Regulatory and labour rigidities in the UK and Europe are a structural tax on startups, not a collection of edge cases

The friction that kills most European startups does not arrive as a single dramatic blow. It accumulates in HR lawyers, notice periods, delayed product rollouts, and the quiet arithmetic of runway consumed while waiting for people and tools that US competitors already have.

Sebastian Mallaby puts the sharpest point on the hiring problem. A Series B company typically has around nine months of runway to prove the next stage of its story to investors. If the three hires it needs to do that are each sitting out gardening leave and cannot join for six months, the startup has lost the majority of its execution window before the team is even assembled. “That’s a death sentence, right? That’s horrible. We call it gardening leave in Britain. That is an appalling idea.” The framing is blunt, but the arithmetic is harder to argue with than the rhetoric. Startup timelines are not forgiving, and notice periods designed for the cadences of large enterprises map poorly onto companies racing between funding rounds.

The hiring dysfunction does not end once someone is through the door. Chris Degnan, reflecting on his own experience building sales teams in Amsterdam, describes a performance management trap that effectively eliminates one of a manager’s core tools. Place an underperforming employee on a performance improvement plan and, in the Dutch system as Degnan encountered it, the immediate response is often a move to sick leave. The company then finds itself in lawyer-mediated negotiations rather than a straightforward conversation about whether the role is working. The result is that the normal feedback loop between performance and consequence breaks down, and the cost of a bad hire rises well above what it would be in a US-headquartered operation. Degnan describes it simply as “the worst.”

When you raise a new round, a series B say, and you've got like nine months of runway to build to the next stage from your company, and you identify the three key talent that you're going to bring into the company and make it happen, and then they turn around to you and say, 'Well, I can come in 6 months.' That's a death sentence, right? That's horrible. We call it gardening leave in Britain. That is an appalling idea. Sebastian Mallaby

The disadvantage is not limited to people operations. Daniel Priestley points to a product-level lag that compounded the hiring problem with a market-access problem. UK entrepreneurs, he notes, sometimes had to wait 12 to 18 months to access the same monetisation tools that their US competitors could deploy immediately. That delay is not a rounding error. For a startup with a narrow window to find product-market fit and demonstrate revenue traction, losing a year of access to a revenue mechanism is a meaningful setback against competitors who faced no such wait.

What the three concrete cases share is a common structure. Each imposes a time cost on a class of company for which time is the binding constraint. Gardening leave delays talent acquisition during the precise window when talent acquisition determines survival. PIP-to-sick-leave loops extend the consequences of a hiring mistake from weeks into months of legal process. Product tool lags defer revenue experimentation until the competitive moment has often passed. None of these costs appear in a single line item, which is partly why they persist. They show up instead in the gap between what a European startup attempted and what a US counterpart with identical capital and ambition actually achieved.

The pattern across these accounts is consistent enough to warrant more than sympathy. European founders are not operating on a level field, and the tilt is not primarily a function of capital availability or talent density. It is embedded in the legal architecture that governs how companies hire, manage, and sell. Reforming that architecture is a political problem of considerable complexity. But acknowledging that the problem is structural, rather than a collection of annoying edge cases, is at minimum a precondition for addressing it seriously.