Business location - Austria- Interview Austria: Good Framework conditions for Industry

Author: Stéphane Itasse

If you think Austria is just a travel destination, think again. The country is a great destination for industry as well: Austria offers a good infrastructure for producers, it has a number of existing high-tech companies, well trained work force and last but not the least attractive subsidies for setting up companies. In this exclusive interview, Dr. René Siegl, managing director of the investment guide Austrian Business Agency, explains how you can profit from Austria as an industry location. René Siegl, managing director of the Austrian Business Agency, in an exclusive interview.

“The political, legal and social stability in Austria is exceptionally high”, says Dr. René Siegl, managing director of the Austrian Business Agency. (Photo: Austrian Business Agency)
“The political, legal and social stability in Austria is exceptionally high”, says Dr. René Siegl, managing director of the Austrian Business Agency. (Photo: Austrian Business Agency)
(Photo: Austrian Business Agency)

What are the strengths of Austria in terms of a location for industry?

Often Austria is primarily perceived as a holiday destination. However, tourism accounts for only about 7.5 % of our economic output. On the other hand, the manufacturing sector accounts for just below 30%. The decisive factors here are ultra-modern F&E infrastructure with clusters, competence centres, technology parks and industrial parks, high productivity and well trained, motivated work force. High security of energy supply, the best sales opportunities, the purchasing power or the BIP per head, here for example almost one-third above the EU-average, are crucial. The sales markets in Southern and Eastern Europe are comparatively closer to Austria which is also an influential factor. Mainly the machine building industry, hardware and electronics are the most important industry branches. Together, these branches are responsible for almost 47 % of the total industrial production in Austria.

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Why should industrial enterprises settle in Austria?

For our international investors factors like an attractive corporate tax, strong support to research and development and high level of qualification of the workforce are crucial. The political, legal and social stability in Austria is exceptionally high. A flexible employment law facilitates the strategic planning for companies, e.g. through the system for ex gratia payments. According to the World Competitiveness Yearbook 2014 Austria is among the Top 5 from sixty industrial countries as regards motivation and education and advanced training of employees and it may have the lowest unemployment rate in EU, on an average just 4.5 % since 2000. From 2005 to 2012, on an annual average only two working days were lost due to strikes per 1000 workers. Only Switzerland has a lesser strikes than Austria. The most important international direct investor in Austria is Germany: In 2014 the investment sum from German establishments was 274.5 million Euros, about 40% above the value from the previous year. All in all about 8450 German companies are active at the industrial location Austria.

Which benefits does Austria offer as a location for industry in comparison to the countries in Eastern Europe and in comparison to the established industrial countries in EU, particularly Germany and Italy?

Companies that want to tap into the market in Eastern Europe often face uncertainties in the language barriers and political or legal instability. An additional factor just for positioning as an employer brand is the quality of life on-site. Vienna was voted the most liveable city in the world for the sixth consecutive time. Austria also offers a good mix owing to the geographical location (from Vienna you can get to any location in Europe within three hours by plane) and due to the close historical ties to many Eastern European nations. Hence, more than 1000 multinational companies and international companies are co-ordinating their East European business from locations in Austria. For example, Siemens, Robert Bosch, Beiersdorf, Allianz and Henkel. Austria is one of the Top 5 in EU-28 as for the work productivity in the manufacturing industry; Germany and Italy have barely managed to enter the Top 10 on the other hand. The improved productivity in Austria nearly compensates for the increase in labour costs in recent years. It therefore follows that, the unit labour costs have been more favourable in Austria than the EU average over the past few years. Between 2010 and 2014, the unit labour costs increased only by 1.5 % annually in Austria whereas in most other EU-countries these costs increased significantly.

How does the Austrian government support the companies for investments?

Certainly, the most important aspect here is the tax benefits. In Austria business tax, wealth tax, inheritance tax or gift tax are not incurred. Only a common corporate tax of 25 % is imposed and the group taxation option (the credit from losses of foreign subsidiaries on overall profit) can be exercised. The support given to R&D is especially of great significance. In March the government announced that it will raise the research grant for companies from 10 to 12% starting 2016 in the framework of the tax reform. This bonus on own expenses or research contracts will be handed out to the companies in cash or as tax credit.

Which approach would you recommend for developing a business location in Austria?

In principle, there are many issues a company faces when it comes to searching a location: The issues can range from the unit labour costs, availability of skilled labour, taxes and duties on “soft” factors like cultural and linguistic compatibility. However, we cannot underestimate these very factors as they can significantly contribute to the success or failure of setting-up a location. As settlement advisors we can provide support in this matter. We are delighted that more companies have used our services than ever before in the last year. We were able to set-up 276 international investors in Austria and thus generate an investment of 371 million Euros. This is a very significant increase as compared to the previous year. The willingness of German companies to invest has also increased again greatly, closely followed by Italy.

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About the author

 Stéphane Itasse

Stéphane Itasse

MM MaschinenMarkt