Executive Search in Austria – 2020 Outlook
Austria catches Germany’s cold
The growth of the Austrian economy, greatly influenced by its major trade partners, the US and Germany, slowed in 2019 and is expected to have minimal growth in 2020.
Major influencers have been trade embargoes, regulation, negative interest rates, transformation caused by circular economy / sustainability focus, environmental pressures or digitalization and of course, local political change as we now have a conservative-green coalition, the first in history. This has played itself out in the following sectors:
Financial Services and Fintech. Banks, insurances are all in transformation, albeit slowly to digitalize, change / downsize staff for new business models, deal with ways to address negative interest rates and increasing regulation. Licenses are hard won but there are a few new entrants and an increasing amount of Fintechs / start-ups though these are often cash poor and seek investment.
Changes on the board level, decreasing board members focus on Agile structures and an interest in diverse boards are currently common. What is to be seen next is a consolidation of the sector.
Manufacturing: The slow-down in the Automotive sector in Germany has affected both Austria & neighboring Slovakia as well as the chain of connected OEM´s and related companies.
The move to digitalizing all manufacturing industrial sectors has also dampened growth because while a recognized move, the pace of change is slow and the consulting companies are booming in supporting the transition. Politically, there are moves to discourage car use, built out more public transit infrastructure and encourage bicycle/scooter transport.
Paper and packaging is also undergoing major changes and seems to be in transformation due to the interest in redefining alternatives to plastic; mergers, consolidation is occurring in the sector and the uncertainty has also affected managerial levels. Other manufacturers are moving to low cost production areas.
Pharma / Biotech: The pharmaceutical /biotech industry seems to be healthier and even as some companies are down-sizing following mergers, others are moving into Austria and expanding especially in bioproducts for wellness, anti-aging, preventive care and cosmeceuticals.
Real Estate: this market is booming not only for home owners but given the negative interest rate, is seen as an alternative investment, bringing benefit to banks and real estate companies.
IT sector: IT skills are in high demand across the board but salaries and wage related costs have encouraged companies to create their IT centers in low cost neighboring countries and this trend continues.
Other factors include
Brexit: The benefits of exporting HQ´s from London to Austria as an outcome of Brexit have not been experienced. Instead, HQ´s have moved to Germany, Netherlands, Brussels, or Paris, making the Austrian market pale in comparison. As the UK is not a significant export partner of Austria, this will have less of an effect but if Germany feels a downswing from Brexit, Austria will also feel it.
US Trade embargoes and tariffs: Austria´s main export partners are the US and Germany, The health of their economies as well as any tariffs and other trade restrictions twill have a trickle down effect.
In terms of demographics, Austria is struggling with high unemployment at both ends -very young unskilled and, as a result of digitalization, the 50+ demographic is the first to be downsized, especially if at a highly compensated position. With almost no prospects to re-enter the work force, there is an increasing amount of individual consultants or early retirees
And in a socialized economy, there is great political concern on how to adjust taxes to accommodate the aging population now increasingly exiting the work force or under earning. This is especially because wages have declined since 2014 when the Russian sanctions came into effect since the Austrian economy benefited greatly through investors, buying power, etc in real estate, companies, luxury goods).
Politically, 2019 was quite a rollercoaster with scandals necessitating a no-confidence vote /dissolution of the government and an interim, party-neutral government being installed for several months led by Austria´s first female chancellor. Following a new election and months of negotiations, a new Cabinet was installed at the beginning of January 2020,– a first of its kind historically, a coalition of Conservative-Greens and with a healthy 50% representation of female ministers.
On the other hand,
if Austria and the Central European region are treated as one, then the picture improves as growth continues in the CEE and it is then also a market having some significance and purchase power as a region. Thus, many companies serving corporates have of late, started
to notice that the regional approach is more significant.
And the financial services industry is on the cusp of change. As with most trends and transformation in Austria, once the change begins, it will be market wide and the growth /consolidation, changes will bring Austria positive effects. It is just a matter of when this will occur.
And the real question will be what happens with the US in 2020 as being Austria´s most significant trade partner, this will ultimately affect its growth.
Contact Lydia Goutas for additional discussions.