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The business case for Sweden: why investing makes good sense

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It is no coincidence that more and more manufacturing operations that were outsourced to low-wage countries are transferred to Sweden. The reshoring trend – or repatriation of manufacturing – is testament to a changing landscape for productivity and competitiveness worldwide.

8 reasons why Sweden is recognised as a highly productive manufacturing location: 

  • Consistently ranks among top 10 most productive countries in the world for manufacturing
  • World class competence in robotic automation and digitised supply chains
  • Strong subcontractor network supplying multinationals both in Sweden and internationally
  • A highly diversified industry ranging from chemicals and machinery to vehicles
  • Advanced IT sector paving the way for IoT solutions, 5G networks and adaptable production lines
  • World’s third best logistics infrastructure according to World Bank, with extensive access to shipping routes
  • Low operational costs: 22% corporate tax and lowest energy prices in EU
  • Financially stable and robust: classified as a AAA-economy by all major credit rating institutes 

More than ever before, investing in Sweden makes solid business sense for international companies that rely on cutting-edge suppliers, affordable energy and modern infrastructure. In a nutshell, here’s why: 

Sweden not only has the world’s fifth largest installation of industrial robots per 10,000 employees, it also ranks among the top three European countries in manufacturing productivity. Last but not least, it is one of the continent’s most competitive countries when product lifecycle costs are taken into account.

Made in Sweden – seeing the big picture

According to surveys by the Organisation for Economic Co-operation and Development (OECD), manufacturing contributed 60 per cent of labour productivity growth between 2001 and 2012.

Since then, Sweden’s integration in global value chains and reorganisation of production processes have kept productivity at the highest level in Europe, even from a multifactor perspective that looks beyond labour output and capital.

Why is productivity high in Sweden? The short answer is twofold: talent and technology.

The combination of a highly skilled workforce and an advanced IT sector has underpinned Sweden’s productivity enhancements and top placement in world rankings. In addition, many companies based here are pushing the boundaries forward in areas such as proactive maintenance and robotic automation.

Strategic action is the real litmus test. Most convincing, perhaps, is the fact that large industrial groups are rediscovering their home turf. Atlas Copco, the global supplier of rock excavation technology and compressors, is just one example. The company recently expanded its footprint in the town of Fagersta, less than 150 km north-west of Stockholm, as automation became the catalyst for bringing back overseas operations that became incorporated into the new subsidiary Epiroc.

“The most significant advances in automation are being made in Europe and particularly in Sweden, which is taking a leadership role. This is where the best automation competence can be found, not in low-wage countries. By bringing parts of our manufacturing back to high-tech facilities in Sweden we have made considerable savings and increased our profitability,” says Conny Fridlund, Project Manager at Epiroc Drilling Tools (formerly Atlas Copco Secoroc AB).    

The bottom line

One of the most persistent myths about Sweden is the idea that manufacturing is too expensive. Corporate tax is 22 per cent, below the OECD average, and Sweden’s electricity prices for industrial consumers are among the lowest in the EU28 economic area. Energy costs remain highly competitive.

What about labour costs?

It is true that labour costs are comparatively higher in Sweden than in some other countries, partly due to ambitious labour standards and high competence levels. However, studies show that these costs are in most cases offset by key advantages such as the availability of skilled personnel – which is a decisive factor for success in today’s high-tech factories.

But it doesn’t end there. According to a report published by Chalmers University of Technology, skills, productivity, proximity and quality of local suppliers are all unique strengths that offset labour costs. That’s also why Sweden consistently scores a high ranking in the World Economic Forum’s Global Competitiveness Index (GCI), in which Sweden secured sixth place in 2017.  

For comparison’s sake, it is worth noting that the total annual labour cost for a senior engineer is 21 per cent lower in Sweden than in Germany. Similarly, the labour cost for a production operative is 17 per cent lower.

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Klas Ericson

Investment Advisor Sweden Investment Advisor, Sweden
+46 70 222 78 02
E-mail klas.ericson@business-sweden.se
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Andreas Scheibenpflug

Investment Advisor Sweden Investment Advisor , Sweden
+46 70 277 83 94
E-mail Andreas.Scheibenpflug@business-sweden.se