Deloitte Survey on Competitive Edge: Austria Ranks Mid-Table

Business location Austria has been stuck in mediocrity for years when compared to international standards, according to the “Deloitte Radar 2023” survey. “Austria is not really getting off the ground. We’ve been moving sideways for years,“ says Harald Breit, Head of Deloitte Austria, summarizing the results of the analysis of the most important international business rankings.

In an international comparison, Austria positions itself mid-table compared to other industrialized nations and regularly comes in approximately 10th in a Europe-only comparison. According to the IMD's renowned World Competitiveness Ranking, the Alpine republic ranked 20th worldwide and 11th among European countries in 2022.

“The fact that it is not the big players at the top, but countries that are quite comparable to Austria in terms of size and national economy, such as Switzerland, Sweden, and Denmark, should give us food for thought,” says Breit.

Although Austria is making great efforts and pursuing ambitious goals, it is not succeeding in playing at the top. The CEO of Deloitte Austria calls on economic policymakers not to settle for a solid mid-table position, but to set higher standards and strive for a top-5 ranking instead. There is an urgent need for action to achieve this. In particular, the ongoing labor shortage in conjunction with the impending wave of retirements poses challenges for the business location that must be overcome. This is also confirmed in a survey among 185 leading domestic executives conducted for the study. 41% of the respondents expect a negative development in the labor market. Almost any industry is already affected by the labor shortage, Elisa Aichinger from Deloitte Austria reports. More than two-thirds of the respondents assess the availability of skilled workers negatively and see either “sufficient” or “insufficient” skilled workers, while only 8% don’t perceive any major problems.

The assessment of the general availability of labor paints a similar picture: 57% rate it as “sufficient” or “insufficient”, 36% as “satisfactory,” and only 8% as “good” or “very good. According to Breit, there is a lack of ambition in Austria to solve the structural problem of workforce shortages. This is worrying as the labor shortage will concern us for a long time.

However, not only the labor market requires action, but Austria is perceived as worse off also in relation to digitization and business location compared to last year. Just under a quarter of the executives surveyed rated economic growth as “very good” or “good”, compared to almost 50% in the previous year.

The excessive bureaucracy is also still perceived as a burden, as only 6% considered it “very good” or “good.” On the other hand, high-income taxation angers many — 59% of companies rate it as “sufficient” or “insufficient.” Deloitte partner Herbert Kovar emphasizes that Austria is a high-tax country. With such high labor costs, it will be difficult to attract workers from other countries. However, the abolition of the so-called cold progression, in which tax rates are not adjusted to higher incomes and thus lead to a creeping tax increase, was an important step in the right direction. 9 out of 10 managers call for further relief, such as a reduction in non-wage labor costs and further tax cuts on income.

Despite the numerous challenges, the overall mood has improved compared to last fall. 70% of managers currently perceive a positive mood in management, whereas in fall 2022, due to the expected effects of the Ukraine war such as rising energy and raw material costs, it was only 42%. In the meantime, at least wholesale prices have dropped again, “and the feared economic slump has not materialized for the time being,” summarizes Breit.