#7 - Business news from the Economic Mission of the French Embassy in Denmark [fr]
#7 - Business news from the Economic Mission – 2.04.2021
Disclaimer - The Economic Mission strives to provide accurate and up-to-date information and will correct, to the extent possible, any errors that are brought to our attention. However, it cannot be held responsible for the use and interpretation of the information contained in this publication.
OECD forecasts of economic recovery in Denmark.
Although the crisis has relatively spared the Danish economy compared to other countries, the recovery will take time. These are the conclusions of the Organization for Economic Cooperation and Development (OECD), which estimates that the Danish economy should return to its pre-crisis growth level only after 2022. According to their new forecast, global economic growth is expected to reach 5.6% in 2021, its highest level since 1973. This estimate is mainly due to a strong growth forecast in the US and China, while the recovery in Europe is expected to be weaker. According to Andrew Barker, in charge of Denmark at the OECD, there is no risk that the Danish economy will overheat during the next two years. The Danish government should therefore not hesitate to spend more in order to stimulate growth. It also recommends that the stimulus measures be targeted, as some sectors are not spared from the risk of overheating (especially the construction sector). Børsen
Payment of DKK 22 billion (€3 billion) in vacation pay to Danes.
The government has just released the rest of the Danish vacation allowances, a total of DKK 57.3 billion (€7.7 billion). As the payment is voluntary, it is estimated that DKK 36 billion (€4.8 billion) should be disbursed, equivalent to DKK 22 billion (€3 billion) after taxes. The combination of this payment with the reopening of the company could result in a boom in private consumption, and thus in the Danish economy. Troels Kromand Danielsen, chief economist at Nykredit, estimates that if half of this money is spent by households, private consumption will increase by 1.1%. In addition, the government expects employment to increase by 5,000 people.Finans, Børsen
Impact of the country’s closure on private employment in Denmark.
According to Danske Bank’s calculations, 16% of private jobs in Denmark were affected by the shutdown - or 350,000 jobs in 15 different industries, which typically generate an annual turnover of DKK 193 billion (€26 billion). Some of them experienced a complete shutdown, while others, such as the aviation and hotel sectors, faced a partial shutdown. To accompany the reopening, the Parliament has just voted to extend the wage compensation scheme until June 30, 2021. After that, a group of experts has been commissioned to draw up recommendations on how the support programs could be phased out as of July 1. In contrast, the Confederation of Danish Industries (DI) and the Danish Chamber of Commerce (DE) are calling on Parliament to extend the compensation scheme for the most affected sectors. Among these, the trade organizations most often cite the restaurant, entertainment, aviation and hotel sectors. Brian Mikkelsen, CEO of DE, proposes that companies that have suffered a drop in turnover of more than 30% should continue to receive aid "for as long as possible".Berlingske, Finans, Finans
Success of the Danish tax system for research and attraction of talent.
The scheme, introduced in Denmark in 1992, offers a tax advantage to foreign researchers and "key employees" who come to Denmark (for a maximum of 7 years), as well as to Danes who return to the country after at least 10 years abroad. The number of researchers and experts in the private sector benefiting from this tax regime has increased from 2,197 (647 researchers and 1,550 key employees) in 2000, to 7,699 (3,046 researchers and 4,653 key employees) in 2019 (+250%). The scheme is particularly used in the education sector, as well as in the Danish business community (especially in the manufacturing and financial sectors). The main beneficiaries are from Great Britain, Germany, Sweden, the United States, India and China. In 2019, 5.7% of the beneficiaries were Danish. Børsen
Water Valley Denmark: a new national initiative for water technologies.
A new innovation center (Water Valley Denmark) will be created south of Aarhus, to bring together the various Danish water technology players who are leaders in this sector. The objective is to build a dynamic ecosystem where small and large companies can exchange and attract talent to the region. Water Valley Denmark could contribute to doubling Danish water technology exports by 2030 (from DKK 20 to 40 billion, or €2.7 to 5.4 billion), as well as boosting employment in this sector. The project is supported by Dansk Industri, Grundfos, AVK and Rambøll, among others. The main challenge remains to find funding for the initiative, which is estimated to cost DKK 250 million (€33.6 million) to establish. Børsen
Strengthening the climate policy of the banking sector.
