Visitors arriving at Larnaca airport are welcomed by signs urging them to ‘Love Cyprus’, part of a new advertising campaign to boost last year’s record four million tourist arrivals. For quite a large island, its population of 1.3 million is small – about the same as the number of Britons who make up a third of sunseekers holidaying there every year.
They should be among those benefitting from the new UK-EU reset deal hailed by Keir Starmer as a ‘new era’ on Monday. The Prime Minister said British holidaymakers will be able to escape queues at Passenger Control by using e-gates when travelling around Europe. Cyprus has a particular interest in the agreement as we will be assuming Presidency of the EU next year. Our ties to the UK remain strong, having been under British rule which ended in 1960, and with 30,000 Cypriots having served in the British army during the Second World War.
More recently the Eastern Mediterranean island has positioned itself as a beacon of stability in an otherwise troubled region, getting humanitarian aid into Gaza as well as helping refugees get out, following the October 7 attacks.
The UK’s influence is still keenly felt, from driving on the left to the wide availability of British supermarkets and a similar legal system. And with more than 300 days of sunshine every year and a lower cost of living, it’s no wonder so many Britons head there on holiday, or even choose it as their retirement destination.
But while tourism adds around three billion euros to our coffers each year, boosting other parts of our economy means the government also needs to persuade Cypriots living abroad to return home to drive forward other sectors of our economy.
That’s why the President of Cyprus, Nikos Christodoulides, will be in London today [MAY21] hoping to lure home some of the 300,000 Cypriots living in the UK. Scientists, academics, doctors and tech entrepreneurs are being offered generous tax incentives to make the move back. A bill has been submitted to parliament that would grant a 25% tax exemption, capped at £21,225, for professionals returning home after working abroad for seven years following their studies. There will also be help with education and housing, as well as free health care on offer.
Like many small island nations, Cyprus finds itself at a crossroads. Following the financial crisis of 2014, which forced the country to reduce its reliance on the banking system and diversify the economy, Cyprus invested heavily in becoming a tech hub in Europe, a decision that has seen remarkable growth.
Last year, the ICT sector’s contribution to the economy outpaced tourism and all other sectors of the economy, amounting to 14% of Cyprus’s GDP. For Cyprus to continue on this trajectory, and secure its digital future, it will need to bridge the gap in STEM workers. The government is trying to facilitate the success by attracting ICT companies to set up a base and on the island. Since 2022, software firms and video games developers made up by far the largest foreign investors in Cyprus, about 35% of all investment activities.
Last month Amazon arrived following a Silicon Valley drive by the president to make Cyprus a major tech hub in the Eastern Med. However, as a relative newcomer to the tech sector, Cyprus hasn’t had sufficient time yet to cultivate local talent to meet the increasing demand.
Universities are doing their best to train new STEM students, but they cannot keep up with the demand. As a result Cyprus introduced additional measures to cater to the need. Among the very important reforms was the establishment of the Business Facilitation Unit with fast track procedures.
For several years, Cyprus had among the EU’s lowest proportion of STEM graduates, and our share of R&D researchers in the total active population was just 0.5%. Meeting this deficit from the talent pool in London, a powerhouse for technology and innovation, is no easy task. STEM workers are scarce almost everywhere, making this a global challenge.
So the gap in advanced skills in Cyprus will need to come from attracting and upskilling staff from other sectors. To echo the words of the President in announcing a new strategy, what we need is a “brain gain, not a brain drain”. Funding for tech research in other countries continues to fall while tax burdens increase, and the high cost of living and rent in better recognised tech hubs such as Luxembourg, Zurich and Dublin is a challenge that doesn’t exist on the same scale in Cyprus.
The cost of living, including rent, in Nicosia, our capital, is 50.4% lower than in London. Even in cosmopolitan Limassol, where much of the tech sector is based, rents are 48.2 lower than in London, and average restaurant prices are 18% lower.
The biggest mass exodus in recent history occurred after the 1974 invasion by Turkey, leaving us with a divided island. Many Cypriots from the northern part lost their houses and their land. Now, with the promise of a better future, it is hoped some will consider returning home to be part of it.
Marios Tannousis is CEO of Invest Cyprus
