It’s no secret that London is fast becoming Europe’s answer to San Francisco’s Silicon Valley. The first half of 2015 has seen record funding of more than a billion dollars (£900 million/€1.2 billion) in those six months alone. Back in 2010, the UK capital’s tech startups raised a now amusing £10 million.
There are now 94k tech businesses in London, and since the launch of the Tech City programme set up by the British government, London’s digital technology industry has grown by 46% (17% more than in 2010) and tech firms now employ almost 200k people who contribute £18 billion to the city’s economy.
The Big But
But despite all of this humongous investment, it’s not all sunshine and daisies for tech businesses. No company can grow without top employees, and that especially resonates in the booming tech world. However, there simply aren’t enough candidates with the skills the market is desperate for.
Universities are producing fewer and fewer graduates in the field (not to mention the disparity between genders — more women in tech, please!). Overall, there will be 900k unfilled tech jobs in Europe by 2020, which in turn means that quality candidates now have far more choice — and power — when it comes to job selection.
The Big But #2
Great opportunity comes hand in hand with great competition, but apart from the global chronic tech skills shortage issue, there’s one other big problem that companies should consider in the London market: very high and skyrocketing living costs, especially when it comes to housing.
Real estate shortage is a pain in the neck, having been called the “biggest public policy failure of the last 50 years”, with London needing at least 50k homes a year just to keep pace with demand. Real estate prices are another headache when opening up a business in London, and they’re now 39% higher than the previous pre-crisis peak in 2007. These two housing factors make it even more expensive to capture the best talent.
These two “big buts” impact twice as hard on new technology businesses — first in the cost of office space; second in higher salaries to meet employees’ hard-to-find skills and so they can afford to live nearby and commute. If housing supply is low, if pricing is expensive, and if top talent supply is very limited, you better be ready to bring out the big bucks (or in this case, the big sterlings) if you stay in Her Majesty’s homeland.
So how can London companies overtake high costs and finally get their mittens on great talent? Quite simple, really.
Go with the tide
If candidates don’t come to you because of all the previous London implications… why not take the leap and meet them where they are? Odds are, every other European city isn’t as expensive as the UK capital. Pack up your office and nearshore to the closest EU destination.
Not to pull the coal under our sardine, but Lisbon is pretty much the best city you can bring your office to if you’re a London company. While the UK and Portugal can boast of maintaining the world’s oldest alliance, there are other, more practical, modern benefits being reaped by technology businesses aware of this longtime affiliation.
From operating on the same GMT timezone, to widespread working fluency of English (compulsory secondary education; film and TV are subtitled, not dubbed); from a highly skilled ICT workforce to not having Spanish siesta time to factor in; from old world economy entangled in economic crisis to becoming Europe’s Entrepreneurial Region of 2015 — Lisbon in particular is proving itself a worthy moon to London’s earth-sized gravitational pull.
Portuguese tech salaries & office costs
Since office space costs and cost of living in general are a great deal lower in Portugal, salaries also match that reality. Based on a mix of our own internal data and external sources, here are some of the country’s typical salary rates for key tech jobs:
- Junior developer: £16K per year
- Midweight developer: £21K per year
- Senior developer: £30K per year
- UX designer: £21K per year
- Digital marketing manager: £25K per year
- Product/project manager: £30K per year
- Business intelligence manager: £30K per year
Regarding other costs, such as office space, take our example: 25 people working at the Landing.jobs Lisbon office in a space such as ours, right in the centre of downtown Lisbon, costs about 2.000 euros (£1.410) a month. If we had the same space in London, we would pay about 22.200 euros (£15.445), 11 times more.
Cost of living in Lisbon
We’ve compiled some numbers about these two cities: rents in Lisbon are 76% (!) lower than their London counterparts, while general goods cost 50% less. Summing up, you (and your employees) can have the same quality of life while saving 62% in expenses.
You can easily spot the differences by looking at this quick comparison on cost of living:
ItemsLondonLisbonDifferenceMeal, Inexpensive Restaurant£12£5–58.62 %Monthly Pass (Public transports)£130£26–80.36 %Apartment (1 bedroom) in City Centre£1,633£397–75.68 %Apartment (1 bedroom) Outside of Centre£1,099£257–76.57 %
You can find a more extensive comparison here.
Even if it does mean a somewhat significant pay cut, the quality of life is uncomparable when looking at these differences.
Nearshoring success
Landing.jobs is a good example of how to provide value between London and Lisbon offices — and some of our clients as well:
- Farfetch
Farfetch offers an inspirational experience to fashion-forward consumers. While their office in London works in areas more related with Business Development, Customer Service and Marketing, their offices in Portugal, both in Porto and Guimarães, have around 200 people handling different fields of business, including Technology and Production.
- Talkdesk
Talkdesk is a browser based software that sets up company call centers. It’s an even bigger example: they have about 30 people in their Portuguese tech team that works in tandem with their US based Business unit. In total, Talkdesk has increased their team from six to over 70 employees in the past three years, expanding their offices to as far as Portland, Oregon and San Francisco, California, where its current headquarters is located.
- Landing.jobs
At Landing.jobs, we have a team of about 25 people located in Lisbon, while our Business Developers are spearheading the UK market in London and Barcelona and getting startups over there to hire great talent through our platform.
The shortage of tech talent is a serious business and one that will take years to live up to current and future demand. Even so, nearshoring your business or specific departments to another city and moving away from Europe’s Silicon Valley can seem daunting.
But think of it this way — without premium talent, there’s no way of meeting your company goals. It’s up to you to move ahead of the tide.
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