ey.com/attractiveness 4Tackling the talent conundrum Brexit has brought the issue of free movement of labor across Europe may need to increase their use of automation and digitization and to the fore. This will change the parameters of competition for talent, cross-border virtual teams. and could intensify rivalry to attract the best people in some places. Issues for governments: Some European countries may need to Already, about 20% of respondents consider employee retention and revise their employment legislation to make the hiring of people access to talent as priorities if the UK leaves the European single simpler, more affordable and more predictable for employers, and market. to enhance their national capacity to access and attract high-quality Issues for businesses: There is an increasingly intense race between talent. This may require a re-examination of procedures for expatriate companies for skills and talent, which is likely to make labor more workers and students, in particular. Policymakers need to invest in expensive. Businesses may need to redesign their people strategies, education, training and R&D capacity to enhance skills in the existing and to rethink their operations and location strategies. And to talent pool. overcome any restrictions on the free movement of labor, businesses 5Bridging the finance and innovation gaps Perceptions of Europe’s capacity for fostering innovation and funding ecosystem. Some European countries have strong national entrepreneurship are improving according to EY’s most recent bodies that offer funding, sometimes in exchange for equity, and European attractiveness surveys. But foreign investors measure EU resources underpin some venture lending. Thinking ahead and European performance against able and improving competition from choosing a location which offers the best funding options within an the US and Asia. appropriate ecosystem should be front-of-mind for innovation-driven Issues for businesses: The UK is the most productive country in investors. Europe in terms of scientific output, and one in four UK publications Issues for governments: The UK Government has shown it is alert is done in collaboration with a European partner. Twenty percent of to possible funding challenges arising from Brexit, and has pledged to projects under the EU’s Horizon 2020 program are coordinated by UK make good any shortfalls. More widely, access to finance is one of the institutions. These provide valuable ideas and resources for business, main challenges for companies in Europe, in particular those that are and the UK Government has pledged to replace EU funding and ensure smaller, younger and more innovative. Studies show that total SME these fruitful partnerships continue. financing gaps for European countries are three to five times bigger However, international investors and entrepreneurs need to look than the gap in the US. At the same time, innovative companies face carefully at present and future funding availability when choosing more limited access to business angel capital and venture capital than where to locate innovation-led businesses, whether these are start- their US counterparts. Policymakers everywhere in Europe should ups or new international operations. Tech start-ups typically rely upon focus more on services, on people and on places. EU and national a mix of founder funding, angel investors, venture capital and state efforts to improve innovation and its financing must be sustained and lending which evolves as they mature. The UK has a well-developed developed further, and any negative consequences arising from a Brexit must be addressed. EY’s European attractiveness survey January 2017 25