Top Countries in Europe for Startups 2020
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). Compare these results to our 2019 study, and learn how the study changed this year in our Methodology.
Germany ranks as the best European country for startups for the second year running, standing out for a healthy economy (GDP of $3,846 billion) and favourable business climate. For example, good access to venture capital can benefit startups looking for funding. And Germany ranked 2nd behind Switzerland for being the least burdensome in terms of government regulation (e.g., complying with governmental administrative requirements like permits, regulations and reporting).
|Average Ranking Across All Categories||6.0 out of 31|
|Economic Health Rank||3|
|Cost of Doing Business Rank||14|
|Business Climate Rank||2|
|Labour Force Quality Rank||5|
Plus the relatively low corporate tax rate of 15.825% is surely an incentive for entrepreneurs. It is ranked #2 in the group according to World Economic Forum metrics for market dominance so competition is not restrained by a few large players—another potential advantage for a startup. Finally, Germany has a highly-educated workforce (83% of adults have at least an upper secondary degree).
2. United Kingdom
The United Kingdom remains in the 2nd spot for 2020 as a great place for startups due to venture capital accessibility and relative ease of doing business, despite relatively low GDP growth expectations. Additionally, startups in the UK have lower costs of doing business (e.g., salary expectations) and they ranked a strong 4th in terms of the ease of finding skilled workers. Lower corporate tax rates (19%) are certainly an attraction compared to many other European countries. Finally, there is a proliferation of startup support organizations in place to help entrepreneurs as and when needed.
|Average Ranking Across All Categories||7.8 out of 31|
|Economic Health Rank||5|
|Cost of Doing Business Rank||14|
|Business Climate Rank||3|
|Labour Force Quality Rank||9|
Switzerland moved up in the standings for 2020, claiming 3rd place out of the 31 countries studied, as a result of ranking 1st in two categories: Business Climate and Labour Force Quality. Businesses report having the least issue with regulatory burden compared to other European countries (a new metric for 2020), and Switzerland has the best market dominance conditions making it easier for new market entrants, contributing to their strong Business Climate score.
|Average Ranking Across All Categories||8.3 out of 31|
|Economic Health Rank||6|
|Cost of Doing Business Rank||25|
|Business Climate Rank||1|
|Labour Force Quality Rank||1|
Switzerland has the highest score for the extent of staff training and quality of vocational training, not to mention the 2nd highest percentage of people having achieved a tertiary education (38.6%). However, Switzerland is one of the more expensive places to start a business due to high costs of living and salary expectations, and it has one of the lowest expectations for GDP growth.
Summary of Top Countries for Startups in Europe
Below are the 31 countries in our study ranked from best to worst for startup businesses, with scores across economic health, cost of doing business, business climate and quality of labour force. As each startup has different circumstances and requirements, we've expanded our data to show how each country ranks in each category. Lower figures are better (1=best, 31=worst).
|Overall Rank||Country||Economic Health Rank||Cost of Doing Business Rank||Business Climate Rank||Labor Force Quality Rank||Average Category Rank|
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 labour force quality. A country's average ranking in each broad category reflects the average of the country's individual rankings across each metric in the category.
The Economic Health category takes into account 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.
|Category Rank||Country||Total GDP (Billions)||GDP Growth||Unemployment Rate||GDP per capita||Average Ranking|
Cost of Doing Business
The cost of doing business category looks at metrics related to the costs of running a business, such as wages and corporate tax rates.
|Category Rank||Country||Cost of Living Rank||Average Salary||Corporate Tax Rank||Average Ranking|
Corporate tax rates are an important consideration for all types of businesses. 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.
