Comparison of Cost of Doing Business within the EU

Cost of doing business refers to the expenses an organization incurs while carrying out its business activities. Understanding the cost of doing business is important to run an organization effectively and productively. One of the major factors affecting the cost of doing business is the legal compliance requirements like data protection compliance. Although the General Data Protection Regulations (GDPR) consolidates & harmonises data protection laws across the European Union (EU), individual member countries have customised the GDPR and enacted additional data protection laws as well as other obligations that change the compliance cost across the EU. For companies looking to expand their operations in the Union, it is essential that they must familiarise themselves with the different legal requirements across the Union.

One of the major expenses of the company’s data compliance requirement is the management services. Companies have to hire skilled employees to ensure compliance requirements. According to the International Association for Privacy Professionals (IAPP) report, in the EU, companies spent more than 45% of their data privacy budget on management services. So, the cost of doing business is higher in countries like Belgium, Finland, and Germany, where the average hourly minimum wage is €11.60, compared to Bulgaria and Romania, where the average is €2.8. Countries with high labor costs also produce highly skilled labor, making them attractive for investment.

To ensure the security of collected personal data and avoid any breaches, the data protection laws require businesses to put in place up to data technologies. McDermott Will & Emery state that companies in the EU spent almost 20% of their annual security budget on technological compliance and an additional 7% on training employees to run the technology. This cost increases in countries like Albania and Kosovo, where businesses have to import technology, compared to the Netherlands, Australia, and France, where most of the technology is locally produced. Less technologically developed countries can be attractive for companies looking for cheap labor.

Regulations and business culture also vary among the EU member countries. According to the report of OECD, fifteen of the European Union countries scored above the average iREG score. Some countries, such as Finland and the Netherlands, have highly developed regulatory frameworks; they have developed primary laws as well as subordinate regulations, while others, such as Hungry and Cyprus, have less developed regulations. Some countries, such as Greece and Italy, prioritize personal relationships and networking, while others prioritize professionalism and efficiency, such as Denmark and Germany. Understating these differences is essential for a company prior to making any investment decision in the Union.

Litigation costs across the EU member countries differ significantly. Resolving any dispute on a fast track is always in the best interest of a business. Countries offering reasonable time for dispute resolution and providing transparent and enforceable decisions are attractive to businesses. Like in Greece, on average, it takes three years to litigate a standardized commercial dispute which is fifteen months longer than the EU average. Lithuania and the United Kingdom have higher scores on the Quality of Judicial Processes Index compared to Netherlands and Spain, making them feasible for businesses. EU member countries with strong judicial systems are more likely to enforce the rights of individuals and impose penalties on companies, which may not benefit a company that receives a lot of individual data requests.

When considering all of these factors together, it is difficult to determine a clear winner for the lowest cost of doing business. However, some countries stand out as offering particularly attractive conditions for foreign investment. For example, Netherlands and France have highly skilled labor and an efficient judicial system. These countries may be particularly attractive for companies looking for a skilled workforce and an efficient dispute resolution system.

In conclusion, the cost of doing business in the EU varies widely depending on a range of factors. Companies considering investing in the EU should carefully evaluate each country’s compliance requirement, skilled labor, judicial system, and technology to determine the best location for their needs. While no one country can be deemed to be offering the best business environment, there are several EU member states that offer particularly attractive conditions for foreign investment. Understanding the unique business environments of each country is essential for companies looking to expand their operations or invest in new markets within the EU.

Lex Bridge is a boutique law firm specialising in regulatory compliance and risk management services. With our in-depth knowledge of the EU business environment we can provide your business with the guidance regarding cost of doing business in the EU. We take pride in our commitment to excellence, integrity and client satisfaction and we work tirelessly to ensure your business is cost efficient. Our clients and services are spread at a global level, primarily from USA; EU; UK and MENA states.​

This article is provided for informational purposes only and does not constitute legal advice.