Swedish tech industry in international comparison

Our prosperity is based on a strong culture of innovation in the business sector combined with extensive trade with the rest of the world. In the report Tech - Sweden's new basic industry, we at TechSverige showed that the industry's contribution to GDP has grown by as much as 1 300% since 1981. In 2020, it amounted to a total of SEK 281 billion, almost as much as the total contribution of the traditional Swedish basic industries.

In addition to creating jobs, growth and tax revenues in the country, the tech industry contributes to Swedish competitiveness and exports. The industry's contribution to Swedish exports has increased sharply, by almost 1,200% since 1998, to SEK 140 billion in 2020. This corresponds to over 6% of Sweden's total exports, more than the contribution of traditional basic industries such as paper, pulp and paper waste, metals, and plastics and rubber.

But while the tech industry has a strong position in Sweden, there are other countries that are introducing sweeping reforms to better harness the potential of digitalization - and where tech is growing faster.

*Finland^{data for 2015, United Kingdom data for 2018.}

The Swedish tech sector's contribution to the Swedish economy was 6.5 percent in 2019
, defined as the sector's share of GDP. This places Sweden in third place among the European countries compared, after Malta and Bulgaria. There are no statistics for the United Kingdom for 2019, but during the period 2014-2018 its tech sector grew by 8.5 %.

Malta's high ranking may be partly due to the fact that the country has long been attractive for tech companies to establish themselves in as a result of an aggressive digitization policy, low corporate taxes, low payroll taxes and English as the national language.

In Bulgaria's tech sector, software development is the fastest growing sector. Many companies are setting up in the country due to low corporate taxes and lower salary levels. However, a highly skilled IT specialist in Bulgaria can earn the equivalent of two to three times more than the average Bulgarian salary, making it easier to attract talent to the sector.

The countries where the tech sector grew most strongly as a share of GDP over the period 2014-2019 were Latvia, Bulgaria and Estonia, with an increase of 25-46%. However, it should be noted that the respective economies of these three countries were equivalent in size to between 6-13% of Sweden's economy in 2019, so growth is starting from low levels. Sweden's growth over the period 2014-2019 was the lowest in the sample at 3.2%.

Table 2 shows the tech sector's contribution to the economy in million euros for 2019, the percentage development in 2015-2019, and the gross value added per capita in 2019 for the European countries with the highest contribution per capita in the sample. Among the countries compared, the Swedish tech industry is the second most value-creating, defined as gross value added per capita in 2019. Switzerland, which ranks highest, has many unique value-creating tech R&D environments, including IBM's research lab, Google's European Research Unit (the company's largest research facility outside the United States) and Meta's Reality Lab.

While the Swedish tech sector is very important for the Swedish economy, it is growing more slowly than other countries in the comparison and had the second weakest growth in the sample during the period 2015-2019. For Malta, Ireland and the United Kingdom, data is missing or incomplete, which means that comparisons cannot be made.

Figure 1 shows what the tech sector's contribution to the Swedish economy could have looked like if it had grown as the fastest growing, or as the average in the sample. If the Swedish tech sector had grown at the same rate as Estonia's, its contribution could have amounted to EUR 39.2 billion in 2019, equivalent to 9.0% of GDP (scenario Sweden - high below). This would have meant an increase in the contribution to GDP of 2.5 percentage points, which is more than the contribution of the entire transport sector to Swedish GDP in 2020 (2.0%).

The Swedish and Estonian economies are different and such rapid growth is not likely. If the tech sector had instead grown at the average of the selected countries over the period, 27.7%, the sector's contribution could have amounted to EUR 30.4 billion in 2019, and its contribution to GDP could have been half a percentage point higher than today, 7.1% (scenario Sweden - means below).

Table 5 shows that several European countries have experienced very strong growth in the number of people employed in the tech sector over the period 2015-2019. Estonia had the highest growth, followed by Bulgaria and Poland, but growth in Estonia and Bulgaria is from low levels. Sweden's growth was 23.7 percent during the period, which is on par with Germany and Croatia, in the middle of the selected countries. One explanation for the fact that employment in Sweden has not grown as strongly as the strongest performers is that there has been a shortage of the right skills for many years, which TechSverige has continuously highlighted.

Germany is the country with the most tech workers in Europe, with over 1.4 million people. In addition to the highest percentage growth in the number of people employed in the tech sector, Estonia also has the second highest share of people employed in the tech sector in the sample. Estonia's population is just over 1.3 million, but through reforms such as digital nomad visas and e-Residency, people from all over the world can live and work in tech in Estonia, physically or remotely.²² The attractive conditions help to increase employment in the tech sector.

Figure 2: Number of people employed in the tech sector and change 2015-2019

The demand for labor in the tech sector internationally is high and competition for talent is fierce. Figure 2 shows the share of hard-to-fill tech jobs for a selection of European countries and the United States. Portugal and the Netherlands stand out and in these countries between 50 and 60 percent of tech jobs are difficult to fill. In Sweden, the share is 40%. The fact that a high proportion of tech jobs are difficult to fill reflects the skills shortage that exists throughout the sector globally.