Hungary’s strong growth of knowledge-intensive occupations came to stop in 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.

Hungary’s growth of brain business jobs came to stop in 2020
Before the corona crisis, Hungary experienced a significant boost in brain business jobs. Between 2012 and 2019, Hungary added 110 000 jobs in knowledge-intensive companies. That is one of the highest numbers of brain business jobs added in all of Europe during this time. However, this positive trend came to an end during 2020, as Hungary lost 4 500 jobs in highly knowledge-intensive industries during the year. Despite this drop, the concentration of the population employed in knowledge-intensive occupations remained at 7.2 percent.

Central and Eastern Europe experienced significant loss of brain business jobs in 2020
In Central and Eastern Europe as a whole, approximately 58 400 brain business jobs were lost between 2019 and 2020. While Estonia and Poland were successful in adding jobs during the turbulent year, the rest of the area suffered significant setbacks. Notably, Romania lost a large amount of brain business jobs during the year.

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”.

Budapest in top three knowledge regions of Central and Eastern Europe
With a concentration of 18.0 percent of its working age population employed in knowledge-intensive firms, Budapest places in the top three of knowledge regions of Central and Eastern Europe. Ahead of it is only Bratislava (22,4 percent) and Prague (19,7 percent). This highlights the rise of Central and Eastern Europe as major knowledge centers of Europe.

Budapest has several innovative start-up companies, such as Banzai Cloud which offers cloud native solutions for enterprises, Shapr3D which provides computer-aided design services, and Almotive which is a developer of automated driving technologies.

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.

read also: Budapest jumps to 85th place on global financial centres index

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.

Investments in Central and Eastern Europe still lags behind
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.

Hungary’s weaknesses and strengths
Compared to the rest of Europe, Hungary is a top performer when it comes to high-tech manufacturing. The concentration of brain business jobs in this sector is more than twice the European average. Another strength is R&D, where Hungary now has close to twice the concentration of the average European country. On the other hand, Hungary has a lower concentration than the rest of Europe when it comes to areas such as advertising & market research and telecom.

While Hungary overall has impressive performance in terms of knowledge-intensive jobs, growth of such jobs outside of the capital region is needed to boost the performance of the country as a whole and to lower regional unemployment levels.

Read alsoSurvival is the current goal, but what is the catering and hotel industry’s future?