There is good news and bad news to share on the entrepreneurship front in Sweden, according to the new GEM Sweden National Report.
First the bad news. Even though the Swedish economy fared better than many other European economies throughout the COVID-19 crisis, entrepreneurship in Sweden is falling and the country now occupies a bottom position internationally. TEA (Total early-stage Entrepreneurial Activity: the percentage of the 18-64 population who are either nascent entrepreneurs or owner-manager of a new business) fell from 8.3 percent in 2019 to 7.3 percent in 2020.
This is despite the fact that different well-received measures and support packages were initiated by the government. Forty seven percent of new entrepreneurs believe that the government had a sufficient response to the financial consequences of the pandemic. For established entrepreneurs, the percentage drops to 40 percent. The survey also shows that nascent entrepreneurship fell more, due to the pandemic, while established entrepreneurship fared better.
“Economically viable companies receiving support from the government is necessary,” said Johan Eklund, Managing Director of the Swedish Entrepreneurship Forum, Professor BTH and JIBS, and editor of the report. “However, companies should not survive long-term on support from taxpayers. Also, there is a risk in that unproductive companies being sustained via grants from the Treasury, companies that – through creative destruction – would have been replaced by new innovative and highly productive start-ups. This year’s GEM report shows that the pandemic had a negative impact on young companies’ international expansion opportunities; an increasing number of entrepreneurs are finding it difficult to reach international markets. Furthermore, perceived business opportunities and the proportion of informal investors are declining sharply.”
On the positive side, Sweden is doing well in the area of intrapreneurship (someone who develops new business activities as part of their job). The country holds the fourth position internationally with 6.2 percent of the population involved in this activity.
Another plus is in the area of growth ambitions; entrepreneurs appear to be more optimistic compared with the previous year. On average, just over 12 percent of entrepreneurs in the three-year period of 2018–2020 stated that they expected to employ 20 or more people within five years. This exceeds the average level that prevailed in the previous three-year interval (2015–2017) by more than seven percentage points.
“Whether these ambitions will be realized or not will depend in large part extent of how easy it will be for the entrepreneurs to scale up their operations in coming years,” said Eklund.
The report shows that TEA in Sweden has increased since the beginning of the century, from an average of just over four percent to around eight percent in recent years.
The GEM survey shows that Sweden has a low rate of company starts and company closures, which is a clear indicator of a relatively low rate of structural change. Measured in this way, only three countries in the survey show lower speeds of structural change.
“There is uncertainty for entrepreneurs in the short and medium term. When the deferral of tax payments is abolished, a new wave of bankruptcies may come. It is important that the withdrawal of aid is designed in a manner that will not negatively affect highly productive companies to a great extent. In the longer term, Sweden’s competitiveness needs to be strengthened,” explained Marcus Kardelo, researcher with the GEM Sweden Team.
Here are some selected other findings from the report:
- 9.7 percent of men define themselves as entrepreneurs compared to 4.8 percent of women.
- About 80 percent of the population state that it is easy to start a business in Sweden.
- Established entrepreneurship increased by 1.2 percentage points between 2019 and 2020 - the largest annual increase since 2010, when the GEM project was started in Sweden.
- The proportion of the population who say that there are good opportunities to start a business in their area fell by almost 18 percentage points from 80 percent in 2019 to 62 percent in 2020.
- The proportion of the population who know someone who has started a company due to the pandemic amounts to 10.5 percent, while the proportion who state that they know someone who has closed a company amounts to 17.9 percent.
- 24.4 percent find it much more difficult to start a business as a consequence of the pandemic.
- 33.3 percent of the entrepreneurs (TEA) expect much lower growth as a result of the pandemic. The corresponding figure for established companies is 42 percent.
The lead institution for GEM Sweden is Swedish Entrepreneurship Forum (Entreprenörskapsforum). You can learn more about the organisation’s work at the following link. Access the GEM Sweden National Report.