SHARE
COPY LINK
PRESENTED BY INVEST STOCKHOLM

‘Slowbalisation’: why Swedish companies are moving back home

Sweden has a dynamic, modern economy, led by Stockholm’s status as an international innovation and startup hub. But you may be surprised to learn that a growing number of Swedish companies with production bases overseas are choosing to move these operations home.

‘Slowbalisation’: why Swedish companies are moving back home
Photo: Getty Images

Experts say the trend is part of the process of ‘slowbalisation’ and can even be seen in services, as well as manufacturing. 

So, what are the reasons for the change and what does it mean for the Stockholm region, the jobs market and the Swedish economy as a whole? The Local spoke to Joacim Tåg, of the Stockholm-based Research Institute of Industrial Economics (IFN), and the CEO of one company that has taken the leap, to find out.  

Stockholm is a global innovation hub and the Stockholm Business Alliance spans 53 Swedish municipalities – find out more

Reasons for reversing 

Costs, increasing automation, sustainability, and intellectual property are all drivers for Swedish companies to give up producing abroad, says Tåg. “I think a lot of companies have reversed their decisions after realising they made mistakes along the way,” he says. 

One reason for this is that rising labour costs in China and other Asian economies may mean what made economic sense a decade or so ago doesn’t look so sound now. “Big macroeconomic shocks like the Covid-19 crisis also provide an opportunity for companies to look over their operations and try to cut costs,” adds Tåg.

Furthermore, increasing automation makes labour costs a less critical factor for many firms. “That means you don’t need to produce in these countries any more, many of which have more unstable institutional environments that are not well-suited to large investments in automation and factories,” he says. Some companies may also be motivated by the ability to better protect their intellectual property by moving production home, he adds.

ChromoGenics, which makes high performance energy-efficient glass, decided to move its main production facility from the US back to Sweden after sourcing advanced technical equipment from a company in Germany that had gone bankrupt. 

In April this year, production began at its new plant in Uppsala, where seven permanent new skilled jobs have been created. In total, the move may have created work for 20 to 25 people, including a pool of students from Uppsala University, according to the company’s CEO, Leif Ljungqvist. He says there are no disadvantages of producing in Sweden.

“The reasons for moving home were to have better quality control over the production process and also that the transportation costs were quite high,” Ljungqvist explains. “Sustainability is obviously also a factor.”

Looking to invest, establish, expand or relocate a business to Stockholm? Learn more about the region from Invest Stockholm

How highly-skilled workers win 

Both the true extent of the trend and its overall impact could be much better understood. That’s why Tåg is starting a research project that will analyse which jobs continue to disappear abroad and which are coming back to Sweden. 

“It’s a net positive when production moves back home,” he says. “However, the jobs you get back are not the same jobs you lost when you offshored to get cheap labour in China. Typically, when you’re investing in a high-tech factory in Sweden, it’s more highly-skilled jobs that are created and the low-skilled jobs don’t come back.”

Joacim Tåg

The new ChromoGenics facility is “fairly automated” and only workers of “high competence” can run the machinery, says Ljungqvist. Such engineering expertise has a similar cost whether you’re recruiting in China or Sweden, he adds.

Tåg cites AI as another area where tech continues to require expert supervision rather than completely replacing human labour. “In some areas, we see shortages of tech workers because tech advances but then you need the workers that take care of the technologies,” he says. 

Stockholm’s status as a startup and fintech hub – along with low interest rates and an active venture capital market – is also likely to ensure demand for highly-skilled workers remains strong in the city. “A lot of Stockholm firms are on the leading edge of technology and that leads to skill shortages,” Tåg says.

Local ‘spillover’ benefits 

While the overall number of jobs being created nationally so far is modest, it’s important to understand the potential for significant local “spillover” effects.

Setting up a big production plant in Sweden has indirect as well as direct benefits; other local firms may become suppliers, for instance, and there may be opportunities for new restaurants or other services. “It can really be a win for smaller regions in Sweden,” says Tåg.

In addition to Chromogenics, another recent example is the eyewear company Synsam moving production from China to Östersund in Jämtland. The new factory is expected to open in 2022 and will create around 200 jobs.

Nor is the trend limited to manufacturing; Tåg says it encompasses “all kinds of industries” in Sweden. Some IT and legal services jobs that moved to the Balkans, for example, are also starting to come home.

Photo: Chromogenics

Slowbalisation not deglobalisation

Some economists have talked about globalisation changing to an era of ‘slowbalisation’ since the 2008 financial crisis. Tåg, director of IFN’s Firm Competitiveness research programme, says the “immense growth in globalisation” that was dominant in recent decades is over. But he adds: “There’s a deceleration of globalisation but it’s not going into reverse.” 

