The UK is considered to be one of the leading business locations in the world with its capital London, which despite Brexit, remains Europe’s number one tech-hub for investment.

According to The Guardian, the United Kingdom is third in the world for the number of created startups.

But it occupies only the 13th position for the number of startups that became established medium-sized companies.

Quite a large gap, isn’t it?

Today we are going to outline the challenges and obstacles for growing tech business in UK, and see whether one pill (a remote team) is able to help.

Pain #1: Talent Drain

In spite of the need for software development in the current business world, there is a huge gap between the skills required for a certain project and the number of highly-skilled resources available, particularly in the UK.

Six years in succession, UK Startup Outlook has reported that a great number of entrepreneurs find it extremely challenging to search out suitable employees to grow up their businesses.

Graph with % of UK startups who find hiring talents challenging

Source: UK Startup Outlook 2018

Pain-killer: Searching across the globe for professionals

Can’t find an in-house employee to meet your business requirements? That’s not a big deal today.

Opt for a remote team and access the world best talents.

In this case the search is not limited by location, meaning you are not restricted to a local area of applicants and can expand your horizons – even globally (if you choose).

For instance, such global tech companies as IBM, Google, Samsung Electronics, Adobe, Oracle, Microsoft, and Accenture have Research & Development centers in Eastern Europe.

This destination remains attractive for UK companies because of geographical proximity, minimal time difference, and cultural similarity.

Among other advantages of outsourcing to this region are the compliance with the International Standards for software development and business operations, convenient financial transactions and a large IT talent pool.

Pain #2: High Salaries

Most startups and developing companies are usually struggling financially. Depending on the sector of your business, you may spend between 50 to 80 percent of gross revenues on employee salaries and benefits combined.

Let’s face it:

In business centers like New York City, Silicon Valley, UK’s innovation hub London life is EXPENSIVE. So, salaries are high as well.

More pain:

Qualified staff are always in great demand, so a well-established company is likely to take over high-skilled candidates with rates that most developing companies or emerging startups can’t afford.

(No surprise there)

Recently Google increased a reward for recommending a friend from $2000 to $4000.

Moreover, the company has launched talent incubators in order to fight talent drain.

If the biggest market players are still struggling to find professionals, others need to look for options to remain competitive.

Pain-killer: Finding balance between price and professional skills

The immediate solution is quite simple – hire a remote development team until you manage to hire employees in London/UK.

There is a great number of talented and high skilled people around the globe with fewer expenses than those people who live in the UK.

‘Small firms in the UK are looking to send work overseas to cut costs but also to increase their own capacity. Rather than turning away contracts for work, they are taking it on and outsourcing it for less abroad to boost profits.’ – Bill Little, European director at Freelancer

An average Software developer in London is reported to earn about £60,335 annually.

This salary is 22.3% more than the average national salary for Software developer jobs and 46.5% more than the average salary across the City.

As a comparison, an average salary for a Software Developer in Kiev, Ukraine is $24,824 per year.

Another benefit of remote over in-house team is that you are able to hire an individual possessing quite a specific skill set required for a certain task. That allows hiring people only for a projected time-frames.

It is also worth considering that not only hiring but also firing an in-house worker in UK can be quite difficult.

Britain’s employment law is one of the fastest moving areas of the legal landscape. For this reason it is better to be sure you are following the correct procedures in case you need to downsize.

Working with a remote team gives an opportunity to pay contractors for the work completed and not binding your business into a lengthy relationships.

Pain #3: High Rent Prices

Rents in United Kingdom, and London in particular, are reaching highly inflated prices.

Forbes reports that more than 25% of 200 tech leaders stated that they have considered moving out of London in order to avoid expensive real estate.

Even trendy co-working spaces aren’t cheap.

It is no wonder that such prices for a sophisticated office may be rather challenging for a startup or a small developing company.

Pain-killer: Remote team saves money on office space and supplies

Why waste tons of money on expensive office space when it is possible to invest in your product and employees?

