(Bloomberg) -- Business was good for Brian Larsen’s car service shop in Kalundborg, a coastal town west of Copenhagen, but he had to shut it down. With Novo Nordisk A/S in the midst of a rapid hiring spree at its manufacturing hub, just half a mile away, finding staff to keep his small business running became virtually impossible.
By the time he closed Flint Auto last month, some eight years after it first opened, Larsen had lost most of his employees to the Danish maker of the diabetes treatment Ozempic and weight-loss drug Wegovy, for 20% more pay. “I didn’t want to fight anymore,” he said. “The focus went from making cars to constantly looking for employees. We couldn’t meet demand.”
A provider of building maintenance and installation services that works for Novo has since taken over Larsen’s lease. He is on a break while he figures out what to do next.
Similar stories are unfolding in and around Novo hubs across the Nordic country of 6 million people, and they highlight the extent to which the pharmaceutical giant and its multi-billion-dollar expansion plans are boosting the domestic economy and labor market. They also lay bare the risks.
Fueled by the success of its two biggest drugs, Novo has become Europe’s most valuable company, driving about half of Denmark’s 2.5% GDP growth in 2023. As of September, it employed about 32,000 people nationwide, a 75% increase in less than three years.
But as Novo scoops up more and more staff, from scientists and hospital workers to mechanics, teachers and even soldiers, complaints are growing from business owners and managers. They say they are losing headcount and struggling to fill vacancies in an already tight labor market. Some firms are closing as a result. Others are moving production abroad and scaling back, or delaying building projects.
“It’s great to have one strong company. But as a society, you also introduce a fragility because you become very dependent on one company,” said Christin Tuxen, Nordic head of banking for SME business customers at Danske Bank A/S, Denmark’s largest lender. “Not everyone is applauding.”
She added, “it’s about how do we ensure that we do not stifle everything else that is going on because they cannot get labor? And how could we in reality have had an even higher growth scenario in Denmark? We want to unleash all the potential.”
As Denmark’s government, known for one of Europe’s strictest immigration policies, looks beyond its borders to address the labor shortages, tensions have surfaced across the political spectrum. Socialists say they are concerned for workers’ rights, while right-wing parties worry about social cohesion. Minister for Employment Ane Halsboe-Jorgensen, of the Social Democrats, has publicly stated that immigration can only be part of the solution.
Responding to questions by email, Mille Borchorst, Novo’s senior vice president for People & Organisation, said that the company is in “ongoing dialogue” with authorities and educational institutions about business conditions, including the “need for a highly educated workforce, so we can help ensure that not only we, but the Danish life science industry as a whole has access to the necessary labor force.”
She said Novo is not, nor aims to be, leading on salary.
In an interview on Dec. 11, Chief Financial Officer Karsten Munk Knudsen said that while Novo will scale back its hiring spree in Denmark and focus on workforce growth in China, France and the US, it will continue to hire in its home market.
Novo set up its production facility in Kalundborg, a former fishing village, in 1969, expanding it as the Danish economy gradually shifted from a reliance on agriculture exports — particularly pork — to becoming a global leader in pharmaceuticals. Around 4,500 people, equivalent to roughly a quarter of the town’s population, worked for the company at the end of 2023, and it is spending more than $8 billion to build a huge factory extension.
With hundreds of carpenters, electricians, plumbers and other tradespeople needed at the site — as well as in Hillerod and more recently also the city of Odense — smaller and medium-sized building companies are facing intensifying competition for staff, according to Morten Frihagen, who heads Dansk Haandvaerk, the national employer’s association for businesses in construction-related fields.
Previously, a fight for talent came from within the industry; now it’s from large multinationals, particularly Novo, he said.
For his members, Novo’s growth is a “double-edged sword,” Frihagen said. Many benefit from orders via the drugmaker’s supply chain, but others are turning down requests because they can’t find staff. Those companies have seen employees take in-house positions within Novo’s facilities management and maintenance, as well as jobs in production, he added.
