Which European Cities Are UK SMEs Relocating To?

It’s no secret that increasing numbers of UK-based companies are looking to relocate teams or even whole offices abroad. Sometimes this is a direct response to Brexit. Other times, it’s simply a case of looking for specialist talent not readily available in the UK. Whatever the reason, everyone seems to be at it, including the likes of Dyson and Sony.

Wilbury Stratton has worked on numerous location analysis projects over the last couple of years. Their clients have included banks, law firms, consumer goods companies, tech companies and consultancies. This has given the company a privileged insight into a number of the European cities that have been receiving significant interest from overseas companies. Below, Matthew Pitt shares findings from some of Wilbury Stratton's recent reports and takes a look at the current landscape of three thriving European cities.

1. Dublin & Financial Services

Dublin has long been recognised as a competitive location for financial services companies. Of the 275 UK finance firms that have recently relocated, the majority chose Dublin as their new home. It's no surprise, as Dublin's International Services Centre (IFSC) is one of the leading banking hubs in the world.

The centre now hosts half of the world’s top 50 banks and half of the top 20 insurance companies. Citibank, AIG, JP Morgan and BNP Paribas are just some of the big-name operations that have chosen to establish themselves there. Tech talent also abounds, with Google, Twitter and Facebook all having a presence in the city.

When it comes to talent, as Ireland’s capital and most thriving city, Dublin can also expect to have ‘first dibs’ on graduate talent from Ireland’s seven public universities and fourteen institutes of technology. It’s also easily commutable for professionals based in other key cities like Limerick & Galway.

But it’s not all good news. Our conversations with Dublin-based professionals revealed that many are starting to experience ‘headhunting fatigue’ because of the sheer volume of calls they receive on a daily basis. Other respondents claimed Dublin is fast becoming a victim of its own success with both residential and commercial property prices rising alarmingly and cross-town traffic becoming increasingly congested.

Furthermore, our conversations with over 100 Dublin-based workers revealed that 52 percent of them would only work in the centre of Dublin. This is concerning as there are currently ten business parks on the outskirts of the city.

Pros:

• Great pool of FS and tech talent
• Universities provide good source of emerging talent
• Thriving social scene

Cons:

• Soaring accommodation costs
• Talent pools suffering from headhunter fatigue
• Transport increasingly congested
• Intransigence among talent pool concerning location of work

2. Lisbon & Technology

Since its bruising 2012 financial crash, Portugal has bounced back impressively. Today, the country is home to not one, but two of Europe’s fastest growing tech hubs: Lisbon and Porto. The cities are home to countless startups and also play host to global super-brands such as Ericsson, Nokia and Bosch.

Between them, Lisbon and Porto generate around 90,000 graduates a year. Of these, 8,000 are IT and engineering professionals. It’s not surprising to find that companies and universities are already working closely together. The University of Porto, for example, has established a Science and Technology Park, ‘UPTEC’, where the most proactive companies have set up offices. This means they begin building relationships with the best talent at an early stage, making it straightforward to secure top quality graduates.

As with Dublin, there is also an undeniable ‘magnet’ quality exerted by Porto and Lisbon: the cities pull in talent not just from proximate colleges and universities but from all over Portugal and, sometimes, even further afield. Brazilian professionals in particular are attracted to the city, taking advantage of a common language and favourable work permit arrangements.

Despite the high quality graduate talent, compensation rates for tech staff remain significantly lower than other European cities. Our research suggests that a senior software engineer in Portugal will typically command a salary of €32,500 whereas in Berlin, Paris, Dublin or London the same individual will cost anywhere between €50,000 and €60,000. That said, salaries are creeping up in Lisbon.

Almost all sources we spoke to during our Portugal projects mentioned the great quality of life. Lisbon, especially, is perceived as unarguably ‘cool’. No industry manifests this urban chic better than technology, with its ultra-modern communal spaces such as “Village Underground” and “Shared Home”.

Pros:

• Go-to place for tech talent
• Salaries still reasonably low in Porto
• Desirable and reasonably affordable location for younger demographic

Cons:

• Strong competition from Google and Amazon
• Rising salaries in Lisbon

3. Sofia & Manufacturing

Sofia boasts a population of 1.2 million people living in the inner city, and an additional 1.68 million in the wider metropolitan area. The city is the economic heart of Bulgaria and home to the majority of local and international companies that operate across the country.

The latter includes global FMCG brands like Coca Cola and Danone, manufacturing companies such as Phillip Morris and tech names such as HP and IBM. Indeed, tech is one of Bulgaria’s boom sectors, with average annual growth of 17 percent since 2007.

However, Sofia distinguishes itself less by sector than by function, with numerous global companies choosing to place shared service centre operations in the city. There are compelling reasons to do so. Bulgaria’s talent pool is highly educated: over 50 percent of the city’s population holds a university degree. Wages are reasonably low and most employers find it relatively easy to retain talent.

This latter point hints at an underlying problem, though. There is a growing sense that tech skills are becoming harder to find and attract. Professionals in the sector tell us they’re tired of being headhunted and prefer to stick with their current employer. Also, although Bulgaria boasts plenty of universities, much of the emerging talent is emigrating in search of higher paid roles in more exciting cities. Sofia offers an excellent quality of life but, arguably, lacks the prestige of Lisbon or Dublin.

Pros:

• Highly educated talent pool
• Good quality of life

Cons:

• Difficult to attract people from wider Bulgarian talent pool
• Tech talent saturated
• Emerging talent is often tempted abroad

Looking ahead

No matter which European city or industry you're in, business leaders need to carefully analyse which cities or regions are attracting competitor brands. Once that is established, take some time to consider the following:

1. The size of the industry talent pool in each city, the strength of the graduate pipeline in relevant degree disciplines.
2. How long it has taken for others in the industry to build up in these locations.
3. How much the best candidates cost in terms of both salaries and bonuses.

The clock is ticking for any business looking to access the right talent in the right location. Once you're armed with the above, you can make a balanced decision on whether your SME would benefit from relocation to a thriving European city.

About the Author

Matthew Pitt is Head of Research at international talent research and executive search firm, Wilbury Stratton. Wilbury Stratton conducts talent research for over a third of the FTSE100 including succession planning, talent pipelining and competitive intelligence projects.