Personal Finance

Best Countries in Europe for Startups

We analysed current economic data to determine the best European countries for startups. Our evaluation covered the general economic health, cost of doing business, business environment and labor force quality of 50 European nations, to arrive at a top 12 list. Below we explain our findings and our methodology.

Top Countries in Europe for Startups

The best European countries for startups have highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. With this in mind, our scoring system uses relevant publicly-available data to rank each country across several categories. Lower scores indicate higher ranks (i.e., better locations for startups).

1. Germany

Germany is a solid choice for startups, with a healthy economy (GDP of $3,677 billion) and favourable business climate. For example, good access to venture capital can benefit startups looking for funding, plus relatively low corporate tax rates are a good incentive for companies (15.825%). It is ranked #2 in the group according to World Bank metrics for market dominance so competition is not restrained by a few large players—a potential advantage for a startup. Finally, Germany has a well-educated workforce (83% of adults have at least an upper secondary degree).

Score
Composite Score5.5
Economic Health5.3
Cost of Doing Business5.0
Business Climate4.3
Labor Force Quality7.7



2. United Kingdom

The United Kingdom shines as a great place for startups due to venture capital accessibility and relative ease of doing business according to World Bank metrics, despite worse overall economic measures (lower GDP growth expectations and GDP per capita). Additionally, startups in the UK have lower costs of doing business (e.g., salary expectations) and declining corporate tax rates are certainly an attraction. Finally, there is a proliferation of startup support organizations in place to help entrepreneurs as and when needed.

Score
Composite Score5.9
Economic Health6.8
Cost of Doing Business3.3
Business Climate5.8
Labor Force Quality7.7


3. Ireland

Ireland stands out as one of the best business climates for new startups in Europe due to the lowest corporate tax rates (12.5%). It has a highly-educated workforce (over 34% have completed tertiary education) and has recently made news for the highest GDP growth in Europe (more than 7% in 2018). However, it can be an expensive place to start a business and it ranked the worst in the top 12 for access to venture capital.

Score
Composite Score6.2
Economic Health5.5
Cost of Doing Business5.3
Business Climate8.5
Labor Force Quality5.3


Summary of Top Countries for Startups in Europe

Below are the top 12 countries in Europe for startup businesses, with scores across economic health, cost of doing business, business climate and quality of labor force. As each startup has different circumstances and requirements, we've expanded our data to show the top countries in each category. Lower scores are better.

RankCountryComposite ScoreEconomic HealthCost of Doing BusinessBusiness ClimateLabor Force Quality
1Germany5.55.35.04.37.7
2United Kingdom5.96.83.35.87.7
3Ireland6.25.55.38.55.3
4Switzerland6.35.511.75.32.7
5Estonia6.48.83.09.05.0
6Czech Republic6.66.52.010.37.7
7Sweden6.77.06.05.58.3
8Norway6.85.510.04.57.0
9Finland6.89.06.75.56.0
10Netherlands6.84.87.77.57.3
11Austria7.06.37.07.87.0
12Denmark7.07.310.34.36.3

Discussion of Categories

This study includes a wide variety of data in order to characterise each country's business environment from the perspective of a startup. We categorise this data into four groups: economic health, cost of doing business, business climate and labor force quality. Each score is based on a country's rank across these categories.

Economic Health

The Economic Health category combines traditional economic measures such as GDP, GDP per capita, GDP growth and unemployment rate. These data points give an indication of the relative strength of a country's economy.

RankCountryTotal GDP (Billions)GDP GrowthUnemployment RateGDP per capitaComposite Score
1Netherlands$8263.2%4.8%$48,2234.8
2Germany$3,6772.2%3.7%$44,4705.3
3Switzerland$6791.1%4.8%$80,1905.5
4Norway$3991.9%4.2%$75,5055.5
5Ireland$3347.8%6.7%$69,3315.5
6Austria$4173.0%5.5%$47,2916.3
7Czech Republic$2164.3%2.9%$20,3686.5
8United Kingdom$2,6221.8%4.3%$39,7206.8
9Sweden$5382.3%6.7%$53,4427
10Denmark$3252.2%5.7%$56,3087.3
11Estonia$264.9%5.8%$19,7058.8
12Finland$2522.6%8.6%$45,7039

Cost of Doing Business

The cost of doing business category considers costs related to operating a business, including tax rates and wages.

RankCountryCost of Living RankSalary Expectation RankCorporate Tax RankComposite Score

1
Czech Republic1142.0
2Estonia2253.0
3United Kingdom3433.3
4Germany4925.0
5Ireland9615.3
6Sweden5586.0
7Finland7766.7
8Austria63127.0
9Netherlands8877.7
10Norway1110910.0
11Denmark10111010.3
12Switzerland12121111.7

Corporate tax rates are a crucial factor for all businesses. While some European countries offer tax discounts specifically to new companies or small to medium enterprises (SMEs), which can make them more attractive for a startup, none of the countries in the top 12 do so.

