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Doing Business in Europe: A Market Overview for Non-EU Members

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Doing Business Europe Market Overview Non Eu Members 1

You’ve been experiencing steady success in your home country for some time now, and you’re looking for opportunities to grow your company. Expanding into the highly competitive European market is an excellent step for companies in many different industries.

This post will explain important differences in European business practices, profitable industries in Europe, and tips for expanding into the European market.

Understanding European business culture

Europe’s rich history has led to the formation of many diverse countries and cultures. As a result, European business etiquette differs significantly between regions, and it’s important to consider these differences.

The United Nations divides Europe into four regions:

1. Western Europe

Western Europe includes Austria, Belgium, Germany, France, Luxembourg, and the Netherlands. All countries in this region use the euro and share the same time zone. The region benefits from sophisticated, well-maintained public transportation infrastructure and service.

English is the most common language for business in this region, but many people speak German as well. Speaking French is especially important if you plan to do business in France.

2. Northern Europe

Northern Europe includes Denmark, Sweden, Norway, Finland, Iceland, and the Republic of Ireland. The region has one of the highest rates of internet usage in the continent, with approximately 94.7% of the population having reliable access to the internet in 2023.

English is commonly spoken in business proceedings in Northern Europe, as is Swedish.

3. Eastern Europe

Eastern Europe is a large region including several countries. Within this area are three subregions:

  1. Baltic: Latvia, Lithuania, and Estonia
  2. Balkans: Romania and Bulgaria
  3. East Central Europe: Poland, Czech Republic, Hungary, and Slovakia

One of the most striking differences between countries in Eastern Europe is the linguistic divide. Most countries speak a Slavic language, but there are a few exceptions:

  • Finno-Ugric: Estonia and Hungary
  • Baltic: Latvia and Lithuania
  • Latin-based: Romania

4. Southern Europe

Southern Europe includes Italy, Greece, Croatia, Cyprus, Macedonia, Malta, Portugal, Spain, Slovenia, and Turkey. Most countries in the region follow traditional, hierarchical structures and are open to international investment.

Business communication tends to differ, as body language is extremely important in this region. Gestures which are acceptable in some countries may be offensive in others — be sure to conduct thorough cultural research to ensure positive interactions.

How competitive is the European business market?

Europe is highly competitive in the global market due to transparent business practices, sophisticated infrastructure, and high productivity levels. The following reports demonstrate Europe’s economic strengths.

Ease of doing business

European countries rank highly in the World Bank’s Doing Business 2020 report, which scores the ease of doing business in multiple countries. Out of the European countries in the top 15, Denmark, tops the list in 4th place with a score of 85.3 and is followed by Norway in 9th place, Sweden in 10th, and Lithuania in 11th.

High-ranking countries often share several similarities, including:

  • Widespread integration of electronic systems.
  • High transparency of regulations.
  • Reliability of supply.
  • Short time to start a company.

World competitiveness

The World Competitiveness Index, published by the Switzerland-based International Institute for Management Development (IMD), ranks world economies based on how they perform through a variety of different metrics. The four categories measured include:

  1. Economic performance
  2. Government efficiency
  3. Business efficiency
  4. Infrastructure

Denmark placed 1st for the first time in the Index’s history in 2022. European countries took many of the other top 10 spots, including Switzerland in 2nd, Sweden in 4th, the Netherlands in 6th, Finland in 8th, and Norway in 9th.

Economic freedom

Higher economic freedom is directly related to higher competitiveness in the global arena. According to the 2022 Index of Economic Freedom report, European economies are some of the freest in the world, with Switzerland taking 2nd place, followed by the Republic of Ireland. Luxembourg ranked 5th, Estonia 7th, and the Netherlands 8th.

Countries are graded on a scale of 0 to 100 based on the following criteria:

  1. Rule of law: Property rights, judicial effectiveness, and government efficiency
  2. Government size: Tax burden, fiscal health, and government spending
  3. Regulatory efficiency: Business freedom, monetary freedom, and labor freedom
  4. Open markets: Investment freedom, trade freedom, and financial freedom

The better a country performs in these areas, the freer its economy — which lends to better performance in the global market.

What is the most profitable business in Europe?

The most profitable industries in Europe include the following.

1. Technology

Although total investment in Europe-based tech companies has fallen since the record highs of 2021, with funding for private tech startups in Europe in 2022 only reaching USD 83 billion, the same trend has affected tech firms worldwide. However, experts believe the initial public offering (IPO) window may reopen in the upcoming year — which would kick-start a lucrative period of opportunity for high-growth firms worth billions of dollars.

This potential rise in value is partially due to the increase in technology leveraged across all industries, as increasing numbers of companies worldwide undergo digital transformation.

The development of artificial intelligence (AI) is another promising trend for tech companies looking to do business in Europe, as AI advancements will grow the tech industry.

Procuring investments from venture capital (VC) firms can help Europe-based tech startups more easily navigate the challenges of scaling beyond national borders by opening access to international networks, potential fundraising partners, or even potential mergers and acquisitions (M&A) opportunities.

Especially promising countries for tech companies include Norway and Estonia. Global increases in remote employment and networking expand the sector’s ability to grow throughout the continent.

