Stockholm – The greatest capital in the world?

From the political debate to annual corporate reports, competitiveness is often mentioned, either as something concrete or as a buzzword. It is framed as one of the essential building blocks for creating an attractive country, a thriving city and successful companies. But what does it actually mean to be competitive? Is it having the largest number of businesses, ranking highly in various quality-of-life indices, or ensuring access to housing? Or is it a combination of it all?

Sweden is a relatively small country, both geographically and in terms of population. Yet we have an extraordinary ability to punch above our weight on the international stage. As a country with fewer inhabitants than Paris or London, Sweden plays a disproportionally large role in tech, innovation and export-driven industry. Our companies are global players with strong positions in technology, pharmaceuticals, music and design. This is especially true of the business community in our capital.

When we began working on this report, our assumption was that Stockholm and Sweden were losing some edge. However, as we gathered evidence, we discovered the opposite. Stockholm and Sweden are in fact stronger than we thought. That is why the tone of this report differs from much of today’s public debate: it is deliberately optimistic.

In Stockholm, innovation, culture and capital intersect in a unique way. Clusters have emerged in gaming, life science and finance, where firms and institutions interact to create so-called agglomeration effects: a dynamic in which different actors reinforce each other and drive progress. Some of the world’s most successful companies and top-ranked universities are closely linked, often within walking distance of one another. Combined with a vibrant music and cultural scene and world-class restaurants, Stockholm has its own unique heartbeat. The city’s historic role as a pioneer in technology and environmental policy, where we continue to top international rankings, shows that Stockholm is already leading in many fields.

And yet, the conversation about Stockholm so often turns to problems: crime, housing shortages, segregation and unemployment. Of course, there are challenges, as in any city. But these should not overshadow our strengths. If we do not champion our own city and region, who will? As cities compete for investment, talent and attention, Stockholm needs more confidence – not to boast, but because we have earned it.

This report presents our interpretation of what it means for a city to be competitive, using indicators that capture how attractive it is to live and invest here. While we do not attempt an exhaustive list of every factor shaping urban competitiveness, we believe that our measures together offer a broad and nuanced picture that clearly points in a positive direction.

We define competitiveness as a favourable business climate that encourages innovation and entrepreneurship; as a system that attracts both domestic and international talent with advanced skills; and as an environment that makes people want to live here and contribute to the city’s development. A competitive city is a strong city – and, in the long run, a driver of national growth. By continually strengthening the interaction between business, academia, culture and policymakers, a dynamic environment emerges where ideas can be shared and realised. Stockholm not only competes with its international peers; we often outperform them.

Daniella Waldfogel
CEO, Stockholm Chamber of Commerce

Stockholm is Sweden’s growth engine

Stockholm is the economic heart of Sweden. Over the past 20 years, the Stockholm region has generated 43% of Sweden’s economic growth, while accounting for 25% of the country’s workforce.¹ This means that every fourth employee has contributed to nearly half of the nation’s economic output.

Stockholm’s dynamic business sector

A capital market at the forefront

Stockholm has emerged as one of Europe’s most dynamic stock exchanges. In the past decade, more than 500 companies have gone public on Nasdaq Stockholm – more than in Germany, France, the Netherlands and Spain combined. The market capitalisation of Nasdaq Stockholm exceeds €1 trillion, representing 45% of the combined Nordic and Baltic stock markets.² This strength rests on breadth: the market is not dependent on a single company or sector.

The Global Financial Centres Index ranks Stockholm as the 50th financial centre in the world. It is also among the cities that improved most in the latest edition, climbing 16 places.³

Europe’s most innovative region

The European Commission ranks Stockholm as Europe’s most innovative region in the Regional Innovation Scoreboard 2025. The region is identified as an innovation leader, topping the list ahead of Copenhagen, London and Zurich.

Stockholm stands out for its high levels of education and leads in several key areas: lifelong learning, international scientific co-publications, share of information and communications technology (ICT) specialists, innovation collaborations among SMEs, and patent and trademark applications.

