Policy Note 22: Counteract relocations and insolvencies with competitiveness!
Major company closures, relocations and insolvencies often attract a great deal of attention in the public and economic policy debate. Recent examples include the insolvencies of Forstinger and Niki in Austria and the case of Niki's parent company AirBerlin in Germany. "The insolvency of a company is undoubtedly a painful experience for those affected. However, its significance for the labor market as a whole should not be overestimated," says Tobias Thomas, Director of the economic research institute EcoAustria. "The best remedy against relocations and insolvencies is the competitiveness of companies and the business location as a whole," says Thomas.
Based on the 'European Restructuring Monitor' (ERM), EcoAustria examined 4,015 major restructuring cases across Europe from 2003 to 2017 with a total of around 1.4 million employees affected. According to the study, the situation has largely 'calmed down' again after the restructuring-intensive phases of 2005/2006 and 2008/2009. In Austria, the average of 2,400 jobs affected by major restructuring measures per year corresponds to a relative impact of 0.06% compared to the average workforce of around 4 million people. In an international comparison, this puts Austria in a group with Finland, the Baltic states, the Benelux countries and Sweden in the upper midfield. Across Europe, Ireland and the United Kingdom have the highest relative rates of 0.13% and 0.09% respectively.
The most frequently cited reasons for restructuring are an unfavorable market situation or a decline in demand, but also cost reasons such as labor costs. This illustrates the relevance of a business location's competitiveness. In contrast, current geopolitical developments in 2016 and 2017 were only mentioned in six of a total of around 350 cases across Europe. Brexit or US President Donald Trump's new foreign trade policy have therefore had no significant impact on major restructurings to date, according to the conclusion of an EcoAustria policy note published today.