2. Automotive

The European Union (EU) is one of the largest motor vehicle producers in the world, designing and manufacturing many iconic car brands such as Audi, Volkswagen, Volvo, Ferrari, Jaguar, and more.

The automotive industry, which provides jobs to 13.8 million people — accounting for 6.1% of total employment in the EU — is critical to Europe’s economic prosperity. Specific roles in the automotive industry and how many individuals they employ include:

  • Manufacturing: 3.5 million jobs
  • Sales and maintenance: 4.5 million jobs
  • Transport: 5.1 million jobs

Vehicle exports are another important aspect of the European auto industry. According to the European Automobile Manufacturers’ Association (ACEA), the EU exports more than 5.8 million automobiles per year, primarily to Asia and Oceania and between member states.

3. Healthcare

Medicine — and especially medical technology (medtech) — is expected to remain in high demand.

Innovation in the healthcare industry is directly linked to advancements in technology — according to Medtech Europe’s 2022 report, Europe-based medtech companies filed more than 15,300 new patents and employed more than 800,000 people in 2021 alone. As a strong contributor to the European economy, the medtech sector has a promising future ahead.

Which European countries are good for business?

Overall, the easiest countries to do business in include Denmark, Sweden, and Lithuania. The best countries for starting a company include Greece, Estonia, Finland, and the Czech Republic. Generally, these European countries may be good locations to grow your company:

1. Denmark

Denmark is a small country in the European market, allowing it to grow quickly and easily sustain that growth over long stretches of time.

Many professionals within the country speak English, simplifying communication for many international companies. While Denmark is an EU member state, they do not use the euro — instead, the national currency is the Danish krone.

According to the 2022 World Competitiveness Index, Denmark’s high economic performance is due to improvements in the following areas:

  • Reduced public debt
  • Reduced government deficit
  • Excellent institutional framework
  • Exceptional business legislation
  • High business efficiency
  • Excellent management practices
  • Increased investment flows
  • Limited rise in prices compared to similar economies
  • Robust public finances

The country’s high emphasis on sustainability is also important to mention, as it has helped Denmark-based companies become leaders in energy efficiency. For example, Denmark aims to cut total emissions by 70% over the next decade.

2. Sweden

Similar to its southern neighbor Denmark, Sweden has an open, competitive mixed economy supported by a strong, sophisticated welfare system. With its highly advanced business infrastructure, Sweden presents a unique opportunity for companies looking to gain a foothold in Northern Europe. Also like Denmark, Sweden is one of the EU member states with a currency other than the euro — their national currency is the Swedish krona.

While economic growth in Sweden is slowing due to global factors, the nation’s GDP is still expected to increase by 1% in 2023. Sweden’s top industries include advanced manufacturing and the information and communications technology (ICT) sector, which is steadily growing.

3. The Republic of Ireland

The Republic of Ireland’s economy is growing — and expected to continue growing throughout the next two years. Its per capita GDP is 60% higher than the Organisation for Economic Co-operation and Development’s (OECD) best performers, leading to high living standards and a stable economy.

One key advantage of doing business in the Republic of Ireland is the ease of paying taxes. This country presents numerous advantageous corporate tax incentives, including:

  1. Corporation tax: The Irish corporate tax rate is only 12.5%, which is the 3rd-lowest in the EU. It’s also the 4th-lowest tax rate out of the OECD group of developed economies behind Switzerland, Hungary, and Chile.
  2. R&D tax credit: To encourage investment in research and development, the Irish state offers a 25% R&D tax credit for companies from around the world.
  3. Knowledge Development Box: Tech companies in the Republic of Ireland can benefit from the Knowledge Development Box (KDB), which offers companies up to 50% tax deductions on profits from qualifying technological innovations. This deduction can reduce the tax rate to as low as 6.25%.

Tips for growing in European markets

Before making any decisions, you need to determine if European business development is right for your company.

If you’ve decided that your company will benefit from a European growth strategy, make sure you can meet the requirements for establishing a company in Europe:

  1. Residency permit: While most countries do not require a visa or work permit to start doing business, you will need a residency permit. These permits are typically temporary, but successful companies may be approved for long-term residency permits.
  2. Business plan: Some countries require you to present a detailed business plan when applying for a residency permit. Companies that have a high chance of success are more likely to gain approval than companies with riskier business proposals.
  3. Creating jobs: To reduce unemployment rates, many European governments require international companies to create jobs for citizens.

Without a partner to guide you, you will also need to register your company with the appropriate jurisdictions and agencies in your target country. In addition to being approved for a European business registry, you will also need to obtain a business tax identification number and enroll in your target country’s social security program to ensure legal compliance.

Simplify your global expansion by working with a trusted global growth partner. They will help manage tasks such as legal compliance and human resource management for you so you can apply your full attention to operating your company.

Grow your company in Europe with G-P.

G-P can help you act on promising business opportunities in Europe without needing to establish a new local entity or subsidiary. We’ve backed our #1 SaaS-based Global Growth Platform™ with the industry’s most robust team of legal and HR experts to streamline everything from finding and hiring, to managing your ideal talent, anywhere in the world. With G-P as your trusted guide to global growth, you can build your international teams starting in minutes, not months, with local and global compliance for ease and confidence.

Request a proposal today, or contact us for more information.

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