Why British companies are moving to Lithuania

A few years ago, Grexit was the word on everyone’s lips. These days, it’s Brexit – and the ever-mounting rhetoric makes it seem as much of an inevitability as the Greek situation a few years ago. Britain believes it is self-sufficient and should not be helping to keep European countries afloat.

However, many European countries – such as Lithuania – are now overtaking the UK. According to the latest Global Competitiveness Report from the World Economic Forum, it is actually easier to start a business in Lithuania than the UK.

Many British companies – from startups like YPlan, an events planning app, to household names like Barclays – are moving their operations to the country, which joined the eurozone on 1 January 2015. In addition to more manageable levels of bureaucracy (it takes six and a half days to start a business in Lithuania in comparison with 12 days in the UK), there is a highly-educated workforce, top quality infrastructure and favourable corporation tax. 

While the UK is playing a balancing act, trying to maintain huge corporations registered on its shores and appeasing voters calling for an end to get-out clauses for tech giants, places such as Lithuania are slowly and surely attracting greater numbers of businesses. Just last month, the Lithuanian minister of economy approved a new regulation allowing foreign investors in the country to be entitled to receive grants of up to €4.34m.

This is in addition to a six-year corporation tax break for investors putting money in the country’s Special Economic Zones. Outside of these zones, Lithuania’s corporate tax rate stands at 15 per cent (and can be as low as 5 per cent for small businesses). By contrast, the UK corporate tax rate is 20 per cent for businesses with profits of £300,000 or less. 

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How did a tiny country, which regained its independence from the Soviet Union in 1990, and has a population of fewer than 3m people, manage to become such an attractive business destination?

Its sustained strong growth in the last two decades has indeed been helped by favourable tax rates – but this would not have been sufficient if Lithuania had not also invested into industries such as ICT, outsourcing, manufacturing and life sciences. To top it off, the country has been focusing heavily on preparing a well-educated, English-speaking population – in which 93 per cent of people have a secondary or higher degree. 

Three-quarters of Lithuanian school-leavers pursue further studies – but only about 40 per cent of British students go on to post-secondary education. As euro-independent as the UK may be feeling of late, there are things it could learn from quiet success stories such as Lithuania. 

But the EU is not just about looking at what one’s neighbour is doing – it also about collaborating and working together to help mutual growth. The UK is excellent at innovating and creating household names – but places like Lithuania can be the incubators that help them grow.

So instead of looking to leave the EU as quickly as possible, the UK should consider the opportunities that are still available to it within the union – or risk overlooking the places such as Lithuania that will help its own economy to prosper.

Image: Shutterstock

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