With its new climate policy, Danske Bank will refuse to lend to or invest in any company that makes more than 5% of its turnover from thermal coal and tar sands extraction, or from coal power. The same will apply to companies that generate more than 5% of their revenues from oil and gas extraction in ultra-deep waters or at the North Pole. Previously, the limit was 30% for coal. At Nordea, it is 10%, while Jyske Bank and Nykredit do not, and assess each company individually. By comparison, the ATP pension fund is much less restrictive, and accepts that utilities may use up to 50% coal in their power generation. These new climate considerations at Danske Bank are part of many initiatives in Denmark for more sustainable finance. The Danish banking sector recently announced that bank advisors will now be required to undergo climate training, in order to push their clients towards sustainability: a pilot scheme will be implemented from May to October 2021, before the initiative is expanded to all advisors at Danish banks. Finans, Finans, Børsen
Nordic Aviation Capital (NAC) is facing bankruptcy.
The company, which has the largest fleet of turboprop aircraft in the world, has been hit hard by the pandemic. The majority of its shares are owned by the investment funds EQT (Swedish) and GIC (Singaporean), as well as the Kirkbi fund (from the Lego family). In the summer of 2020, they invested an additional DKK 400 million (€53.8 million) in NAC to help it overcome the crisis. Today, NAC can no longer repay its debt (DKK 38 billion, or €5.1 billion), and the trio of shareholders refuses to invest more. Martin Møller Nielsen, founder of NAC, said he was ready to inject money himself to reach an agreement with the creditors: he maintains that bankruptcy is still far away, but that a formal reconstruction of the company is necessary. PFA, which is one of NAC’s creditors (for DKK 3 billion, or €403 million), has announced that it is following the situation very closely. Børsen, Børsen
Danish companies could participate in the European vaccine production effort.
Thierry Breton, European Commissioner for the Internal Market, also heads the European Commission’s working group on vaccines. In this capacity, he went to Copenhagen to meet with the Danish Prime Minister and Minister of Foreign Affairs, as well as representatives of several Danish pharmaceutical companies. Among them were Bavarian Nordic, Fujifilm, AJ Vaccines, ALK Abello (specialized in R&D of allergy vaccines) and AGC Biologics (with a strong manufacturing capacity in biopharmaceuticals). Thierry Breton underlined the "very fruitful exchanges", indicating that these companies could be part of the European platform he is in charge of setting up: the Commission’s objective is to build a European vaccine production capacity, which should allow the production of between 2 and 3 billion doses by the end of the year. Finans
Mærsk’s general meeting marked by good finances and an ambitious climate plan.
A.P. Møller-Mærsk’s annual meeting was held online, against a buoyant backdrop: A.P. Møller-Mærsk’s operating profit has increased for ten consecutive quarters, the business has become more profitable, the share value is up, and debt has been reduced. Chairman Jim Hagemann Snabe announced that the value of A.P. Møller-Mærsk is higher today than before the divestiture of both its oil business and its holdings in Danske Bank and Dansk Supermarked. This development, which has been supported by long-term shareholders, is proof that reinvention is possible, even for large traditional companies. The leader in maritime transport is developing a new line of business: the transport of pharmaceutical products. After signing an agreement to transport half of Novo Nordisk’s insulin production, Mærsk has joined the Covax alliance and will distribute nearly one billion doses of Covid vaccines to developing countries. Mærsk’s goal of being carbon neutral by 2050 was also reiterated at the general meeting: the company will, for example, launch its first CO2-neutral ship in 2023, and wants to integrate ESG criteria into the remuneration of the executive board. In addition, Jim Hagemann Snabe’s high remuneration (DKK 7 million per year, or €940,000) was strongly criticized by some shareholders, including the pension funds ATP and AkademikerPension. Berlingske,Børsen
The Children’s Kingdom Foundation is seeking private investors to build a world-class children’s hospital.
The Children’s Kingdom Hospital, with a construction budget of DKK 2 billion (€270 million), is scheduled to open in 2025. The private foundation Ole Kirks Fond (from the Lego family) has already invested DKK 600 million (€81 million) in this project. To keep the hospital running smoothly and to be constantly at the forefront of research, the Children’s Kingdom Foundation expects to raise millions of kroner each year from sponsors. Although private funding is common in the Danish health system (with foundations that are shareholders in large pharmaceutical groups investing in research projects), this is the first time that it has been mobilized to enable the construction and operation of a public hospital. Finans