How a Swedish town turned itself around

When a town faces the prospect of losing a major employer, the fate of an entire community can hang in the balance. But for Västervik, situated on Sweden's east coast in Småland, a factory closure gave a kick-start to the town's entrepreneurial spirit.

Swedish electrical appliance company Electrolux closed its factory doors in Västervik in March 2004 with a loss of 1,500 jobs – a sizeable number in a town of 20,000.

The closure of the factory was undeniably a blow to the town, but local leaders saw that it also provided new opportunities. Their initiative has come to be known as The Västervik Model – an active way of promoting business growth in a small town.

Much of the success can be attributed to an informal air of council and community co-operation, which is a vital partnership for success according to Västervik’s council leader Harald Hjalmarsson.

“The council and local businesses work to clarify their roles and their expectations of each other,” he says.

Businesses continue to be responsible for formulating their needs through Västervik Framåt, a development agency and resource centre for new and existing enterprises in the region.

“A crucial factor for the positive development of Västervik is the involvement of business leaders at every level,” Hjalmarsson adds. “They believe in Västervik and want the municipality to develop in a positive way.”

Five years on and the abandoned factory is thriving again with 25 companies housed in the building, employing 400 people.

During that time the council has also focused on establishing a better business environment with improvements to infrastructure, communication and education in the region.

Västervik has also used its attractive natural setting as an advantage to entice both new business and new residents. With a coastline stretching 550 metres and around 5,000 islands in the surrounding archipelago, it has focused on developing new waterfront housing and trade centres, a huge draw for the sea-loving Swedes.

Indeed, the area was a prime choice for Stockholm-based company Aquavilla to expand its offering. Founded in 2000, the company is behind the capital’s Pampas Marina, a living harbour with 20 habitable floating villas, a restaurant and sailing supplies store.

Aquavila acquired land on the island of Lucerna in the Västervik archipelago and will complete the construction of a new factory in 2010, creating around 60 jobs in the process.

“We believe Västervik is a perfect location for us,” says Roger Alm, managing director of Aquavilla. “It’s on the coast, has a very good harbour and the good transportation links are a benefit.”

Aquavilla will also construct a living marina by the town’s Södra Skeppsbrokajen. “The town has a positive attitude and that translates into new business,” Alm adds.

The council has taken a proactive approach in marketing the town as both a tourist destination and an attractive place to move to. It offers a moving service (Inflyttarservice) which helps private individuals or families relocate to Västervik.

The approach that has paid off with a current database of around 3,000 people who have shown interest in making a move.

This information means new companies have a head start in recruiting locally. “If I know a company is looking for an IT specialist, I can contact people whose skills fit those credentials,” explains Hanna Hägg who works with the service.

“Companies can connect with people they otherwise would have missed,” she adds. “Other authorities working with this kind of moving service are reactive, but we work differently and have a more holistic approach.”

The turnaround in Västervik has been used as a model for other municipalities in Sweden looking to stimulate business growth in an increasingly tough climate.

“Despite the global finance crisis and the conditions in the job market, the market here is still good,” Hjalmarsson says.

And work to promote the region continues: in 2010 the municipality and the business community will create a group to work strategically with the business development in Västervik.

Article produced in cooperation with Västerviks Kommun.

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‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT