Once outsourced, production rarely returns to Denmark

Denmark’s European neighbours can produce at a quality equal to the Danes, but at a lower production cost

When Danish companies first outsource production overseas, they rarely ever return home again, according to new figures from Statistics Denmark.

With waning market growth in regions such as Asia making the local labour force more expensive, Danish companies have begun shifting production to eastern Europe, where countries like Poland, Ukraine, Slovakia and Czech Republic are cashing in.

“For every 100 Danish companies, there are 17 that outsource their activities and just 1.8 that move production back to Denmark again,” Michael Nielsen, a consultant from Statistics Denmark, told Politiken newspaper last week.

US consultancy firm, AlixPartners, estimated that production levels between China and the US will even out in 2015, but that will not occur in Denmark due to the wage levels and other expenses being so high. Danish companies are under pressure from European neighbours as well.

“High quality production, flexibility and low consumption of resources are the hallmarks of Danish production. But they also do that in Germany, the Netherlands and Sweden, where expenses are lower,” Kent Damsgaard, an economist from industry advocate association Dansk Industry (DI), told Politiken.

Damsgaard said that the government’s growth package, Vækstplan DK, is a needed step in the right direction, but that growth must be considered in everything Denmark does, from the education system to the construction of roads and other infrastructure.

“The competition for production is so fierce that more needs to be done. Business and growth policy must be meshed into all political avenues,” Damsgaard contended.

Another issue, according to Damsgaard, is that businesses in Denmark are bombarded with documentation demands that are far stricter than in other EU countries.

The minister of business and growth, Annette Vilhelmsen (Socialistisk Folkeparti), said that Vækstplan DK makes it more attractive to invest and produce in Denmark while strengthening worker competencies.

“But the work does not end here. We have also allocated funds for special efforts dedicated to the areas in which Danish companies have international competition ability,” Vilhelmsen told Politiken. “The work by the government has shown that it is possible to create growth and jobs in a number of business arenas.”

In 1990, there were about 500,000 Danish jobs in the industrial sector, a number that could be halved by 2016-2017.

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