Total revenue in the business economy, excl. financial and pharmaceutical activities, was approximately 5,100 billion ISK in 2021 compared with 4,300 billion ISK in 2020. This 18% increase (as measured by each year’s price level) was the third greatest since 2002 and well beyond the year’s inflation (5.1%).
Revenue grew most in tourism industries, manufacture of basic metals and real estate activities. Despite the resurgence in tourism industries the effects of Covid-19 were still recognisable, causing the industry to be the fifth largest in 2021 (in terms of total revenue) compared with being the second largest in 2019. Wholesale trade, retail, high technology manufacturing and services and fisheries were all larger than tourism in 2021.
The real estate industry was very active in 2021, recording twice the profits of fisheries that ranked no. 2 in terms of profits. On the other hand, tourism lost nearly 3.6 billion ISK, mostly due to poor performance of airline-related industries. Despite the loss in 2021 it was a significant improvement from 2020 when the industry lost 89 billion ISK. In total, the business economy returned 674 billion ISK in profits which was over 500 billion ISK more than the previous year. Profits in real estate were roughly 25% of total profits in the business economy in 2021.
Expenses in the business economy were similar to previous years. Goods and raw materials were 48% of total revenue and depreciation and other operating expenses were relatively unchanged. Financial items were modestly better than in 2020 and overall gross margin was 52%. Labour costs increased by 10% but stayed unchanged relative to revenue.
Total number of employees started to increase again following two years of decline. In total, the business economy added 1,742 employees, growing by 2% compared with a drop of 11% in 2020 and 3% in 2019. Only once before in the period 2003 to 2021 did the number of employees decline, namely in 2009 when the drop was 12% following the financial crisis of 2008. Overall, the number of employees declined by more in 2019 and during Covid-19 in 2020 than in the year following the 2008 crisis. In 2021 the number of employees dropped by 4% in utilities (electricity, gas, steam and air conditioning supply, etc.), 2% in tourism industries and 1% in fisheries.
Wages (labour costs per employee) increased by 8% overall in the business economy, the most in real estate activities and tourism, which nonetheless had the lowest wage level along with retail among the top 15 industries in the country. On the other hand, fisheries and utilities had the highest wages, approximately twice that of retail and tourism. Labour costs in 2021 were 20% of total revenue, equaling the average for the years 2002 to 2021.
Overall, the financial position improved for the business economy and most of the main industries in 2021. Record profits led to increased equity and long-term-debt-to-equity ratio declined for most, both long-term debt and equity increased for all industries but for most the increase in equity outpaced the growth in debt. Debt-to-equity ratio for the whole business economy was 87% in 2021, which was 12 percentage points lower than the year before. Most improvements in the ratio were in construction of buildings, real estate, wholesale and retail trade and repair of motor vehicles and motorcycles and retail. In high technology manufacturing and services, tourism and information and communications technology (ICT) did the ratio rise, but stayed within generally accepted levels.
Tourism industries
Total revenue for the tourism industries in Iceland grew by 45% in 2021, from nearly 279 billion ISK to 405 billion ISK. Despite the increase the revenue level was only two-thirds of what it had been in 2019 before the Covid-19 pandemic. Revenue was 628 billion ISK in 2019 but roughly halved in 2020. As mentioned earlier the industry was no. 5 in terms of revenue, having been no. 2 in 2019. Tourism still had the greatest number of employees, or 19,047, which was nevertheless 2% lower than in 2020 and nearly a third lower than in 2019.
Revenue increased in all sub-sectors of the tourism industry. For example, doubling of revenue of travel agencies, from 28 billion ISK to 54 billion ISK, and 67% increase in total revenue of hotels and similar accommodations. Renting and leasing of motor vehicles increase by 63%, restaurants experienced 36% growth in revenue and passenger air transport had a 24% increase, although there was still plenty of room to grow back to the pre-pandemic level.
In total, the tourism industry lost 3.6 billion ISK but most of its branches returned a profit. Only airline-related and passenger transport sectors reported a loss, passenger air transport lost nearly 16 billion ISK. Hotels and similar accommodation made only 215 million ISK but restaurants and travel agencies earned 2.8 billion ISK and 2.6 billion ISK, respectively. Overall, the effects of Covid-19 were still prevalent but some signs were of better times ahead.
Real estate activities
Record profits were in real estate in 2021. In total, the profit was 178 billion ISK compared with 56 billion ISK in 2020. Total revenue increased by 60 billion ISK, or 30%, which was also the third greatest increase since 2002. Only in 2004 and 2011 did revenue grow by more; 38% and 46%, respectively. This increase was far beyond the growth in the previous four years when revenue growth oscillated between 4% and 9%.
Limited supply, increased demand and low interest rates were all factors that drove significant price increases in the housing market. As a reference, housing prices in Iceland increased by 15.9% in 2021 and by the most since 2000 with only 2005 being an exception. In addition, wages grew by 11%, second most among main industries, and the financial position improved by 25 percentage points, with debt-to-equity ratio dropping from 159% to 134%.
Manufacture of basic metals
The price of aluminum rose significantly in 2021, causing revenue for the manufacture of basic metals industry to grow by 43%, from 227 billion ISK to 325 billion ISK. The industry also recorded 53 billion ISK in profits, which happened to be the fourth highest in the business economy. This was a significant improvement from the 19 billion ISK loss in 2020 and only three industries delivered greater results in 2021; real estate, high technology manufacturing and services, and fisheries.
Fisheries
The fishing industry grew its revenue by 12%, from 374 billion ISK to 419 billion ISK. But more impressively did it return a profit of 89 billion ISK that was three times that of 2020. Only real estate activities earned more in 2021. In general, this increase in profits was due to overall operational improvements, such as revenue growth and relatively lower expenses, positive financial income and growth in profits of subsidiaries.
Other industries
In general, other industries fared well in 2021. Wholesale and retail trade were the largest industries in terms of revenue and earned a handsome profit that was approximately twice that of 2020. The number of employees grew modestly by 4% in wholesale and 2% in retail while labour cost per employee grew by 6% and 7%, respectively.
Technology-related industries grew steadily throughout the pandemic without any significant interruptions or meaningful increases. High technology manufacturing and services was the third largest industry in Iceland, earning 55 billion ISK on 8% growth in revenue in 2021. Most of the technology-related industries experienced modest revenue growth, minimal wage growth, relatively unchanged number of employees but decent growth in profits.
The wholesale and retail trade and repair of motor vehicles and motorcycles industry experienced 25% growth in revenue and six-fold increase in profits. This was similar to other countries as the industry struggled with supply chain issues alongside pent-up demand from the pandemic. Despite positive signs on the horizon with regards to the hopeful end of the pandemic its effects were still evident in the year’s data. Overall, 2021 was still a good year for the business economy with general growth in revenues and earnings across most industries.
About the data
The income statement and balance sheet are compiled from nearly 35 thousand corporate tax returns of companies that have nearly 114 thousand employees in 2021. Figures for 2021 are preliminary and will be updated at the next release.