Korean companies cut back for 2026 due to global slowdown

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Korean companies cut back for 2026 due to global slowdown

Published: 01 Dec. 2025, 17:13 Updated: 01 Dec. 2025, 19:57

Audio report: written by reporters, read by AI

Prime Minister Kim Min-seok, third from right, and mid-size business executives clap during a ceremony on mid-size enterprises at Lotte Hotel in Jung District, central Seoul on Dec. 1. [NEWS1]

Korean companies are increasingly shifting their business strategies for 2026 from expansion to maintenance, as the economic slowdown and global uncertainty drag on and regulations on businesses tighten. The aggressive drive that once fueled the country’s economic growth through bold corporate investment appears to be fading.

“The only certainty in next year’s plan is uncertainty,” said a senior executive at one of Korea’s top 10 conglomerates, describing their 2026 management strategy.

Holding the line and cutting headcount

A recent survey by the Korea Enterprises Federation (KEF) of 229 companies with more than 30 employees showed that among those with finalized plans for next year, 39.5 percent were aiming to maintain current levels, while 31.4 percent planned to tighten operations.

Together, those opting for a maintenance or constricted strategy accounted for more than 70 percent — establishing “defensive management” as the dominant approach among Korean enterprises. Only 29.1 percent of companies planned for expansion.

Among those choosing a constricted business strategy, the top tactic was “optimizing work force management,” cited by 61.1 percent. It marked the first time in nine years — since the 2017 forecast — that labor adjustment topped the list of cost-cutting measures.

Several struggling industries have already begun restructuring this year. Companies in petrochemicals, such as LG Chem, steel such as Hyundai Steel, home appliances such as LG Electronics, telecommunications like SK Telecom and LG U+ and retail with companies such as 11st and Hyundai Duty Free, have all accepted applications for voluntary retirement, citing business restructuring and a renewed focus on profitability.

When asked about hiring plans, 52.3 percent of companies in the KEF survey said they would maintain current levels. Among large firms with 300 or more employees, 41 percent said they would reduce hiring — the most common response in that category.

A separate analysis by Leaders Index of 152 companies among Korea’s top 500 businesses that submitted sustainability reports also reflects this trend. These firms hired 154,266 new employees last year — a 12 percent decline from the year before, and a 29.9 percent drop compared to two years earlier.

“I’ve graduated from a decent university and done two internships so far, but it’s still hard to get a job with a liberal arts degree,” said a 26-year-old job-seeking university student surnamed Park. “Companies are expanding AI-based roles while cutting back on traditional ones.”

Job seekers read notices for positions on bulletin boards at a job fair held at Setec in Gangnam District, southern Seoul on Nov. 20. [NEWS1]

Domestic investment shrinks as focus turns abroad

Caution was also evident in investment plans for Korean companies. Overall, 48.3 percent of companies surveyed by KEF said they would maintain their current investment levels.

Among large companies with more than 300 employees, 40 percent said they would reduce domestic investment, exceeding the 35 percent that said they would maintain or the 25 percent that said they would expand domestic investment.

In contrast, 45.7 percent said they planned to expand overseas investment. That figure reflects a yearslong shift toward Southeast Asia, including Malaysia, as well as growing investments in the United States. When a major manufacturer moves abroad, its primary and secondary suppliers often follow.

President Lee Jae Myung, center, and the heads of top Korean conglomerates, including SK Group Chairman Chey Tae-won, seccond from left, and Samsung Electronics Executive Chairman Lee Jae-yong, second from right, salute the flag before a joint government and private sector meeting at the presidential office in Yongsan, central Seoul on Nov. 16. [JOINT PRESS CORPS]

President Lee Jae Myung raised concerns over such an imbalance between domestic and overseas investment at a meeting with business leaders on Nov. 16, saying, “I’m worried that the growing emphasis on investment in the United States may come at the expense of domestic investment,” and called for a more balanced strategy.

“A push for domestic facility investment under soaring electricity rates and labor costs is like asking us to absorb a fixed-cost bomb,” said a source at one manufacturing firm. “Add policy variables like the Yellow Envelope Law and revisions to the Commercial Act, and the environment is forcing businesses into a defensive stance.”

The ruling Democratic Party is currently pushing a third round of amendments to the Commercial Act, which would mandate the retirement of treasury shares. This follows earlier revisions to the act and the so-called Yellow Envelope Law — amendments to Articles 2 and 3 of the Trade Union Act.

“If both domestic and global firms are to actively invest and hire in Korea, additional regulations on businesses must be minimized, and bold reforms — such as increasing labor market flexibility — need to be introduced,” said Ha Sang-woo, head of the economic research division at the KEF.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SU-MIN [[email protected]]