European Cities On The Verge To Take London’s Place As Startup Hotspot

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While we have to wait to see what the exact effect of Brexit on the UK will be, many European cities chose to look on the bright side, and are now attempting to attract business to their own countries from what currently - still - is the most important startup hotspot in Europe.

It did not take long after this summer’s referendum, that banks started announcing they are considering moving their headquarters away from the British capital, mainly to Frankfurt, Paris or Dublin. This is a direct consequence of the expected loss of “passporting” once the UK departs from the EU.

Startup Talent At Risk

For startups things are not looking much better for several reasons. Just like in the UK’s banking system, many startup employees are expats. One of the most important consequences of this votum will be that foreigners will have a much harder time getting to work in, or even being allowed to remain inside Britain. This, combined with the fact that approximately 20% of British startup founders call another land their home is a genuine problem. The Startups’ employees also tend to have a very international background. As Julian Baladurage, MBJ co-founder, tells the Financial Times “Brexit imposes a certain risk of visa requirements for non-Brits…Our team is very international so we can’t risk having to apply for 100 visas”. This implies that startups will be strapped for talent. Moreover, there is already a shortage of engineers and IT specialists which is only projected to get worse if foreigners are indeed to be blacklisted.

Seizing The Opportunity

With all this going on, other startup hubs across Europe see their chance to flourish at the expense of London, and are making preparations to make their countries more attractive for startups to relocate. Paris is just one of the cities trying to lure startups in. As Loic Dosseur, the co-director of Paris and Co. says, “There isn’t just Silicon Valley to help startups emerge, Paris today is in the top three worldwide”. The city now hosts Europe’s biggest incubator, Cargo, which is currently home to 50 startups.

Berlin shares Paris’ ambition to grab a share of British startups looking for relocation options. But the German capital is not only behind London, it also must catch up with the City of Light. EY reported that in the first half of 2016, both Paris and London surpassed Berlin’s number of venture capital deals. In fact, by this measure, Stockholm did better than both Paris and Berlin, with €1bn being invested in comparison to €673 in Paris and merely €520 in Berlin.

This brings us to the next startup ecosystem likely to offer a new home to the UK’s startups: Stockholm. Sweden is generally recognized as a leader in innovation, and the size of its startup scene is huge for such a small country. More recently, Stockholm responded to Spotify’s threatened to expand offices outside of its hometown by trying to keep the country globally competitive. The strategy to achieve this goal includes reducing trade barriers, opening even more to international labour forces, and identifying sectors that must be internationalized among others.

Scoring the lowest corporate tax in Western Europe, Dublin was chosen by tech companies such as Slack, Twitter, and Airbnb to locate their headquarters. That, coupled with an openness for international talent, English-speaking population, makes Dublin a viable option for businesses that are looking for a new place to move to.

Brexit Initiation Still Shrouded By Uncertainty

Even though months have passed since the vote for Brexit, there is still much uncertainty regarding what the new deal between the EU and UK will entail. European leaders have warned time and time again, that the UK will not have access to the single market if it does not continue to allow freedom of movement. Since one of the main promises of Brexit, was to stop immigration, it is unlikely that the UK will comply with this requirement, and if it will, it means undermining one of the main concerns of Brexit supporters. Currently, Britain plans a formal trigger of Article 50 in March 2017. It remains to be seen what agreement will be reached, and what the short and long-term implications will be – not only for the EU and Britain but also for Europe’s startups.



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Photo credit: Tilman Köneke via VisualHunt / CC BY