ring road in Iceland

Iceland sees further decline of knowledge-intensive occupations in 2020

  • The number and share of jobs in highly knowledge intensive companies in Iceland has fallen over time, and this fall was accelerated in 2020 as the country lost 750 brain business jobs.
  • Even despite this negative trend, Iceland places ahead of countries such as France, Austria, and Czechia in the knowledge ranking.
  • Iceland has several strengths compared to the rest of Europe, especially in film/TV/music

Iceland’s showed negative development of brain business jobs between 2012 and 2020

The ECEPR and Nordic Capital Brain Business Jobs Index, measures the share of the working age population across Europe employed in highly knowledge-intensive enterprises, in 31 countries and 284 regions.

Between 2012 and 2019, Iceland lost 87 jobs in knowledge-intensive companies. This negative trend was accelerated in 2020, during which Iceland lost 750 brain business jobs. Thus, the concentration of the population employed in knowledge-intensive occupations decreased slightly during the year, from 8.8 percent in 2019 to 8.7 in 2020.

Nordic region experienced growth of brain business jobs – in contrast to other parts of Europe

In the Nordic region as a whole, 8 600 brain business jobs were added between 2019 and 2020. While Sweden, Denmark, and Iceland lost brain business jobs, the overall Nordic development was positive due to the strong growth in Finland and the positive development in Norway. The most notable change occurred in Finland, where the number of brain business jobs increased significantly.

Fostering brain business jobs important aspect of reducing regional unemployment

The region with the highest concentration of brain business jobs, the Slovakian capital region of Bratislava, has an impressive unemployment rate of 2.4 percent. This does not seem to be a coincidence.  A comparison of 281 European regions shows that a strong link exists between high brain business jobs concentration and low unemployment, and that this link is driven by regions with low brain business jobs concentration. Amongst regions with up to 50 brain business jobs per 1 000 working age population, a straight-forward linear regression shows that 28 percent of the variation of unemployment can be explained by differences of brain business jobs concentration.

Geographical equalization of brain business jobs taking place in Europe

According to Dr. Nima Sanandaji, President of the ECEPR, the overall trend is that Central and Eastern European countries are catching up to Northern and Western Europe. Knowledge-intensive firm occupation is also growing in several Southern European countries, such as Cyprus, Portugal, and Malta:

“Since 2014, Cyprus has had an almost 50 percent increase of brain business jobs per capita. Slovakia, Hungary, Poland, Latvia, Portugal, and Bulgaria have experienced a growth of a third or more. Cost of labor is a main driving force. Brain business jobs are growing in places which combine an ample supply of talent with lower wage costs”.

Iceland ranks in the top 50 of knowledge regions in Europe

If Iceland was a region, it would place in the top 50 of the approximately 280 regions in Europe.With a concentration of brain business jobs of 8.1 percent, Iceland places ahead of regions such as Hannover, Essex and Rome.  

Iceland has a number of innovative start-ups, such as Authenteq which provides real-time identity verification for blockchain, built on the principles of privacy by design, and Laki Power, a research and development company focused on eco-friendly power solutions.

Warsaw is the fastest growing region, alongside Bratislava and three German regions

On a regional basis, the most significant increase of brain business jobs has occurred in Warsaw, the Polish capital region, followed by the Slovakian capital region of Bratislava, and the German region of Braunschweig. This German region was an important center of commerce already in medieval Germany and is one of several strongly growing German regions.

Successful new European firms often combine service innovations with digital platforms for service delivery

A study of 150 innovation companies, founded in the top-30 leading European brain business jobs hubs, finds that the most common forms of innovations are business service innovation, consumer service innovation, and digital infrastructure/platform innovation. Often firms rely on digital platforms for service delivery. The least common form of innovation is manufacturing technology.

New Nordic firms have significant lead in investments

The average company in Eastern and Central European brain business hubs, founded in 2015, has attracted 10 million Euros in investment, compared to 23 million in Southern Europe, and 35 million in Western Europe. The innovation firms of the Nordic regions on the top-30 regional list, have on average attracted 85 million Euros in investments, far outstripping firms in other parts of Europe.

”Knowledge is the foundation for attracting investments and creating value in a long term sustainable way. As a leading investor in Europe it is natural for Nordic Capital to support research on how knowledge strengthens good investment conditions”, says Klas Tikkanen, Chief Operating Officer at Nordic Capital Advisors.

”The study confirms that high knowledge intensity gives resilience in a time of crisis. Sweden and the Nordic countries still stand strong despite the pandemic. But now is the time for reforms and developing the regulatory frameworks in order to get back to the level before Covid-19. That will lead to increased investments, and the increase of brain business jobs again”, Klas Tikkanen adds.

Iceland’s weakness and strengths

Compared to the rest of Europe, Iceland has several strengths. The main strength is film/TV/music, followed by R&D. However, Iceland lags in high tech manufacturing as well as head office & management.

The challenge for Iceland is to compete for brain business jobs, in a time where much of the growth is happening in the capital regions of Eastern and Central European countries, which combine talent supply with low costs for employing the talents. To achieve this, policies that reduce firm costs of hiring knowledge workers are required.

For more information:
Benjamin Julin