At the national level, Sweden is also ranked the EU’s most innovative country in the European Innovation Scoreboard 2025, and placed second globally in the World Intellectual Property Organization’s Global Innovation Index 2024 – surpassed only by Switzerland.

One example of Stockholm’s role as a global hub is being home to the world’s fastest-growing startup in terms of customer growth, the AI-driven software company Lovable, which was both founded and is based in the Swedish capital. This reinforces Stockholm’s position as one of the world’s most dynamic cities for entrepreneurship and innovation.⁵

A favourable start-up climate

Stockholm’s entrepreneurial spirit runs deep. According to The Swedish Agency for Growth Policy Analysis (Tillväxtanalys), more than 21,000 new companies were registered in the Stockholm region in 2024, accounting for 30% of all new firms in Sweden. As many companies were launched in Stockholm alone as in the Västra Götaland and Skåne regions combined.⁶

Unicorns gather in the capital

Nearly three-quarters of Sweden’s unicorns – startups valued at more than US$1 billion – have their roots in the Stockholm region. The city’s startup scene stands out internationally too. Stockholm has more unicorns per capita than New York, Los Angeles or London.

Grounded potential at Stockholm Arlanda Airport

Stockholm lies on the northern edge of Europe, with long geographical distances to the rest of the continent. This makes air travel critical for international connectivity.

Direct flight connections are key to the capital region’s competitiveness. Arlanda Airport offers a substantial number of direct routes, but compared with Copenhagen, Oslo and Helsinki, its range is weaker relative to the city’s size and economic importance. Stockholm has fewer direct connections per capita than any of the other Nordic capitals – despite hosting the region’s leading business community.

The issue lies not just in the number of destinations, but which business hubs are served. Today, Stockholm lacks direct flights to major destinations such as the US West Coast, Shanghai and Singapore – routes that Copenhagen can offer. It is a paradox that Stockholm, with its leading business sector and strong capacity for innovation, does not have an airport that fully reflects this position.

Arlanda has the potential to handle more direct connections, including additional intercontinental routes. To strengthen Stockholm’s global reach, international connectivity must be improved.

The world’s third-best public transport

Despite challenges with cancellations and delays, Stockholm’s public transport system ranks as the third best in the world, according to the Urban Mobility Readiness Index published by the Oliver Wyman Forum, an international think tank on sustainable urban mobility.

In 2019, Stockholm embarked on one of Sweden’s largest infrastructure projects: a major expansion of the metro system. The initiative will add new lines while also extending existing ones and is expected to be completed in the 2030s. Once finished, capacity will increase by 16%, ensuring that an additional 180,000 people will be able to travel on the metro daily.⁷ For a growing city with new districts, the expansion is vital to ensuring accessibility and connectivity.

Losing ground in Europe’s prosperity rankings

Although still among Europe’s most prosperous capital regions, Stockholm has slipped in the EU’s prosperity ranking. Between 2013 and 2023, the region fell from ninth to 16th place in GDP per capita (PPS) among 270 European regions.⁸

This is not because Stockholm has grown poorer—prosperity has increased—but because other regions have grown faster. Eastern European capitals such as Bucharest, Budapest, and Warsaw have surged ahead, driven by rapid growth and lower price levels that boost purchasing power parity. Stockholm has followed a relatively stable trajectory, but the high cost of living means that the increase in real purchasing power has not kept pace with that of several other regions.

Key reasons for the decline include:

– High living costs eroding purchasing power

– Stagnating real incomes

– Faster growth in competing regions

– Negative net migration and demographic shifts

– Slower productivity growth

Housing market pressures

Stockholm’s housing market is a clear example of the city’s structural challenges. According to Eurostat, only one in ten residents believes it is easy to find a good home at a reasonable price, ranking Stockholm 76th out of 80 European cities.⁹ The bottom ranks are dominated by other densely populated capitals such as Copenhagen, Paris, and Munich—highlighting a broader challenge across major urban centres.

