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Iceland market overview – Enterprises


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Iceland had 60,945 registered enterprises and organizations December 2010. Private limited companies make up 49.5% of the enterprise total, non-profit organizations 20.5% and residents association 15.3%. Between 2009 and 2010, the number of private limited companies increased by 0.1% after increasing by 5.3% 2008 – 2009. The reason is a change in the tax code which makes this enterprise form less desirable than limited partnerships that increased by 83.2% or from 207 – 929 between 2009 – 2010. The share of limited partnerships in the enterprise total was 0.8% 2009 and has risen to 1.5%. There are 1,624 sole proprietorships in the country (2.7% of enterprise total).

Turnover increased 2005 – 2008 where it rose from ISK 34.9 million per enterprise to 46.6 million. 2009 saw a drop in average turnover to 43.5 million yet 2010 gives rise to optimism as turnover increased again 2010 to 45.8 million on average. This, however, tells only part of the story. Enterprise insolvencies have escalated after the collapse, with the number of insolvencies rising from 442 in 2005 to 980 in 2010; an accumulated increase of 89.4%. The largest shock is 2007 – 2008 where insolvencies increase by 39.0%. The insolvency ratio (insolvencies to total enterprises) has climbed from 0.9% in 2005 to 1.6% as of 2010. As a result of the economic situation, unemployment has risen sharply albeit not as sharply as in many parts of Europe (primarily PIIGS).

Between 2005 and 2006, the labor force grew by 5.4%, by 4.0% 2007 and 1.4% 2008. It shrank by 1.7% 2009 but increased again – slightly – 2010 (0.1%). Employed persons decreased 2008 – 2009 by 6.0% and by 0.3% 2009 – 2010. Unemployment increased by 16.3% 2005 – 2006, decreased by 16.0% the year after, and then exploded to 138.2% 2008 – 2009. Fully understanding current conditions are vital for businesses contemplating entry into the Icelandic market. Businesses are short on surplus funds and are combating a drop in consumption, but they are increasingly looking toward e-commerce in order to attack foreign markets.

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