Opinion: Services Are Sweden’s New Export Industry—Policy Must Keep Pace

The service sector currently accounts for nearly 40 percent of Sweden’s exports. But Sweden is losing ground to several competing countries. Lars Jagrén and Johannes Nathell are calling for policies that better capitalize on the service sector’s importance for jobs, exports, and growth. The next government must create better conditions for Sweden’s new export industry.

In just under two weeks, Sweden will hold its general election. So far, the campaign has mostly revolved around crime, household finances, and the organization of the welfare system, while structural reforms aimed at creating more jobs and fostering growth have received surprisingly little attention. One question that deserves attention—and one that politicians should address—is: How can we create better conditions for the service sector, which is Sweden’s new export industry?

The service sector accounts for an increasingly large share of the economy

The service sector is at the heart of the Swedish economy, and its importance has only grown in recent decades. Service output has doubled in constant prices over the past 25 years and now totals 3,000 billion kronor. During the same period, more than 800,000 new jobs have been created in the private service sector—three out of every four new jobs. Today, the private service sector accounts for over half of output and nearly half of the jobs in the private sector. Growth has been driven primarily by a rapid expansion of business services and other knowledge-intensive services.

The service sector is also playing an increasingly important role in Swedish exports. Service exports currently account for nearly 40 percent of Sweden’s exports and employ up to 730,000 people—as many as the goods export sector. Knowledge-intensive service exports are particularly significant: they total 845 billion kronor and account for two-thirds of total service exports, far above the EU average. Audiovisual services are growing the fastest, having increased fiftyfold over the past ten years. This growth is driven primarily by streaming and gaming.

Service exports currently account for nearly 40 percent of Sweden’s exports and employ up to 730,000 people—as many as goods exports.

Sweden Is Losing Ground to Its Competitors

But behind these strong figures lie two problems.

First, Sweden’s position in international trade in services has weakened over the past decade. If we set aside a few global successes, such as Spotify and the major Swedish game developers, Swedish service exports are growing significantly slower than the EU average and even compared to comparable countries such as Denmark, Estonia, Finland, Latvia, Lithuania, the Netherlands, and Germany. Between 2014 and 2024, Sweden’s market share of the EU’s knowledge-intensive service exports fell from 5.8 to 4.8 percent. This is shown in Almega’s new report, “Sweden’s Knowledge-Intensive Service Exports Remain Strong—But Competitors Are Catching Up.”

The decline is occurring despite the fact that the Swedish krona has depreciated sharply during the period, a development that typically benefits exports. Nevertheless, Swedish service exports are underperforming compared to the EU average. Volume growth is relatively weak, and market shares are declining. This suggests that competitiveness is determined not primarily by price, but by quality, expertise, and innovation.

The wealth gap is, in fact, a service gap.

The problem extends beyond Sweden. Several reports indicate that the service sector needs to expand if Europe is to close the wealth gap with the United States.

Another report from Almega shows that productivity in the U.S. service sector increased by 60 percent between 2000 and 2020, while Europe’s increased by only 10 percent. Research and development (R&D) in the services sector is even more telling: in the U.S., R&D investments have increased tenfold during the 2000s to 232 billion euros, while in Europe they amount to only 38 billion euros. The prosperity gap is, in fact, a services gap.

The second problem is that the service sector is overshadowed—and is almost entirely absent from trade policy. Swedish export promotion is still largely geared toward the manufacturing industry: trade shows, products, and market launches. But service companies sell projects, expertise, and scalable solutions, often without any physical goods involved at all. This requires a different approach—and a new policy.

Policy Must Change

Regardless of which government takes office after the election, it must shift its policies. First, the conditions for new knowledge-intensive service companies must be improved. Skill requirements are rising rapidly, not least as a result of developments in the field of AI. A sound regulatory framework for innovation, startups, and business growth, along with measures to address the long-term skills shortage, is crucial for improved competitiveness and increased growth in the service sector.

Second, export promotion must reflect the new reality for exports and service companies. Third, Sweden must champion this issue internationally. Barriers to the EU’s internal market for services must be removed. In new free trade agreements, services—particularly digital and knowledge-intensive services—must take center stage and not be overshadowed by tariffs on goods.

Services are already the foundation of Sweden’s prosperity and competitiveness. Policymakers must now create better conditions for this export industry to continue growing. Where are the politicians who are raising these issues during the election campaign?

Lars Jagrén, senior consultant , former chief economist at Företagarna and Unionen
Johannes Nathell, economic policy expert, Almega

See also – OPINION: The service sector is Sweden’s future export engine – now is the time to strengthen small businesses