day it is the talent that has created such a great and vibrant tech community in London, and if you are putting barriers on that talent entering and moving around freely, then that does put everything that has been built in London at risk.”
According to the Wired report, until recently, early-stage start-ups would fight to be part of London’s buzz, Now they are turning to Estonia, Lithuania, Poland and Romania as cheaper, less risky locations to make their mark.
Some countries in emerging European have been doing a lot in recent years to attract foreign direct investment (FDI), offering added incentives to companies willing to invest in their markets. They have also been working hard on developing and changing regulations to draw UK talent.
For example, the Bank of Lithuania created a special e-licensing tool last year to make the submission of information for an operating banking license easier and more efficient as well as launching a regulatory sandbox earlier this month.
According to Mantas Katinas, managing director of Invest Lithuania, “lately, we have seen rising interest from UK-based FinTech companies eager to find a ‘plan B’ solution for the Brexit scenario.” According to Wired, eight UK FinTech companies have recently set up hubs in Lithuania.
Other countries in the region have also gained a lot of interest.
“Certain Eastern European cities such as Tallinn have a reputation as being rich in engineering talent. Access to this talent pool, which may well offer lower employment costs than the UK, would be the main benefit for a UK fintech setting up a hub there,” says Ryan Weeks, editor of the finance website AltFi.
Operational costs are also a key deciding factor when setting up abroad, and emerging Europe is very competitive compared with the UK.
“What makes Poland highly competitive amongst other European countries are low operational costs,” says Agata Szeliga, partner at Polish law firm Sołtysiński Kawecki and Szlęzak.
“We looked at Romania, Ukraine and Poland, and decided on Wrocław. We were very impressed with the level of education, language ability and positive references from banks and other tech companies. The location gives us cost advantages, but it also enables us to hire faster,” says Christian Nentwich, founder and CEO of Duco, a London-based data engineering company.
“These cities are primarily interested in becoming entrepreneurial hubs. Such clusters of economic activity are known to spur dynamism to other sectors, generate employment, and induce higher rates of economic growth,” says George Panos, professor of finance at Glasgow University.