Best Countries in Europe for Startups
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 Score | 5.5 |
| Economic Health | 5.3 |
| Cost of Doing Business | 5.0 |
| Business Climate | 4.3 |
| Labor Force Quality | 7.7 |
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 Score | 5.9 |
| Economic Health | 6.8 |
| Cost of Doing Business | 3.3 |
| Business Climate | 5.8 |
| Labor Force Quality | 7.7 |
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 Score | 6.2 |
| Economic Health | 5.5 |
| Cost of Doing Business | 5.3 |
| Business Climate | 8.5 |
| Labor Force Quality | 5.3 |
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.
| Rank | Country | Composite Score | Economic Health | Cost of Doing Business | Business Climate | Labor Force Quality |
|---|---|---|---|---|---|---|
| 1 | Germany | 5.5 | 5.3 | 5.0 | 4.3 | 7.7 |
| 2 | United Kingdom | 5.9 | 6.8 | 3.3 | 5.8 | 7.7 |
| 3 | Ireland | 6.2 | 5.5 | 5.3 | 8.5 | 5.3 |
| 4 | Switzerland | 6.3 | 5.5 | 11.7 | 5.3 | 2.7 |
| 5 | Estonia | 6.4 | 8.8 | 3.0 | 9.0 | 5.0 |
| 6 | Czech Republic | 6.6 | 6.5 | 2.0 | 10.3 | 7.7 |
| 7 | Sweden | 6.7 | 7.0 | 6.0 | 5.5 | 8.3 |
| 8 | Norway | 6.8 | 5.5 | 10.0 | 4.5 | 7.0 |
| 9 | Finland | 6.8 | 9.0 | 6.7 | 5.5 | 6.0 |
| 10 | Netherlands | 6.8 | 4.8 | 7.7 | 7.5 | 7.3 |
| 11 | Austria | 7.0 | 6.3 | 7.0 | 7.8 | 7.0 |
| 12 | Denmark | 7.0 | 7.3 | 10.3 | 4.3 | 6.3 |
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.
| Rank | Country | Total GDP (Billions) | GDP Growth | Unemployment Rate | GDP per capita | Composite Score |
|---|---|---|---|---|---|---|
| 1 | Netherlands | $826 | 3.2% | 4.8% | $48,223 | 4.8 |
| 2 | Germany | $3,677 | 2.2% | 3.7% | $44,470 | 5.3 |
| 3 | Switzerland | $679 | 1.1% | 4.8% | $80,190 | 5.5 |
| 4 | Norway | $399 | 1.9% | 4.2% | $75,505 | 5.5 |
| 5 | Ireland | $334 | 7.8% | 6.7% | $69,331 | 5.5 |
| 6 | Austria | $417 | 3.0% | 5.5% | $47,291 | 6.3 |
| 7 | Czech Republic | $216 | 4.3% | 2.9% | $20,368 | 6.5 |
| 8 | United Kingdom | $2,622 | 1.8% | 4.3% | $39,720 | 6.8 |
| 9 | Sweden | $538 | 2.3% | 6.7% | $53,442 | 7 |
| 10 | Denmark | $325 | 2.2% | 5.7% | $56,308 | 7.3 |
| 11 | Estonia | $26 | 4.9% | 5.8% | $19,705 | 8.8 |
| 12 | Finland | $252 | 2.6% | 8.6% | $45,703 | 9 |
Cost of Doing Business
The cost of doing business category considers costs related to operating a business, including tax rates and wages.
| Rank | Country | Cost of Living Rank | Salary Expectation Rank | Corporate Tax Rank | Composite Score |
|---|---|---|---|---|---|
1 | Czech Republic | 1 | 1 | 4 | 2.0 |
| 2 | Estonia | 2 | 2 | 5 | 3.0 |
| 3 | United Kingdom | 3 | 4 | 3 | 3.3 |
| 4 | Germany | 4 | 9 | 2 | 5.0 |
| 5 | Ireland | 9 | 6 | 1 | 5.3 |
| 6 | Sweden | 5 | 5 | 8 | 6.0 |
| 7 | Finland | 7 | 7 | 6 | 6.7 |
| 8 | Austria | 6 | 3 | 12 | 7.0 |
| 9 | Netherlands | 8 | 8 | 7 | 7.7 |
| 10 | Norway | 11 | 10 | 9 | 10.0 |
| 11 | Denmark | 10 | 11 | 10 | 10.3 |
| 12 | Switzerland | 12 | 12 | 11 | 11.7 |
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.
