2024-11-07 05:19:00
The mood among Austrian entrepreneurs is worse than it has been for a long time. Economic performance is shrinking, the country is becoming increasingly less competitive in international comparison, and high taxes, energy prices and a shortage of skilled workers are causing more and more business people to doubt whether Austria is the right location for them. According to a survey, every second company is thinking about migrating at least part of the company.
The managers’ bad mood is not just a snapshot. Austria has been steadily losing ground in the international competitive rankings of the Lausanne business school IMD for years. While Austria was ranked 16th in 2020, this year it was only ranked 26th out of 67 countries compared. The managers surveyed for the Austrian infrastructure report presented on Thursday also expressed concern about Austria’s competitiveness: In 2020, 61 percent of the representative respondents said that Austria was very or somewhat competitive, this year it was only 29 percent.
In the competition for investors, the 27 EU countries compete with much more dynamic economic areas. “The annual GDP growth of the BRICS countries is eight times as high as that of the EU, the NAFTA countries are growing five times as fast,” says David Ungar-Klein, author of the “Austrian Infrastructure Report 2025” from the Future Business Austria (FBA) initiative. . In addition to tax incentives, legal and planning security and the availability of skilled workers, what is crucial for potential investors is also the available infrastructure – and especially the digital connections.
For the infrastructure report, domestic companies were asked about their tendency to emigrate. The result is sobering: 56 percent of the companies surveyed, for whose operations there was a fundamental possibility of emigrating from Austria, stated that they had already considered emigrating due to the current situation – 17 percent with the entire company and 39 percent with parts of their company .
The reasons given by local managers are the high tax burden (57 percent), labor shortages (41 percent), high energy prices (34 percent) and general inflation as well as excessive bureaucratization (30 percent).
A migration of manufacturing companies would have far-reaching consequences for security of supply, warns Ungar-Klein. “While Europe provided 44 percent of the global production capacity for semiconductors in the early 1990s, in 2022 it was only eight percent. At the same time, China’s share of global production capacity has increased from seven percent in 2005 to 24 percent in 2022 increased.” In the area of drug supply, around 80 percent of the active ingredients required in Europe come from third countries – mostly from India and China. A good three quarters of the managers surveyed are of the opinion that Austria should increase its own extraction of raw materials such as lithium or gas. A third are in favor of using nuclear power as an alternative to fossil fuels.
In addition to the lack of skilled workers and workers themselves, managers also complained about a significant decline in work morale. While last year 34 percent of the managers surveyed said that the willingness to perform in their companies had decreased, this year it has already increased to more than half (57 percent).
The location factor infrastructure is considered to play a key role in competitiveness. By expanding digital infrastructure in Austria, productivity growth of a good 90 billion euros would be possible – this is shown by a model calculation from the Austrian Infrastructure Report, which will be presented on Thursday as part of the “22nd Future Business Austria – Location and Infrastructure Symposium”. “Digitization and the expansion of the energy infrastructure should be given top priority in order to secure the performance of domestic companies and prosperity in the long term,” says economist Andreas Reinstaller from the Office of the Productivity Council in the National Bank.
“If you put this additional annual increase in productivity in relation to a one-off investment of ten billion euros, which, according to our estimate, would be required for the nationwide expansion of broadband and 5G infrastructure, it becomes clear that investments in infrastructure are the strongest lever of location policy for more productivity,” explained Katharina Reinwald, co-author of the infrastructure report. A central demand of the report is therefore the development of a comprehensive “Location and Infrastructure Strategy 2040” based on the Swiss model for the areas of energy, transport and digital infrastructure.
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**Interview with David Ungar-Klein, Author of the “Austrian Infrastructure Report 2025″**
**Interviewer:** Thank you for joining us today, David. It seems that the mood among Austrian entrepreneurs is quite pessimistic. What factors do you think are driving this negative sentiment?
**David Ungar-Klein:** Thank you for having me. The current mood is largely influenced by a combination of high taxes, rising energy prices, and a significant shortage of skilled workers. Many business leaders are questioning whether Austria is still a viable location for their operations. In our recent survey for the Austrian Infrastructure Report, we found that over half of the companies are considering relocating parts of their business.
**Interviewer:** That’s a striking statistic. Are there specific reasons behind this consideration to migrate?
**David Ungar-Klein:** Absolutely. The high tax burden is the primary concern for 57% of the respondents. Labor shortages come in second at 41%, followed by high energy costs at 34% and excessive bureaucracy at 30%. These challenges make it difficult for companies to maintain competitiveness on an international scale.
**Interviewer:** Austria’s ranking in the IMD competitiveness report has recently dropped. How significant is this decline in terms of global dynamics?
**David Ungar-Klein:** It’s very significant. Austria fell from 16th place in 2020 to 26th this year. In comparison, countries in the BRICS and NAFTA regions are experiencing much faster GDP growth. The competitive landscape is changing rapidly, and if Austria does not take action to improve its investment climate, it risks losing even more ground.
**Interviewer:** You mentioned infrastructure and digital connections as critical factors for investors. Can you elaborate on this?
**David Ungar-Klein:** Certainly. The availability of robust infrastructure, especially digital connectivity, is vital for attracting investment. In today’s digital economy, companies look for locations that not only have a strong workforce but also good infrastructure to support their operations. Enhancing digital connections will be crucial for Austria to remain competitive.
**Interviewer:** What potential impacts could the migration of manufacturing companies have on Austria?
**David Ungar-Klein:** The migration could have serious repercussions for Austria’s security of supply, particularly in vital sectors like semiconductors and pharmaceuticals. Historically, Europe was a leader in semiconductor production, but we’ve seen a significant decline in that capacity. If companies relocate their manufacturing abroad, we risk further dependency on third countries like China and India for essential resources.
**Interviewer:** Given these challenges, what do you think Austria should prioritize moving forward?
**David Ungar-Klein:** Austria must enhance its attractiveness for investors by addressing key issues such as tax incentives, labor availability, and reducing bureaucratic hurdles. Additionally, increasing domestic resource extraction and considering energy options like nuclear power could help stabilize the economy and ensure a more resilient supply chain.
**Interviewer:** Thank you for your insights, David. It sounds like there’s a lot of work to be done to improve Austria’s economic landscape.
**David Ungar-Klein:** Thank you for having me. It’s crucial for Austrian policymakers to realize the urgency of these concerns and take decisive actions to foster a healthier investment environment.