The Belitsoft bespoke software development company examines the primary reasons behind this trend and shares what to expect in the coming year. By 2026, hiring local European teams to create custom software will be more than just a way for UK startups to save money; it will be a central part of a smart plan to grow quickly and steadily. It has become a central part of a smart plan to grow quickly and steadily. UK startups can successfully address significant issues with high costs, hiring qualified personnel, and maintaining flexibility by collaborating with these specialised tech hubs.
Strategic and Geopolitical Trends
Brexit has resulted in tougher labour laws in the UK, according to ContractorCalculator’s review. The IR35 rule, which raises taxes for contractors, is a notable example.
Many businesses are therefore forced to look for alternatives outside of the UK, such as nearshoring or offshoring. Recent studies confirm that a lot of UK startups and growing companies are now turning to countries like Poland or Portugal for their staffing. The main reasons are that these offshore resources cost much less and allow companies to avoid the financial burden of the IR35 tax rules.
For research and development, big businesses and the government have begun to regularly work with outside partners. This is a significant and long-lasting shift rather than a passing fad. Even large-scale projects like the National Health Service's (NHS) digital initiatives now regularly involve international teams.
Access to a Large Pool of Skilled Talent
Due in part to the exodus of EU workers after Brexit, the UK is currently experiencing a severe shortage of tech talent. Nearshoring helps fill this gap. In Central and Eastern Europe alone, there are approximately 1.8 million IT workers, and the region produces a significantly higher number of computer science graduates each year than the UK. These developers are highly skilled. Poland is one of the best countries in the world for coding skills and is renowned for its scientific and technological education.
Financial Advantages
Hiring a developer in the UK costs an average of £57,500 per year, compared to approximately €43,000 in Poland, Bulgaria, or Romania - a saving of 30-40% on labour costs. These cost reductions are made without compromising quality, and startups are able to increase their runway and make more investments in other areas of growth.Additionally, hiring tech workers in these areas does not trigger complicated UK tax laws like IR35, and they frequently pay lower income taxes (some as low as 5% to 10%). This results in lower employment costs. Because of this, hiring them as contractors is easier and less expensive than hiring locals.
Strong Legal and Regulatory Alignment
Contract law and intellectual property (IP) protection are also robust. Because EU-wide IP laws are in line with UK laws, UK businesses can work with Eastern European vendors with confidence, knowing that trade secrets, copyrights, and patents are protected.
Agile Collaboration and Speed
For startups, speed to market is critical. Working with a team that is only one or two hours ahead of or behind you makes collaborating much easier. Because your workdays mostly overlap, you can have your daily check-in meetings, work on code together in real-time, and quickly share feedback when both teams are at work. This all helps get projects finished faster. With offshore teams in Asia, where a time difference of 5 to 8 hours can result in major delays, this high level of integration is challenging to accomplish.Proximity also facilitates travel. A UK manager can fly to cities like Warsaw, Lisbon, or Tallinn in a few hours. This encourages team-building activities, workshops, and planning meetings, which results in team integration and builds trust.
The Linguistic and Cultural Fit
With Western-style education, many developers in Eastern Europe and Portugal are proficient in modern agile development methodologies. English is spoken by professionals in these countries' tech sectors, and they are familiar with US and UK software standards. A major benefit for startups is that there are fewer misunderstandings and projects can move more swiftly because they operate and communicate similarly to British teams.
In Conclusion
According to analysts, the trend of nearshoring custom startup software development among UK-based companies will only intensify in 2026. Global IT spending is expected to reach $6.08 trillion in 2026, up roughly 10% from 2025, according to the most recent forecast by business and technology insights firm Gartner.
The CBI's analysis says that nearly 40% of significant European tech buyers specifically intend to embrace more nearshore (particularly Eastern European) sourcing. By 2026, the software industry in Eastern Europe will have grown rapidly thanks to the digital transformation and its "massive talent pool" at a lower cost, according to Gartner and others.
In conclusion, it is generally expected that by 2026, European tech companies, including startups in the UK, will adopt nearshoring as a standard practice rather than as a specialised cost-cutting strategy.
About the Author:
Dmitry Baraishuk is a partner and Chief Innovation Officer at a software development company Belitsoft (a Noventiq company). He has been leading a department specializing in custom software development for 20 years. The department has hundreds of successful projects in AI software development, healthcare and finance IT consulting, application modernization, cloud migration, data analytics implementation, and more for startups and enterprises in the US, UK, and Canada.
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Company Name: Belitsoft
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City: Warsaw
Country: Poland
Website: https://belitsoft.com/