That is an even bigger issue since the European Union’s building directive, which came into effect in May, is now being implemented as it requires housing upgrades as part of climate adaptation plans.
“We are very concerned,” Frihagen said. “We still need to be able to call a handyman when there’s a hole in the roof or for maintenance of our houses.”
Jobs at Novo targeting economists, lawyers and other social science professionals have also exploded, according to Helene Rafn, salary negotiation manager at Djof, a trade union based in the capital that represents professionals in those fields.
She said there’s been a significant increase in contracts for Novo jobs she is reviewing this year, typically for support functions within HR, marketing, procurement and project management.
Attractive pay and benefits and company-wide bonuses are a lure. There are less tangible attractions, too. Novo is a large organization with good career prospects, international opportunities and a focus on training and education. The century-old company’s reputation for helping people living with serious chronic diseases also plays a role, according to Rafn.
“There’s a positive vibe around Novo,” Rafn said. “They help drive the Danish economy forward. It helps to attract people who want to be part of that adventure.”
Though dominated by Novo, Denmark’s pharmaceutical sector includes big players such as H Lundbeck A/S, Genmab A/S, Zealand Pharma A/S, ALK-Abello A/S and Bavarian Nordic A/S.
The industry as a whole has experienced a “huge talent drain,” said Henrik Brabrand, CEO of Albright Partners, which specializes in executive-level recruitment for pharmaceutical makers. Some have had to put projects on hold because of lack of capacity, he said.
Novo was responsible for half of private-sector job growth outside the agricultural industry since the beginning of 2023, either through direct hiring or indirect jobs, the state’s fiscal watchdog said in May.
In Slagelse, about a 38-kilometer (45 mile) drive from Kalundborg, the local hospital’s chief biologist, Pia Krohn Hansen, said that her clinical microbiology department has lost about 10 people over the past two years to Novo and that the drugmaker has depleted the recruitment pool, including of many new graduates the hospital has invested funds in training.
“We have a hard time recruiting, because there is no one to recruit,” said Hansen, who’s had to fill some positions with unskilled workers. “At some point it will become a problem for patients that we don’t have qualified staff to analyze their samples.”
She said it is the first time in her 25 years at the hospital that she has found herself in such a situation, adding; “It’s absolutely grotesque.”
For Denmark, finding a solution to the labor crunch is crucial as it bets on its life science industry for future economic growth.
The government is “well aware of the challenge,” Minister for Immigration and Integration Kaare Dybvad Bek said by email. Attracting and retaining foreign labor is key, as long as unemployment is low, he said.
“There have never been so many foreigners in the Danish labor market as right now,” Bek said. “The government has already eased access to foreign labor through a number of initiatives.” They include easing restrictions on hiring abroad and prolonging an expat tax scheme. He added that more changes are underway, without providing details.
Across Denmark, some businesses are engaging in conversations with their employees about pay, promotions or relevant training to counter Novo offers, according to Djof’s Rafn.
It’s a good time for these companies to also re-evaluate their work conditions and brand, said Tuxen of Danske Bank. “Competition is always healthy,” she said, adding that companies could consider offering remote work to access recruits in a broader geographical area.
Martin Damm, the mayor of Kalundborg, is happy about how the town has changed. He also acknowledges the downside — explaining that even the municipality has lost staff to the drugmaker.
To accommodate job growth in the town, the council is building more homes, supporting infrastructure improvements to ease commuting and helped to establish a university college targeting international students. “People migrate up the chain where it creates more value,” Damm said. “That is one way the country becomes richer.”
For Frank Poulsen, CEO of Simatek, a manufacturer of industrial filters, competing with Novo on pay wasn’t an option, and other incentives weren’t attractive enough. In August, he moved production from Jerslev, a 10-minute drive from Kalundborg, to Poland and the Baltics. The departure of blacksmiths to Novo or its suppliers made planning and staffing too difficult; even temp agencies couldn’t help.
Ultimately, he said, “money is also important if you can get that much more.”
--With assistance from Naomi Kresge and Ashleigh Furlong.
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