Gothenburg takes proactive stance as global headwinds bite

Located on the western coast of Sweden, the region surrounding the city of Gothenburg was ranked number one in Sweden for logistics in 2019, according to global real estate services firm Savills. It also came second for connectivity out of 55 mid-sized cities in fDi Magazine’s European Cities and Regions of the Future 2018/19.

Historically, foreign investors have been most active in Gothenburg’s transportation and warehousing sector, which accounts for more than 20% of all greenfield FDI projects announced in the city since 2003, according to greenfield investment monitor fDi Markets. 

Despite just three greenfield projects being recorded by fDi Markets, the automotive original equipment manufacturer sector has garnered an estimated $1.02bn of inbound greenfield investment since 2003, the largest amount of any sector according to the database. However, the current geopolitical climate is giving cause for concern.

Geopolitical challenges

“We have a lot of automotive suppliers based in the UK, while the US and China are very important markets for us. Customs and trade difficulties related to Brexit and the trade war could affect us very quickly,” says Andreas Göthberg, head of FDI at Business Region Göteborg (BRG).

Headwinds in the automotive sector are not limited to Gothenburg, however, as global car sales and production fell by about 3% and 2.4%, respectively, in 2018, according to IMF figures. Despite disruption across the global car industry, Gothenburg hopes to build on its automotive strength and innovation landscape through initiatives such as MobilityXLab, a start-up accelerator based in the city that focuses on the future of mobility.

China-based Geely Group’s announcement in June 2017 that it would set up its European innovation centre in Gothenburg through its subsidiary Volvo Cars – the Swedish carmaker it acquired in 2010 – is a testament to the confidence in the city’s automotive talent pool. “We are fully committed to our long-term investment in Sweden, furthermore by leveraging the expertise and talent pool in Gothenburg,” said Li Shufu, chairman of Geely Group, at the time the project was announced.

Get moving

To build on its innovation landscape, Gothenburg is boosting its competence through a ‘hand-in-hand’ common approach to attracting FDI and talent. “We have created ‘Move to Gothenburg’, a master project for bringing in talent to the city involving industry, universities and the authorities, that guides people moving to Gothenburg for work,” says Mr Göthberg.

“Most of the FDI that we get in Gothenburg is competence rather than market driven, and we want to bring in more competence to continue attracting FDI,” he adds. Since 2000, the number of people employed in the wider Gothenburg region has grown by 33% to just over 530,000, according to BRG figures. 

Sweden ranks fifth globally, and second in Europe, in terms of R&D expenditure – equivalent to 3.28% of GDP, according to Statista. But between January and September 2019, the country attracted 28.6% fewer greenfield FDI projects than the corresponding period the previous year, and the lowest number since 2013, according to fDi Markets. The capital, Stockholm, accounted for the majority of the fall, attracting 16 fewer greenfield projects than the first nine months of 2018, while Gothenburg attracted one more project.

Despite strong labour market growth and a solid innovation landscape, Gothenburg ranked last among 15 Scandinavian cities in terms of its total tax rate on profit, however, which stands at 49.1%, according to investment location comparison tool fDi Benchmark.