He estimates that between two and five percent of Swedish firms that took production abroad have moved it home or are doing so. While more companies continue to offshore operations than move home at present, Tåg says he does expect the homecoming trend to continue.

Ljungqvist believes it’s becoming more attractive to many mid-sized and smaller Swedish companies as a result of Covid-19. “People will look to have better control over their supply chain and other things,” says the CEO. “The pandemic hadn’t started when the decision was taken. But now we feel quite lucky as we have other contractors that have been affected by Covid.”

Looking ahead, he predicts: “With really high volume production, it might still be worth going to China. But with mid-sized and smaller volumes, I think production will be coming back to Sweden.”

Learn how you can get free, tailor-made advice that could help you connect to the right business ecosystem in the Stockholm region

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

BUSINESS

What are the 26 French ‘unicorns’ hailed by the government?

France now has 26 'unicorns', something Emmanuel Macron's government sees as a major success. Here's what this means and how it affects France's future.

People dressed as unicorns attend a tech summit.
People dressed as unicorns attend a tech summit. France now counts 26 start-ups valued at more than $1 billion. (Photo by CARLOS COSTA / AFP)

In 2019, French President Emmanuel Macron set what seemed like an ambitious objective: having 25 French start-ups valued at over $1 billion by 2025. 

These companies are colloquially referred to as “unicorns” or licornes in French. 

The target was very on-brand. Macron had sold himself at a youthful, ambitious and liberalising president keen to lead France towards modernity. 

To achieve this goal, the government lifted regulations; hired liaison officers to manage relations between tech entrepreneurs and government ministers; created a new kind of visa to allow entrepreneurs, innovators and investors to move to France; and launched an incubator scheme known as the French Tech Tremplin (“French Tech Trampoline”) to help underrepresented groups such as women, poor people and those in the countryside to launch tech start-ups. 

Just three years later, it appears these efforts have paid off. 

“They told us that it was impossible – that creating a start-up nation was just an act. But collectively we have got there three years ahead of schedule,” said Emmanuel Macron on Monday, sporting a Steve Jobs-style polo neck as he celebrated the fact that France now had 25 ‘unicorns’. 

On Tuesday, La French Tech, a body run by civil servants aimed at creating a healthy environment for start-ups in France heralded another success – a 26th licorne

The latest addition is a company called Spendesk – it runs a platform that allows small and medium sized businesses to manage spending, expenses, budgets, payment approvals and invoices through a single integrated platform. It is already used by thousands of clients. 

Spendesk recently raised a further $100 million, pushing its overall value past the $1 billion mark. It plans to employ a further 700 people in France. 

La French Tech couldn’t contain its joy. 

“We don’t ask ourselves what is going on, we know it: #FrenchTech is booming #26unicorns”, wrote the organisation in its Twitter account. 

La French Tech claims that beyond the 25 ‘unicorns’ valued at $1 billion or more, there are a further 20,000 tech start-ups in France and that half of French people use their services daily. The organisation says that this sector has already created 1 million jobs – and that this figure should double by 2050. 

“French tech is obviously about more than these unicorns, but I see them as an example, a model for the rest of the ecosytem,” said Macron on Tuesday. 

So who are the other unicorns leading the way? 

Alan

This start-up was created in 2016 and offers health insurance coverage for individuals and businesses. What differentiates it from standard health insurance providers, or mutuelles, is that it functions through an easy-to-use app. Individuals can send medical bills directly from their smartphone and be reimbursed almost immediately. Doctors can be reached through the app’s messaging and video call services. Employers can manage arrêts de travail the comings and goings of poorly staff directly through the interface. It is currently available in France, Belgium and Spain, counting 230,000 members. 

Ankorstore

Ankorstore is an online marketplace aimed at supporting independent wholesalers – from florists to concept stores. It pitches itself as a platform to buy “authentic products and brands that e-commerce giants such as Amazon do not offer.” It is present in 23 European countries with offices in France, Germany, the Netherlands, Sweden and the UK.

BlaBlaCar

This carpooling service has more than 100 million members across 22 countries. It connects drivers with people looking for a lift on a highly accessible app and website based platform. BlaBlaCar allows people to save money on transport and said that it saves 1.6 million tons of CO2 emissions in 2018 through ride-sharing – the platform has grown significantly since then. This company has also started running a bus service, BlaBlaBus. 

BlaBlaCar launched BlaBlaBus in 2019.

BlaBlaCar launched BlaBlaBus in 2019. (Photo by PHILIPPE DESMAZES / AFP)

BackMarket

Backmarket is a website for buying used, unused or reconditioned electronic devices. The company sells everything from cameras, to laptops, to iPhones – at well below the market rate. Many of the products come with a warranty. The company is keen to emphasise its role in reducing electronic waste and carbon emissions involved in manufacturing new products.

