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Starting a business in eastern Europe

Last updated: 10 May 2022

Are the new East European member states such a great place to do business? The much vaunted skilled, low cost workforce in some of these countries mean potential gains can be substantial. Tempting though it is, and despite recent praise by the World Bank for measures taken to streamline business regulations and taxes, there are many pitfalls for British companies.

Transport networks, for example, can be primitive. The fastest links at present are those between Germany and Poland, Hungry and Czech Republic. Not ideal for UK businesses. In less established countries, travelling around can take four times as long as expected, and such difficulties need to be factored in.

Taxes also vary considerable. The Czech Republic has corporate taxes of 26%, Lithuania half that amount. Wage differentials, which may be high now could narrow in future, and companies need to consider carefully whether the enormous upheaval is worth it. Pollution, product piracy and money laundering are often more widespread in Eastern Europe. Language and cultural differences provide further barriers. Many eastern Europeans learn English as fast as they possibly can, but it is altogether another matter conducting complex business negotiations in another language.

There is also the question of customer reactions to moves eastward. Many may resent a company that takes jobs from the UK, and be sceptical and unsympathetic to such moves. Workers still have to be trained and valued employees relocated. Even locating a small office in another country would be a challenge. But for those eager to stretch their companies’ boundaries beyond the UK there is money to be made and business done. But it is not for the faint-hearted.

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