Hungary’s supplier association (MAJOSZ) said problems in attracting and keeping labour were among the worst of the Visegrad countries although the UK’s exit from the European Union could provide an unexpected shot in the arm for workforce retention.

Enticing staff to remain has emerged as a key battleground for eastern Europe as its low wage attraction for legions of foreign OEMs and suppliers triggers intense wage competition, with staff readily moving between European Union (EU) states.

The Visegrad Four – Hungary, Czech Republic, Slovakia and Poland – have all been eyed keenly for some time by foreign OEMs and Tier 1s, drawn to their orbit by low wages and high productivity, but it seems their collective goose is slowly being cooked by a combination of EU freedom of movement and huge demands on a dwindling workforce pool.

“[Labour] availability is even worse in Hungary – the salaries are lower which means there is a bigger chance Hungarians go to work in Slovakia,” Association of Hungarian Automotive Component Manufacturers, Denes Klujber, told just-auto on the sidelines of this week’s Central and Eastern Europe Forum in Prague.

“That means we are not in the best situation with these low salaries – people leave the country and to work [abroad]. Partly the solution is many, many companies started quite an intensive [salary] increase because if they don’t pay more they don’t have any guys to work.”

The Hungarian government is looking to extra training schemes in an attempt to persuade domestic labour to stay but Klujber conceded this took a significant amount of time – “that is not an immediate solution”, he added.

There may be a small chink of light however, as the UK embarks on its complicated withdrawal from the EU. Intense speculation has surrounded what London’s policy will be – either to retain some access to the single market or go it alone with a consequent ending of free labour movement.

Should the UK opt for its so-called ‘hard Brexit’ and raise the drawbridge on unlimited EU rights to work in Britain, this might mean some Hungarians would opt to stay at home but, in any case the numbers would be far smaller than those, say, from Poland or Czech Republic.

“Brexit could help Hungary because if the UK don’t let eastern Europeans go there for work then, sooner or later, [some] of them will come back [home],” said Klujber.

“This could help but, certainly if there is a common European Union, then the workforce should have free movement. Brexit [however] could be a small help.”

He maintained labour difficulties were “the main challenge” facing the Hungarian supply sector although he drew some comfort from the fact there were pockets of people scattered around the borders able to converse in the local language.

“Hungary was three times bigger than now in the past,” added Klujber. “This results around Hungary in Ukraine, Romania, Slovenia, many people speak Hungarian, so that could be also possible, we make some campaign in these countries.

“The solution is is not only one solution, it is several items.”

Despite the undoubted labour challenges, MAJOSZ actively seeks overseas Tier 1s to set up shop in Hungary with their trickle-down effect to smaller domestic suppliers while also encouraging companies engaged in non-auto work to consider opportunities in the sector.

MAJOSZ works closely with the Hungarian Investment Promotion Agency (HIPA) to co-finance initiatives, which recently saw 15 suppliers travel to IAA in Frankfurt.

In common with other Visegrad countries, Hungary exports 85%-90% of its automotive production while the sector contributes a hefty 15% to domestic GDP.

Around 150,000 people work in the Hungarian automotive sector in 600 companies with total exports totalling EUR19.6bn (US$22bn).

Fifteen of the world’s top 20 suppliers have factories in Hungary.