As 2 of Europe’s biggest economies, it’s no wonder that so many entrepreneurs debate between starting a business in the UK and starting one in Germany.
The truth is, the place you decide to run your business from can have huge implications for its success.
Luckily, we’re here to help. Here’s everything you need to know about starting a business in the UK vs Germany, helping you to compare them side by side.
Setting Up
The ease of setting up a business in these economies largely depends on what type of passport you have. If you only have a UK one, setting up a German business can be tricky. However, if you hold both a UK and and EU passport, then it will be easier:
Germany: Setting up a business in Germany is possible, but it does mean jumping through lots of hoops. You’ll need to get a business visa if you don’t have an EU passport and then start their process to set up. This involves registering with the trade office and the tax office.
One of the major barriers is that all documents need to be translated to German – which can add a chunk of cost to the process. However, once you do register, you can operate under EU laws, which makes it easier for trade.
UK: One of the big benefits of the UK is that starting a business is really easy. It costs just £50 on companies house and all documents can be in English – meaning no translations needed.
This low barrier to set up makes it a good choice – however due to Brexit, UK companies no longer get the benefit of being part of the EU.
Taxes
Germany: German corporation tax is set at 15%, making it lower than the UK. Companies also have to pay a 5.5% solidarity surcharge. VAT is charged at 20%.
Income tax varies between 14% – 45%. However the high rate only comes into play once you are earning over €277,826.
UK: UK corporate taxes are 25%, making them higher than those in Germany. Income taxes are also higher, as workers pay 40% of their income on taxes above £50,271. The highest rate of 45% applies to those earning over £125,140.
Language
Language also plays a major role, especially as you will be living in the country you set your business up in.
Germany: Especially in hubs like Munich and Frankfurt, locals speak a lot of English, though German is the official language. However all business contracts will need to be in German, so having a good understanding of the language is important.
UK: Unsurprisingly, everyone in the UK operates in English – especially for business. This can be useful for those that do not speak another language – especially when it comes to contracts, networking and more.
Cost of Living
Setting up a business in a new country also means living there, so the cost of living should be considered.
Germany: Germany is a big country, so it does depend where you decide to start your business, but in general, costs are lower than the UK. As an example, a one bedroom apartment in Munich costs €1,309 per month on average, making it more affordable than other major cities in Western Europe.
UK: The UK, especially London, is very expensive. The hubs around the UK that are best for businesses are major cities like Manchester, London and Leeds. In London, an average one bed apartment can cost up to £2,500, making it very costly.
Wages
If you are planning to hire employees, it’s also useful to know what the minimum wages are, as this will have an impact on profitability.
Germany: In Germany, the minimum wage is €12.41 per hour.
UK: In the UK, the minimum wage is £11.44 per hour for those over 21. However for London, this rises to £13.85 per hour to account for the higher cost of living.
Location
Germany: As Europe’s largest economy, Germany has great access to EU markets and is well set up for international trade. It is also positioned between the UK, Middle East and North Africa, making it a good location for international collaboration.
UK: Since Brexit, the UK no longer has access to the EU. However, it has very strong trade agreements with many countries around the world, especially because of the commonwealth. How its trade agreements with the US will be interesting to see evolve as Trump takes power, but its location between Europe and the US makes it a good spot for trade.
UK vs Germany: Which Is Better?
Whether you choose the UK’s easy business landscape, or Germany’s EU access, both countries are incredible options for entrepreneurs.
Start by thinking about what your business needs, and then weigh up the pros and cons. But the good news is – both options are good!