| Rank | Country | Corporate Income Tax Rate | Exemptions/Notes |
|---|---|---|---|
| 1 | Ireland | 12.5% | 25% for non-trading income |
| 2 | Germany | 15.825% | Including 5.5% solidarity surcharge |
| 3 | United Kingdom | 19% | 18% for year starting 1 April 2020; 17% from 1 April 2020 |
| 4 | Czech Republic | 19% | Unknown |
| 5 | Estonia | 20% | 0% on undistributed profits; lower dividend rate of 14% available for amounts less than taxed dividends paid during the three preceding years |
| 6 | Finland | 20% | Unknown |
| 7 | Netherlands | 25% | 20% lower rate for income up to EUR 200,000; standard rate reducing down annually to 20.5% by 2021 (15% lower rate) |
| 8 | Sweden | 21.4% | Decreasing to 20.6% in 2021 |
| 9 | Norway | 22% | Unknown |
| 10 | Denmark | 22% | Unknown |
| 11 | Switzerland | 11.5% to 24.2% | 8.5% federal tax on profit after tax plus cantonal/communal taxes depending on company's location |
| 12 | Austria | 25% | 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.
| Rank | Country | Ease of Starting Business Rank | Trust in Justice System Rank | VC Access Rank | Market Dominance Rank | Composite Score |
|---|---|---|---|---|---|---|
| 1 | Denmark | 1 | 1 | 11 | 4 | 4.3 |
| 1 | Germany | 8 | 5 | 2 | 2 | 4.3 |
| 3 | Norway | 2 | 2 | 6 | 8 | 4.5 |
| 4 | Switzerland | 12 | 3 | 5 | 1 | 5.3 |
| 5 | Finland | 6 | 4 | 1 | 11 | 5.5 |
| 5 | Sweden | 4 | 6 | 3 | 9 | 5.5 |
| 7 | United Kingdom | 3 | 10 | 4 | 6 | 5.8 |
| 8 | Netherlands | 11 | 9 | 7 | 3 | 7.5 |
| 9 | Austria | 9 | 7 | 10 | 5 | 7.8 |
| 10 | Ireland | 7 | 8 | 12 | 7 | 8.5 |
| 11 | Estonia | 5 | 11 | 8 | 12 | 9.0 |
| 12 | Czech Republic | 10 | 12 | 9 | 10 | 10.3 |
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.
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.
| Rank | Country | Adults with Tertiary Education | Adults with at least Upper Secondary Education | Training | Composite Score |
|---|---|---|---|---|---|
| 1 | Switzerland | 36.5% | 84.2% | 1 | 2.0 |
| 2 | Estonia | 37.8% | 86.9% | 11 | 4.7 |
| 3 | Finland | 34.3% | 74.0% | 3 | 5.7 |
| 4 | Denmark | 34.2% | 75.5% | 6 | 6.0 |
| 5 | Austria | 27.4% | 79.2% | 5 | 6.7 |
| 6 | Norway | 35.8% | 74.9% | 9 | 6.7 |
| 7 | Netherlands | 31.0% | 68.9% | 2 | 7.0 |
| 8 | Germany | 26.1% | 82.8% | 7 | 7.3 |
| 9 | United Kingdom | 32.4% | 62.0% | 4 | 7.7 |
| 10 | Ireland | 34.4% | 66.4% | 8 | 7.7 |
| 11 | Sweden | 31.6% | 74.2% | 8 | 8.3 |
| 12 | Czech Republic | 20.2% | 90.2% | 10 | 8.3 |
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