RankCountryCorporate Income Tax RateExemptions/Notes
1Ireland12.5%25% for non-trading income
2Germany15.825%Including 5.5% solidarity surcharge
3United Kingdom19%18% for year starting 1 April 2020; 17% from 1 April 2020
4Czech Republic19%Unknown
5Estonia20%0% on undistributed profits; lower dividend rate of 14% available for amounts less than taxed dividends paid during the three preceding years
6Finland20%Unknown
7Netherlands25%20% lower rate for income up to EUR 200,000; standard rate reducing down annually to 20.5% by 2021 (15% lower rate)
8Sweden21.4%Decreasing to 20.6% in 2021
9Norway22%Unknown
10Denmark22%Unknown
11Switzerland11.5% to 24.2%8.5% federal tax on profit after tax plus cantonal/communal taxes depending on company's location
12Austria25%Unknown

Business Climate

The business climate category includes many wide-ranging factors such as trust of the justice system, competitive environment and availability of funding. These data points are meant to quantify the ease of doing business and general business environment in each country.

RankCountryEase of Starting Business RankTrust in Justice System RankVC Access RankMarket Dominance RankComposite Score
1Denmark111144.3
1Germany85224.3
3Norway22684.5
4Switzerland123515.3
5Finland641115.5
5Sweden46395.5
7United Kingdom310465.8
8Netherlands119737.5
9Austria971057.8
10Ireland781278.5
11Estonia5118129.0
12Czech Republic101291010.3

Labor Force Quality

A startup's success is often dependent upon the quality of its workforce. In order to capture the quality of each country's workforce we analysed upper secondary and tertiary education attainment rates.

chart showing educational attainment rates for countries in Europe that are good for startups

Since startups require a variety of skills besides academic achievement, we also factored in the World Economic Forum's local availability of specialized training services data. Access to training helps individuals to build skills and gain expertise that could be useful for a startup. Switzerland not only has a highly-educated population but also boasts the top spot in the world for local availability of specialized training services.

RankCountryAdults with Tertiary EducationAdults with at least Upper Secondary EducationTrainingComposite Score
1Switzerland36.5%84.2%12.0
2Estonia37.8%86.9%114.7
3Finland34.3%74.0%35.7
4Denmark34.2%75.5%66.0
5Austria27.4%79.2%56.7
6Norway35.8%74.9%96.7
7Netherlands31.0%68.9%27.0
8Germany26.1%82.8%77.3
9United Kingdom32.4%62.0%47.7
10Ireland34.4%66.4%87.7
11Sweden31.6%74.2%88.3
12Czech Republic20.2%90.2%108.3

Methodology

We focused our data collection on general economic factors, such as growth rates and unemployment rates, and factors specific to startups including the ease of securing financing and salary costs. We gathered the data from several reputable sources including the World Bank, World Economic Forum, UNESCO, OECD and tax consultancies.

Using these data sets, we first ranked 50 European countries based on each metric and calculated an average ranking for each category. The composite score is an equally weighted average of each category's score. A lower score indicates a better rank. With this information we narrowed down the list of 50 countries to arrive at the top 12 countries in Europe for startups.

Economic Health data include general indicators of an economy's strength. We included GDP per capita, GDP growth rates and unemployment rates. Together, these factors gave us a picture of the general state of each economy.

Cost of Doing Business data include costs related to business operations. We included corporate taxes, cost of living ranks and salary expectation ranks.

Business Climate data relate to the ease of doing business and development status of each country, such as ease of starting a business, trust in the justice system and availability of venture capital funding.

Labor Force Quality incorporate primary and secondary education attainment rates and local availability of training ranks to estimate the skill of each country's workforce.

Sources

Economic Health

  • World Bank: GDP per capita, GDP, GDP Growth, Unemployment Rates
  • OECD: Unemployment Rates

Cost of Doing Business

  • PWC: Global Corporate Income Tax Rates
  • Deloitte: Corporate Tax Rates 2018
  • Numbeo: Cost of Living Ranks
  • Wikipedia: Average Wages by European Country
  • Europa.eu: Company Tax Rates, 10Y Bond Rates

Business Climate

  • International Telecommunication Union: Percentage of Population with Internet Access
  • World Bank: Extent of Market Domination, Prevalence of Bank Branches, Venture Capital Availability, Access to Business Loans
  • OECD: Trust in the Justice System

Labor Force Quality

  • UNESCO: Education Attainment Rates (Secondary, Tertiary)
  • World Economic Forum: Global Competitiveness Rankings - Local Availability of Specialized Training Services

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