|Rank||Country||Corporate Income Tax Rate||Exemptions/Notes|
|2||Bulgaria||10%||15% for phone/online gambling games|
|3||Ireland||12.5%||25% for non-trading income|
|5||Lithuania||15%||0% or 5% reduced rates for small companies and agricultural companies; 20% for credit institutions exceeding EUR 2 million|
|6||Germany||15.825%||Includes 5.5% solidarity surcharge|
|7||Romania||16%||Micro-companies with max revenue 1 million EUR previous year have lower rate of 1% (1+ employees) or 3% (no employees); higher of 5% of revenues or 16% of profits for nightclubs and gambling businesses|
|8||Switzerland||11.9% to 21.6%||8.5% federal tax on profit after tax plus cantonal/communal taxes depending on company's location, bringing overall tax rates to 11.9% to 21.6%|
|9||Croatia||18%||12% on revenues less than 7.5 million Croatian kuna (HRK)|
|10||Luxembourg||18.49%||Includes 7% solidarity surtax on the 17% CIT; 15% CIT for income less than EUR 175,000|
|11||Poland||19%||9% for first tax year or sales revenue < 2 milion EUR|
|15||Iceland||20%||20% for limited liability companies and limited partnership companies; other types of legal entities taxed at 37.6%|
|18||Portugal||21%||20% Madeira and 16.8% in the Azores; Reduced rate of 17% for SMEs on first EUR 25,000 of income (13% in Madeira; 12.5% if located in inland region)|
|18||Slovakia||21%||Reduced rate of 15% for corporate taxpayers, entrepreneurs and self-employed individuals with income (revenues) up to EUR 100,000|
|20||Sweden||21.4%||Decreasing to 20.6% in 2021|
|21||Norway||22%||25% for certain financial sector companies|
|24||Latvia||25%||The CIT rate is 20% on the taxable base, which should be divided by a coefficient of 0.8 before applying the rate, making the effective rate 25%|
|24||Netherlands||25%||16.5% lower rate for income up to EUR 200,000; standard rate reducing down annually to 21.7% by 2021 (15% lower rate)|
|24||Spain||25%||15% for first tax period with a company profit, and following period|
|28||Italy||27.9%||24% plus 3.9% regional production tax|
|29||France||28%||Rate drops annually to 26.5% as of January 2021 and 25% as of 1 January 2022|
|30||Belgium||29.58%||Includes 2% crisis tax; CIT drops to 25% and crisis tax abolished in 2021; SME standard rate is 20% on first EUR 100,000 profit|
The business climate category includes many wide-ranging factors such as perceptions of judicial independence, 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.
|Category Rank||Country||Ease of Doing Business Rank||Judicial Independence Rank||VC Access Rank||Market Dominance Rank||Regulatory Burden Rank||Average Ranking|
Labour Force Quality
While a startup's success is dependent upon many factors, the quality of its workforce is certainly one of the driving forces. To compare the quality of each country's workforce we first analysed upper secondary and tertiary education attainment rates.
Since startups require a variety of skills besides academic achievement, we also factored in the World Economic Forum's data on the extent of staff training and the quality of vocational training in each country. Access to training helps individuals to build skills and gain expertise that could be useful for a startup.
|Category Rank||Country||Adults with Tertiary Education||Adults with at least Upper Secondary Education||Staff and Vocational Training Rank||Ease of Finding Skilled Workers Rank||Average Ranking|
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 31 European countries based on each metric and calculated an average ranking for each category. The overall composite ranking is an equally weighted average of each category's average ranking across the various metrics. A lower score indicates a better rank.
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 average salaries.
Business Climate data relate to the ease of doing business and development status of each country, such as trust in the independence of the justice system, market dominance of large players, regulatory burdens and availability of venture capital funding.
Labour Force Quality incorporate primary and secondary education attainment rates, the availability of staff and vocational training as well as the ease of finding skilled workers to compare the skill of each country's workforce.
Differences from our 2019 study
We have made a few changes to the study for 2020. First, we expanded the number of countries presented in the study to include the United Kingdom and all of the European Economic Area (EEA) except Liechtenstein (due to a lack of reliable data for Liechtenstein resulting from its small size). Here is the complete list of the 31 countries included in the study for 2020:
- Czech Republic
- United Kingdom
We also added two new, useful metrics to increase the robustness of the study: regulatory burden (Business Climate category) and the ease of finding skilled workers in a country (Labour Force Quality category). We also made a change to the metric capturing training in each country because the World Economic Forum (WEF) has removed its metric for "Local Availability of Specialized Training Services"; in its place we've incorporated the WEF's Extent of Staff Training and Quality of Vocational Training metrics.
- World Bank: GDP per capita, GDP, GDP Growth, Unemployment Rates
Cost of Doing Business
- PWC: Global Corporate Income Tax Rates
- Numbeo: Cost of Living Ranks
- Eurostat and OECD: Average Gross Single Person Earnings by European Country
- World Economic Forum: Extent of Market Domination, Venture Capital Availability and Burden of Government Regulation
- World Bank: Ease of Doing Business
Labour Force Quality
- UNESCO: Education Attainment Rates (Secondary, Tertiary)
- World Economic Forum: Global Competitiveness Rankings - Extent of staff training, Quality of vocational training and Ease of finding skilled employees
Regardless of where you start your business, keep in mind a few other important factors such as the availability of different types of business insurance, as well as the cost of business insurance in your chosen country.