Is the European Union really open for business right now?
The bear case practically makes itself. From the war raging on the E.U.’s eastern flank, to political upstarts threatening long-established rules of the road in core countries like Germany and France, to persistent economic underperformance in most of the bloc’s national economies, outside entrepreneurs might be forgiven for saying “thanks, but no thanks.”
One might imagine homegrown entrepreneurs eyeing the exits, too.
But E.U.-focused investors like Target Global would beg to differ. They can distinguish signal from noise, and they believe that opportunities still exist for capable, well-prepared European entrepreneurs.
“The European Union remains a dynamic, opportunity-rich environment for growth-oriented businesses,” says Target Global partner and co-founder Shmuel Chafets.
Here’s why.
A Dynamic, Well-Educated Workforce
The European Union’s workforce is well-educated and rich with talent relevant to a technology-driven society. According to the most recent available figures, about 31% of euro-area adults have a four-year university degree. Over 45% of adults have a university degree in Ireland, Cyprus and Luxembourg.
This rate of educational attainment stands in marked contrast to other parts of the world. In many middle-income countries, the share of university degrees in working-age adults is half that (or even less) of the European Union’s.
Ongoing Reforms to Reduce Internal Trade Barriers
The European Union has long worked to reduce external trade barriers to expand its export markets, but member governments and bloc-level policymakers are more focused than ever on reducing internal trade barriers as well.
This follows the realization that nation-level protectionist policies tend to benefit a small group of favored stakeholders while disadvantaging a much wider set of European consumers and business owners. It will become all the more important as trade barriers rise elsewhere in the world.
Relatively Low (And Declining) Interest Rates
Heartened by falling measures of price inflation across the bloc, the European Central Bank has reduced benchmark interest rates several times over the past year as it looks to boost economic output.
“Most measures of longer-term inflation expectations continue to stand at around 2%, despite an uptick at shorter horizons that may reflect the recent rise in energy prices,” says ECB executive board member Philip Lane.
Lower interest rates mean lower borrowing costs for companies doing business in the E.U. and consumers preparing to finance durable goods purchases.
Relatively Low (And Falling) Living Costs
Europe’s comparatively low inflation rate has further improved its already favorable cost of living, which is now a powerful draw for economic refugees from higher-cost countries like Australia, Canada and the United States. Factoring in housing costs, the same salary goes at least twice as far in Paris as in New York or San Francisco. As a result, Europe-based businesses have to pay less to attract the same talent — and do less to convince them to make the transition.
Nascent Tech Hubs in Berlin and Paris
Low cost of living is just one factor behind the emergence of Berlin and Paris, in particular, as tech hubs to rival Boston, New York and Toronto. Quality of life is also a factor; and few who’ve spent time in either city need to be convinced of that. Over time, experts like Chafets expect these tech hubs to expand, creating synergies that benefit the national economies of France and Germany, boost prosperity across the E.U., and benefit businesses that choose to set up shop here.
Rising Economic and Policy Uncertainty in North America
Rising uncertainty around domestic and trade policy in North America, particularly the United States with regard to tariff policy, may soon erode the region’s competitive advantage.
“Tariff increases could undermine domestic confidence with a non-linear impact….retaliatory measures would present additional risks not considered in our estimates,” debt ratings firm Fitch said in February.
While any adverse U.S. trade moves would affect the E.U. economy as well, the damage is unlikely to be as widespread there due to the size of the internal trading area and the optionality of non-North American import/export markets. That outlook favors European businesses over American ones.
Ready to Make Your Move?
In the best of times, starting a business is a risky proposition. It entails making a bet on yourself and your colleagues, some of whom you might not know on a personal level. It is in no way guaranteed to last, let alone “succeed” by any definition of the term.
And these are not the best of times. Certainly not in Europe, but arguably not anywhere else either.
Yet like their peers who choose to take the leap now, entrepreneurs who content themselves to “wait” for better times might find themselves treading water for quite a while. If that’s the alternative, why not shoot your shot?
