EU Headquarters: 5 Reasons why Establishing a Company in Europe Matters
Covid, data laws, hybrid work and Brexit may have prompted many to question the need for European headquarters. Here’s why they matter, now more than ever.
Photo by Michiel Annaert on Unsplash
30% of the world’s wealth is produced in the EMEA region, an area with a GDP of around $28.7 trillion and the largest addressable market outside of America. Europe alone, as the second-largest B2B addressable market, has been the top choice for US companies looking to expand beyond their borders. For UK-based companies, the EU has represented an escape route from Brexit: dozens of UK companies ended up moving their headquarters to an EU country or setting up a subsidiary in the EU as a result of Brexit. Among the “movers” big tech names such as Panasonic and Sony, insurance leaders such as Lloyds of London and lesser-known SMEs that wanted to keep doing business in the EU post-Brexit.
The post-covid world has, however, posed new challenges to business and hybrid work models, new data privacy laws and the Russian-Ukrainian conflict nearing the EU borders have led many business leaders to wonder whether maintaining their European headquarters is the right course of action.
Here are 5 key reasons why EU headquarters matter now more than ever before.
OFFICE CULTURE HAS NEVER BEEN SO RELEVANT
How do companies survive tough times, such as a Covid-led crisis? For many business leaders, it is all about culture.
Where companies, especially new startups, are torn between running their business virtually and having a physical location, many organizational leaders have agreed upon the importance of a hybrid work model.
In this model, there is no central HQ. Instead, teams can choose to work with colleagues in different hubs or choose to work from any other place, home or not. They can still go to their local company hub for key moments like collaboration sessions, team events and even dealing with employment contracts.
The hybrid work model enables greater access to talent, increased productivity for individuals and small teams, lower costs, more individual flexibility, and improved employee experiences. But it only works if employees can get together in physical locations, optionally and at their own discretion, for the occasional visit, reporting or meeting.
Physical location not only creates a workspace culture, but it is also crucial for giving the organization its identity. Despite big technological advancements over the years, nothing can replace face-to-face communication: it creates significantly more opportunities for rich, informal exchanges, emotional connection, and emergent “creative collision” that can be the lifeblood of trust, collaboration, innovation, and culture.
A distributed team hub model thus combines the flexibility of remote work with on-site collaboration, strategically close to key talent pools that allow the company to find and curate top talent.
2. DATA PROTECTION LAWS ARE A POWERFUL INCENTIVE TO ESTABLISH EUROPEAN HEADQUARTERS
Just as 2021 ended, regulators in Brussels added the finishing touches to a ground-breaking ruling. After months of negotiations, the Privacy Shield Agreement was effectively shattered. The end of the trans-Atlantic data-transfer deal left U.S. tech providers that operate in Europe incapable of sharing personal data from residents of the 27 countries in the bloc.
Data privacy laws around the world - Source: Telemessage
The ripple effects were immediate. Portugal’s statistical institute, for example, stopped using cloud-security company Cloudflare Inc. after the country’s regulator said it was possible that Cloudflare could move data to the U.S., where it is based. In December, a German court ordered a university to stop using Cookiebot, a consent-management platform for websites that shared data with a U.S.-based cloud host.
But perhaps the most staggering response came from Facebook, that said it may stop operating its core apps in Europe if it's forced to suspend transfers of European Union data to the US. The announcement followed Facebook's legal fight with Ireland's Data Protection Commission, questioning the validity of the mechanism Facebook uses to send data back to the US.
This seismic shift in data protection laws has no end in sight and provides an ample reason for business leaders to consider establishing or keeping their European headquarters.
3. THE EU IS THE WORLD’S LARGEST SINGLE MARKET
Even if you are currently working as a distributed team and have no plans to invest in a physical office right away, you still need to think about where your customers are, where the talent you need is concentrated, and where you can best access markets and opportunities for long-term growth.
Europe qualifies for all the above.
The EU is the largest single market in the world. With a GDP of 13 trillion euros and 500 million consumers, if the EU was a country, it would be the third-largest in the world by both metrics. It is also a top trading partner for 80 countries. The European startup ecosystem is flourishing, with nearly $60 billion in venture capital invested into Europe in the first half of 2021, up threefold from 2020. Combined, EU tech hubs would make up an ecosystem with over 130 unicorns, 30 thousand startups and 2.7 million jobs.
4. THE EU HAS A RICH TALENT POOL
If talent represents the foundations of the European tech ecosystem, its academic institutions are the bedrock. There are over 1.8 million scientists and engineers across Europe, specialising in every field. Europe is home to 5 of the Top 10 computer science universities in the world and 31 of the world's top 100 universities in engineering and technology. There are clusters of world-class talent potential in every corner of Europe.
In some EU countries, the tech talent pool has elevated importance. This is most notable in Spain and Portugal, where the relative share of tech jobs is far higher than in other European countries.
Portugal is attracting global tech companies. The success of Talkdesk, Farfetch, OutSystems, among others, has inspired more people to create companies, captured the interest of investors and helped move the local investment landscape forward.
5. TOP PERFORMERS WANT TO MOVE TO PORTUGAL, FOR GOOD REASONS
Many entrepreneurs list the sunshine, food, lifestyle, costs, and culture as key motivations to move to Portugal. Here’s why entrepreneurs are choosing to settle in Portugal:
The Portuguese government has determined a 10-year tax break on most foreign-sourced income, including dividend, interest, rental and pension income, as well as real estate capital gains, under the so-called Non-Habitual Resident (NHR) tax status, which is granted to new residents.
A wide range of Visa options caters to the different needs of entrepreneurs who want to call Portugal home.
Portugal promotes a tolerant, open and safe society and is ranked one of the most peaceful countries in the world.
Portugal came out first as the favorite European place to live and work for expats, thanks to its overall quality of life measured in leisure offers, gastronomy, affordability, healthcare system, family life and ease of settling in.
Portugal’s exceptional quality of life and the ease of settling in have won over tech entrepreneurs from around the globe. To know more about Portugal as a Tech Destination, download our ebook here.
If you are thinking of relocating or expanding your operations to Europe, we can help you through the entire process. Book a call today.
