Total revenue in the business economy (excluding financial and insurance activities) increased by roughly 426 billion ISK in 2023 and totalled 6,835 billion ISK compared with 6,409 billion in 2022. This was a 6.7% year-over-year increase which was significantly less than in 2022 when growth in most sectors of the economy led to a 22% increase in revenue following a contractionary period during the Covid-19 pandemic.
Overall, the year 2023 was characterised by significant growth in the tourism industry, contraction in export industries and continuous growth in financing costs. Revenue increased in most industries with the greatest increase happening in tourism, vehicle sales and construction. However, in many industries revenue growth was lower than the year’s inflation (8,8%). In fact, revenue declined in fisheries and manufacture of basic metals.
Net profit in the business economy decreased by 28% from 741 billion ISK in 2022 to 536 billion in 2023. This was primarily due to the contraction in base metals manufacturing and net loss in high technology manufacturing and services which furthermore stemmed from negative results in pharmaceutical manufacturing. Total net profit was also affected by changes in financial items, decrease in extraordinary items and lower share in profit of subsidiaries. Like in previous years the greatest profit was in real estate but earnings also doubled in tourism.
Operating expenses increased by 508 billion ISK, or 9%, totalling 6,149 billion ISK where the share of labour costs in operating expenses increased from 19.6% to 21.1%. In addition, higher interest rates led to increased financing costs from 85 billion ISK to 202 billion ISK, thereby raising the share of financial items to 3.0% of total revenue from 1.3% a year earlier. Lastly, the financial position of the business economy stayed nearly unchanged year over year.
Significant growth in tourism
Revenue increased most in the tourism industry, reaching 930 billion ISK in 2023 and growing by 21% from 2022. Many sectors of the industry experienced significant growth with revenue increasing most in passenger air transport (27%) and air transportation services (26%), accommodation (26%) and travel agencies (17%). In renting and leasing of motor vehicles there was also 15% growth and 20% revenue increase in taxi operations. Restaurants experienced more modest growth or 11%.
Net profit in tourism improved significantly in line with the revenue growth, nearly doubling from 23.5 billion ISK in 2022 to 44 billion ISK in 2022. Most notable was a nearly fourfold profit increase in accommodation and 80% rise at travel agencies. However, losses continued in passenger air transport, amounting to 4.1 billion ISK in 2023. In all, the total profit of the tourism industry in 2023 was the most since 2016. Furthermore, the total revenue (in real 2023 CPI-adjusted ISK) increased beyond the previous high recorded in 2018. These improved results in the industry led to improved financial position as equity grew by 26%, assets 17% and liabilities 14%.
Contraction in export industries
Net profit in metals manufacturing decreased markedly in 2023 with the industry barely making a profit of 1.9 billion ISK in 2023 compared with 84 billion in 2022. Revenue decreased by 19% to 357 billion ISK as the local currency strengthened and the global price of aluminium fell in 2023 following sharp rises in 2022. The value of inventory decreased as well and assets in total by 9%. However, liabilities decreased by 13% causing a net improvement in financial positions with the assets effectively less heavily financed by liabilities in 2023 relative to 2022.
A small contraction was in fisheries with total revenue declining by 1% (unchanged when accounting for aquaculture). The industry did nonetheless record a positive net profit of 79 billion ISK as operating expenses remained unchanged while financial items and subsidiary income improved. Financial position also improved as liabilities increased only 10% against growth of 14% in assets. Earnings in fishing, aquaculture and fish processing were the second highest in the business economy. Net profit in manufacture of food products also increased sharply as share of profit from subsidiaries increased year over year.
Total revenue in high technology manufacturing and services increased by 9% in 2023, totalling 678 billion ISK compared with 621 billion in 2022. The highest growth was in manufacture of computer, electronic and optical products (34%), information service activities (19%) and pharmaceutical manufacturing (19%). In total, the high technology manufacturing and services industry recorded a loss of nearly 23 billion ISK in 2023 due to declines in financial items in telecommunications and computer programming, consultancy and related activities. Higher goods and material expenses in pharmaceutical manufacturing and other high and medium-high technology manufacturing industries also contributed to the year’s loss.1
Real estate most profitable
As was the case in 2022 the real estate was the most profitable industry with approximately 120 billion ISK net profit. This was still 4% lower than in the year before when the net profit was 125 billion ISK.2 Total revenue increased by 8% from 277 billion ISK in 2022 to 298 billion in 2023. The drop in earnings was largely due to increased operating expenses (24% year-over-year increase) in addition to lower extraordinary income.
Significantly greater growth was in construction where revenue grew by 15% to reach 685 billion ISK in 2023 of which 13% growth was in construction of buildings (416 billion ISK) and 18% in specialised construction activities (237 billion ISK). Net profit in the industry was nonetheless unchanged at 64 billion ISK as a 44% higher depreciation expenses (from 21 billion ISK to 30 billion) contributed to the 17% rise in total operating costs. Labour costs and raw material expenses also rose by approximately 18%. Still, the financial position improved as liabilities increased by only 18% against 20% growth in assets and 23% in equity.
Significant growth in vehicle sales
Revenue in motor vehicle trade reached new heights in 2023, growing by 14% from 268 billion ISK in 2022 to nearly 305 billion ISK. However, most cost items rose in 2023 leading to lower income than in 2022. Net profit amounted to 9.5 billion ISK which was 28% lower than in 2022 when the profit was 13 billion. Total operating expenses increased by 16% with 17% increase in raw material expenses and 75% higher financing costs.
In other trade industries there was less growth or only 4% in wholesale trade and 1% in retail trade. Earnings in retail trade improved however by 13% year over year as good and raw material cost decreased by 1%, subsidiary income increased and earnings from financial items improved. The opposite effect occurred in wholesale trade with net profit decreasing by 8%. In all, the modest growth in both trade industries led to nearly unchanged financial position from 2022 to 2023
About the data
The income statement and balance sheet are compiled from nearly 36,000 corporate tax returns of companies that have roughly 128 thousand employees in 2023. Figures for 2023 are preliminary and will be updated at the next release.
All numbers are nominal unless otherwise noted. Inflation in 2023 was 8.8% according to the annual average consumer price index.
1 Financial items can include interest expenses and interest income along with gains (losses) on the sale of securities, dividends and mark-to-market changes in security prices. Changes in financial items in few industries can thus significantly impact the results of the total business economy. For example, in 2022 financial items for the telecommunications industry were positive by 31 billion ISK due to sales of assets which thereby raised the number for the whole economy and masked the impact of rising interest rates to some extent. In 2023 this was reversed as financial items in the telecom industry were negative by 7.3 billion ISK which consequently markedly affected the results for the total business economy.
2 The real estate industry includes buying/selling of property, commercial and residential leasing, renting of land and land rights, brokerage and property management. Most of the industry’s revenue comes from commercial leasing. Change in assessment values and market prices of properties can significantly influence revenue and profit (loss) of operating entities in the industry.