By having a part or even majority of your team work remotely, you are able to save on such things as rent, insurance, office supplies etc.

A good example:

An American insurance company Aetna got rid of 2.7 million square feet of office space and saved $78 million per year with remote workers.

If you are not sure whether the collaboration with a remote team is effective or you still think it is easier to control in-house employees, here are a few tips:

  • Use video conferencing; an ability to see the person, even if he is on the other side of the world, helps you understand messages, body language, and minimize miscommunication risk.
  • Use collaboration tools; there is a great number of tools that may help you to communicate with your remote team such as Skype, Google Hangouts, Slack, Zoom, you also use Trello for managing the team.
  • Hold weekly meetings; this is a great opportunity to make sure that everyone is aiming for the same goals and targets.

Pain #4: Taxes and Additional Costs

Calculating the true cost of hiring an in-house employee has always been quite difficult.

I don’t talk about the salary only.

Can you get a rough estimate of how much tax the employee will cost you?

What’s the cost of sick leaves, legal fees and red tape?

Here is a report, published by the Centre for Economics and Business Research (CEBR) and the UK’s Federation of Small Business, that may help you to build an approximate picture of potential expenses.

For example, business with 1 employee and 1 owner is reported to face an average employment cost of £35,500 per worker. In the case of a company’s first-hire, 20% of the total employment costs are going to national insurance contributions (the UK equivalent to Social Security) and income tax.

You should also take into account onboarding expenses, training costs, expenses necessary to provide adequate work stations for your new staff, bonuses, pension etc.

Not long ago TheUnderCoverRecruiter compiled research concerning an average costs of hiring staff in UK. It says that in case you are hiring an employee with an average salary around £27,600, you actually need an approximate budget of £53,000, including all the additional costs and expenses.

It is twice as much!

Pain-killer: Outsourcing helps cutting additional costs

Hiring people outside your office gives you a great opportunity to employ people with necessary experience and the specific skill-set needed.

Investing in outsourced work does not mean actually taking on new employees.

Outsourcing frees the company from paying employee benefits such as sick pay or insurance, or investing in training the employee either.

When you opt to outsource, you pay as a contractor, which avoids bringing additional employees into the company and saves you money on everything from benefits to training.

Pain #5:  Brexit Issues

On June 23, 2016 a majority of British in the UK (52%) voted for so-called “Brexit” (British exit), meaning the country will leave the European Union. Now governments, investors, entrepreneurs, and financial institutions are afraid of its economic impact, assuming that it may be prominent.

Brexit is becoming another challenge for the British tech sector too. According to Tech Nation 2018, the UK’s annual state of the nation’ report on the country’s tech sector, 2 out of the top 3 challenges of tech companies are related to Brexit. It is anticipated to affect hiring process and complicate access to talents due to immigration rules and employment laws before and after Brexit.

It is connected with the fact that a third of the UK’s tech sector, according to Forbes, comes from European countries. It allows companies to use highly-skilled European talents and therefore top up the lack of homegrown specialist.

It is not clear yet what the UK’s policy will be towards foreign workers, as one of driving forces of the Brexit campaign was the apparent hostility toward EU migrants.

Pain-killer: Brexit won’t influence the way the outsourcing works

Modern agile companies all over the world are trying to surpass state borders and work permits. Outsourcing gives a great opportunities for this.

If the government fails to gain a convenient financial passport solution, startups can always use outsourcing as an easy and cost-efficient way to operate on the EU and global market.

Bottom line

The London business scene is one of the biggest in Europe which is growing faster than any other ecosystem. But the company attempting to “dig in” London must be ready to face challenges.

Collaborating with other professionals in remote teams is an effective ways to overcome these challenges, improve work processes, save money and build an excellent product that will generate profit along the way.

If  you see opportunities for your startup in partnering with remote development teams,  we invite you to find out more about MindK as a software development partner.

 

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