Business Analysis: Now is the time for Baltic development agencies to strike

Turn on the radio, or pick up a newspaper in the UK and you will be regaled with  story after story predicting the end of the economic world as we know it. Every commentator seems to want to outdo all others with predictions of impending economic meltdown and disaster.

The constant drip drip of bad news is having a severe effect on business sentiment in the UK at present. Many companies that would naturally look to grow and expand are deciding, instead, to retrench. They blame the lack of finance, but our banks claim they are making extra efforts to lend money to business. Certainly the banks have tightened up on their lending criteria, but they are still lending.

Indeed, Barclays Bank has just launched a campaign to try to persuade small businesses to borrow more money, running “drop in” clinics for businesses to come in and have a chat and find out how much they could be lent, and on what terms.
If we are to get out of this mess, then the obvious, indeed the only, way to do this is through renewed economic growth, and that will only come when some form of confidence returns to business, and they feel that they can start to grow their businesses again.

This confidence will only return when we start to get some positive news, and my guess is that that will only happen when we sort out the current eurozone crisis. The potential collapse of the euro is hanging like the sword of Damocles over the world economy. Whichever way it is going to end, it is better to get it over with quickly, so we can start to understand what the new economic landscape is going to look like.

My guess is that this new “landscape” will look good for the Baltic States, as they have led Europe in taking the tough decisions needed to reset their economies. As a result, they are back into growth, and their geographic position allows them to develop the strategy of becoming the EU’s gateway to Russia and the potentially lucrative CIS states’ markets.
The skills of the people and the competitive cost of running businesses also means that they should become a natural base for international companies to consider as part of their growth strategy, especially if they are going to need highly educated and skilled people to allow them to innovate and develop their businesses.

I have just returned from a week of running Inward Investment road shows for Invest Lithuania in England; we covered three cities in the English Midlands, and were looking to attract companies who need to expand and innovate to survive. I have to say, the attendance was lower than we would have liked, but those companies who did attend were universally positive about the events and what they heard about the opportunities in Lithuania.
Our job is now to make sure that we keep working with those companies, looking to persuade them to make Lithuania the center of their strategic development over the next few years. 

On the face of it, that may seem a tall order, but I do not believe it is. What choice do these companies really have if they want to develop a research team, or expand their IT development capacity? The costs of doing it in the UK are around three times the costs in the Baltics, and that is without any EU funding they might be able to get hold of. To put that in perspective, if I ran an IT company in the UK, I could get 15 developers in the Baltics for the cost of 5 in the UK. That is going to make me extremely competitive in the UK market.

So, I really believe that the current situation, as difficult as it is, is the time for the Baltic States’ development agencies to get on the trail of UK businesses, and make them understand they have a stark choice: stay in the UK market, and stagnate, or invest in a low-cost, high-skill country, which will allow them to continue to innovate and put them in the best position to prosper when we get through this current madness.