The problem in Stockholm, however, seems to be less about affordability than access. The share of households spending more than 40% of disposable income on housing—a measure of financial strain—is significantly lower than in Copenhagen or Oslo.¹⁰ This indicates that the real obstacle here is supply. Sweden’s heavily regulated rental market restricts mobility, while ownership is constrained by high barriers to entry. A previous study by the Stockholm Chamber of Commerce found that more than 60% of young adults cannot afford even a small apartment in Stockholm County.¹¹

Unless structural reforms are made—shortening rental queues (currently approaching 9 years on average in the county, and more than 20 in the city centre), loosening credit restrictions, and simplifying planning processes—Stockholm’s competitiveness as a knowledge hub could be at risk.

Education and talent in the capital

World-class academic institutions

Stockholm’s strong innovation profile rests on a highly educated workforce and several research-intensive universities of international renown. Together, they supply advanced expertise and foster research-driven innovation.

Karolinska Institutet is one of the world’s leading medical universities, responsible for awarding the Nobel Prize in Physiology or Medicine. KTH Royal Institute of Technology, Sweden’s largest technical university, is globally ranked in engineering and mechanical sciences. Stockholm University excels in fields such as environmental science and governance, while the Stockholm School of Economics punches above its weight in business and economics. Uppsala University, the oldest in the Nordic region and within commuting distance from Stockholm, further strengthens the region’s academic ecosystem.¹²

Together, these institutions anchor Stockholm’s status as a global knowledge hub, attractive to students, researchers, and businesses alike.

Stockholm does not stand alone, and the capital’s success is tied to the competitiveness of the whole country. Sweden’s innovative capacity, stable institutions, and high R&D investments create fertile ground for long-term prosperity. For years, Sweden has ranked highly in international comparisons, reflecting a well-functioning social system and the ability to combine economic growth with high quality of life. The country’s brand remains strong, but as other nations and cities modernise rapidly and invest heavily in their future, Sweden has begun to slip in certain areas. Past advantages can no longer be taken for granted.

An engine for growth and a model for innovation

Growth above the EU average

Sweden has enjoyed steady economic growth over the past two decades. Since 2005, GDP has grown faster than the EU average, and despite its smaller size, Sweden ranks seventh among EU and EEA countries by GDP level. This is a strong result, especially given that many countries growing faster have started from much lower baselines after years of war, crisis, or systemic transition, as in parts of Central and Eastern Europe after the fall of the Soviet Union.

Growth figures should therefore be put in context. Low-income countries tend to grow faster in percentage terms, while the Nordic countries—with high GDP per capita and mature welfare systems—have less room for explosive growth. Yet Sweden still outperforms the average, a sign of enduring competitiveness. Combining high living standards with solid economic growth is far from obvious, but Sweden manages to do just that.

Easy to do business

Sweden is considered one of the ten easiest countries in the world to do business in (out of 190 economies measured), according to the World Bank’s Ease of Doing Business Index 2020. In Europe, Sweden ranks just behind Denmark, the UK, and Norway.

A strong startup scene, but weak scaling opportunities

Sweden sees many new companies being founded, especially in Stockholm, but a smaller share succeeds in reaching the next financing stage compared with the European average. Fewer than a quarter of Swedish startups make it to Series A—the first major venture capital round after seed funding.¹⁵ This can be attributed to limited access to growth capital, a relatively small follow-on financing ecosystem, or a constrained domestic market.

Those companies that do scale, however, tend to grow faster, become larger, and reach higher valuations than their European peers. This suggests strong underlying innovative quality, but also that many promising ideas never realise their full potential.

Digitalisation and low production costs have made it easier for tech firms to expand rapidly, as they can scale production quickly. However, unlike traditional industries, such firms are less tied to geography and can relocate abroad if business conditions are judged to be better elsewhere.

Swedish dominance among Europe’s younger large companies

Despite its small population (2.3% of the EU), Sweden has distinguished itself as a heavyweight in technological development. Over the past 50 years, only 13 companies in the EU have been founded that are today publicly listed and valued at over US$10 billion. Four of them are Swedish—all headquartered in Stockholm. That is twice as many as from any other single EU country. In addition, another company on the list is led by a Swedish CEO, meaning that more than one-third of these young European giants are Swedish or Swedish-led.