Contentsquare 

This start-up has existed since 2012. It acts as a tool to allow website and app designers to monitor how their users behave while on their webpage/app. Contentsquare provides analytical information that can help to tailor websites to improve the digital experiences of users. 

Deezer

Deezer is an online music streaming services similar to Spotify. It was founded in 2007 and counts 16 million active users. 

Doctolib

Doctolib is a platform that connects patients to medical professionals. Creating an account is free and allows you to book medical appointments, with filters such as the kind of care you want, the area of the medical practice and the languages spoken by the doctor. It runs via a user-friendly app and website and is available in France, Italy and Germany. During the Covid-19 pandemic, it has become the main way that French people have booked vaccination appointments. 

Exotec

This company was founded by two engineers in 2014 and manufactures intralogistic robots. The technology is used in warehouses of retailers, supermarkets, e-commerce and industry. In essence, it is used to remove human labour from the supply chain. 

iad

iad is a network where people can sign up to learn how to become an independent real estate agent – it also serves as a site where people can look for property to buy or rent. 14 percent of all properties sold in France in 2020 went through this platform according to one study. 

Ivalua

Ivalua is a tool used by organisations to manage spending and supplies. It operates largely though Artificial Intelligence and provides a wide range of functions designed to improve collaboration and decision-making. 

Ledger

Ledger is a company that provides individuals and businesses an easy way to buy and sell cryptocurrencies and store these currency on USB-type hardware. If you get sick of that guy at work who never stops talking about Bitcoin, this is probably not one for you. 

Lydia

This is a payment app that allows people with French bank accounts to send and receive money with other users, and is often used by friends to reimburse each other with small amounts for dinner, drinks, holidays etc. If you hold your savings in the app, you can benefit from a 0.6 percent interest rate. It also allows you to pay for things overseas without incurring fees. 

ManoMano

ManoMano is an online marketplace specialised in DIY and gardening equipment. It employs 800 people in 4 offices and operates across 6 European markets: France, Belgium, Spain, Italy, Germany and the UK. It’s website sells products from more than 3,600 retail partners and stocks more than 10 million products. 

DentalMonitoring

Patients can download this app after undergoing dental work. They can then use the secured system to send pictures of their teeth to their dentist (if the dentist is subscribed to the service). The start-up boasts that it can allow dentists and orthodontistes to carry out remote consultations and that the AI technology embedded in the app can automatically detect dental problems. 

Meero

Meero is a company that connects professional photographers to clients and vice versa. It organises one photo shoot every 25 seconds and has more than 30,000 customers around the world. 

Mirakl

Mirakl is a cloud-based e-commerce company that allows retailers, manufacturers and wholesalers to access a single online market place. The start-up aims to help other businesses scale-up their operations rapidly and describes its staff as “Mirakl workers” (as in the French ‘miracle’ pronounced me-rackluh). 

OVHcloud

This start-up was founded in 1999 and is now Europe’s biggest cloud provider, offering both public and private information storage solutions. They also provide domain name registration, telecoms services and internet connection. 

PayFit

Payfit is an automated payroll service that allows employers to save time dealing with spreadsheets and other systems. It is an intuitive bit of software already being used by 6,500 small and medium-sized businesses.

Qonto

Qonto provides financial services to freelancers, self-employed people, small businesses, charities and new businesses. It provides solutions for managing expenses, accounting, invoices and payments. 

Shift

This company is based in Paris and helps global insurance companies to detect fraudulent insurance claims via artificial intelligence technology. 

Sorare

This is a fantasy football game where users build and manage squads, trading, selling and buying players. It makes use of blockchain technology. French footballer Antoine Griezmann is a major investor. 

A tradable player card from Sorare.

A tradable player card from Sorare. Credit: Sorare

Swile

This is a financial and networking service for businesses and employees. It essentially is a bank card with an app that allows employers to issue anonymous surveys to employees, facilitate communication via a messaging service, organise collections and plan events. 

Vestiare Collective

This is an online marketplace for second-hand luxury fashion. Be aware that some items still cost thousands of euros, so they’re only ‘bargains’ in relative terms. 

Veepee

This is an online and app-based service. Users can create an account for free to be alerted of upcoming sales of up to 70 percent on their favourite brands. It is available in eight European countries including the UK. 

Voodoo

Voodoo is a French mobile game developer and publisher. It provides help for video game developers to promote their work and councils them on the development process. In the past, Voodoo has come under fire for producing games that appear to be closely modelled on other games already on the market.

SHOW COMMENTS