Foreign-owned companies are on the rise in Hungary

Foreign-owned companies have been contributing massively to Hungarian economy over the last fifteen years. Get an overview of what this means in numbers, and consider how your business might fit a niche on the Hungarian market.

Latest statistical data

While KSH, the Hungarian Central Statistical Office regularly collects and analyzes data, their latest comprehensive report is on data from 2020 (while data tables are updated constantly). Even though the last couple of years have been troubled first by the COVID-19 pandemic and later by the war in Ukraine, data over the last 15 years seem consistent, and still offer some insight.

Foreign-owned companies in the EU

In the member states of the European Union, more than 25% of added value is generated by foreign-owned companies. According to data from 2018, their proportion was the highest in Ireland with around 67%, while it was above 33% in the countries that joined the EU since 2004, meaning Hungary as well as Bulgaria, the Czech Republic, Estonia, Latvia, Slovakia, Poland, and Romania. Out of this total, 55% is generated by companies governed from other EU countries and 45% from outside the EU.

The share of foreign-owned companies on the Hungarian market

Since 2008, the number of companies in Hungary grew from 566,000 to 674,000. At the same time, the number and proportion of foreign-owned companies was reduced from 18,700 and 3.3% to 15,200 and 2.3% – while they kept producing about 50% of the added value generated in Hungary, and employing about a quarter of the Hungarian work force. Moreover, in 2020 they realized about 44% of all the gross investment in tangible goods – which is again in line with data from the preceding period, which fluctuated between 55% and 40%, and in fact shows a slight increase compared to the previous years.

The proportion of owners seated in EU member states and third-countries was 65:35 both in 2008 and in 2020. However, the 2020 data is the result of a sudden change from 70:30, which might be a product of Brexit taking effect that year.

Industries and size of operation

If we consider the generation of added value, the share of foreign-owned companies in Hungary is the biggest in the processing industry (which has the biggest share in Hungary anyway) with about 67%. It is followed closely by information and communication at 58% and energy at 51%. If we consider production value, the same sectors will be in the front, with slightly different rates (73%, 56%, and 48%, respectively).

Foreign-owned companies also tend to use more advanced technology, introducing their practices on the Hungarian market and driving development and innovation. This is most obvious in the processing industry, where the number of foreign-owned companies using highly advanced technology is the double of Hungarian ones (18% vs. 9,8%), and the difference is even more conspicuous for those using mostly advanced technology (47.9% vs. 19.2%).

Regarding the size of the operation in Hungary, we will see that most large enterprises are foreign-owned, meaning more than 70% of companies with 250+ employees, reflecting the share of foreign investment in Hungary. The smaller the number of employees, the smaller the share of foreign-owned businesses becomes: companies with 50-249 employees at 47%, 10-49 employees at 21%, fewer than 10 employees at 13%.

Pandemic related developments

While the pandemic hit every sector of the economy hard, added value generated in Hungary in fact increased by 1% compared to the previous year, both for domestic (+1.3%) and foreign-owned businesses (+0.8%).

This is just an average, however: both hospitality (accommodation and food services) and logistics (transportation and storage) suffered greatly (-37% and -19%), while the losses of foreign-owned companies (-62% and -30%) were more than double of those of domestic ones (-30% and -12%). In construction, while there was an overall reduction (-1.5%), companies under domestic ownership still managed to grow (+2%), while those under foreign ownership suffered (-28%).

In industries where significant growth was realized in spite of the pandemic, foreign-owned undertakings did typically well compared to Hungarian ones. These include real estate related activities (+10.4% vs. -1.1%), wholesale and retail trade (+6.3% vs. +1.4%), the processing industry (+6.4% vs. +2.2%), and even scientific and technical activities (+12% vs. +10.8%).

There is room for your business in Hungary too

As you can see, foreign-owned companies are an integral part of Hungarian economy. They generate about half of the domestic added value, employ a quarter of the local work force, and drive innovation with advanced technology. If you can find the right niche on the Hungarian market, you are just a feasible business plan away from success.

Helpers Hungary offers assistance not only with company formation, but also market research and business planning. Take advantage of our local network and extensive know-how, plan your European operation on a solid basis.

This article originally appeared at helpers.hu.