Renewable energy as a competitive edge

Sweden’s energy system is a clear strength. The grid is extensive and reliable, with outages rare and brief. Electricity production is nearly 100% fossil-free, consisting of roughly 40% hydropower, 30% nuclear power, 25% wind power, and a small share of solar and thermal energy.¹⁸

When it comes to the share of renewable energy in total final consumption, Sweden leads the EU. Only Norway—outside the Union—ranks higher¹⁹. This shows that Sweden not only generates fossil-free electricity but also uses renewable sources extensively across transport, heating, and industry.

This position gives Sweden a strategic advantage in the green transition. Low-carbon energy production benefits industrial investment and exports, especially in a global economy where sustainability has become an increasingly decisive factor in investment decisions.

A global leader in human development

Sweden is internationally recognised for its strong social welfare system. A wide range of indicators place Sweden at the top globally in terms of human development—that is, living standards, prosperity, and social conditions. A key benchmark is the UN Human Development Index (HDI), which takes health, education, and income into account. Sweden ranks among the top five, reflecting high life expectancy, long years of schooling, and high GDP per capita.

Swedes among the happiest in the world

In the World Happiness Report 2025, Sweden is again among the happiest countries. The Nordic region dominates the top positions: Finland, Denmark, and Iceland hold the top three spots, with Sweden in fourth place and an average life satisfaction score of 7.3 out of 10. High levels of happiness are strongly correlated with factors such as social support, freedom of choice, low corruption, and good health—all areas where Sweden performs well.

With an employment rate of 69% and an unemployment rate of 8%, driven by exceptionally high labour force participation, Sweden faces the paradox of both high employment and high unemployment. In practice, this means that a very large share of the population is active in the labour market, which is a strength as it underpins long-term growth and sustainability. At the same time, even small fluctuations in employment rates are reflected significantly in unemployment statistics.

Despite relatively high unemployment, Sweden also faces labour shortages—indicating a mismatch problem in the labour market. Another challenge is the sharp difference in unemployment between highly and less-educated groups, greater than in comparable countries. People without upper secondary education have, on average, five times higher unemployment than those with tertiary education. Sweden also has the lowest share of workers employed in low- or no-skilled occupations in the EU, about 4%, compared with an EU average of 8% and 10% in Denmark.²¹

Unemployment among foreign-born residents is significantly higher than among the native-born population. Large differences are evident depending on country of origin: those born outside the EU face unemployment rates of just over 19%, far above the levels of both native Swedes and EU-born immigrants.

Another factor inflating the unemployment rate is that full-time students seeking part-time jobs are counted as unemployed, which partly explains the youth unemployment figures. At the same time, the share of young people neither in employment nor in education is one of the lowest in the EU. In 2024, only 6.3% of Swedes aged 15–29 were outside both work and education, well below the EU average of 11%. This places Sweden among the countries in Europe with the lowest share of young people not engaged in employment or education.²²

Regulation holds back competitiveness

The EU’s ambition to lead in sustainability and digitalisation has triggered a wave of regulation. Between 2019 and 2024, more than 13,000 legal acts were adopted across the Union, compared with around 5,500 laws and resolutions in the US over the same period. This rising regulatory burden consumes significant corporate resources and risks slowing growth and innovation.

According to the European Banking Authority (EBA), supervisory reporting alone costs the European banking system more than €5 billion each year.²⁶ These are resources that could otherwise have been invested in innovation, development, or expansion. Beyond their size, regulatory costs are often seen as opaque and hard to navigate, with frequent changes, short implementation timelines, and unclear requirements. A well-known criticism is that Europe’s heavy regulatory framework undermines investment, particularly compared with more growth-oriented environments such as the US.

For the EU to remain competitive globally, it must strike a balance between necessary regulation and companies’ need for flexibility and clarity. Without this, the Union risks suffocating its own ambitions in the details, while encouraging investment and innovation to migrate to less regulated markets.