Survey of 4,600 entrepreneurs: Business conditions near pre-pandemic levels but uncertainty continues
Economic expectations among SMEs have risen sharply following the pandemic year, the SME Barometer of 4,600 entrepreneurs shows.
About 35% of small and medium-sized companies in Finland see an upward economic trend over the next 12 months, compared with 26% of companies six months ago.
At the moment, 13% of respondents believe that economic conditions will deteriorate, down from 23% six months earlier. These are the results of the new SME Barometer.
“SMEs have trust in the recovery of the Finnish economy now, similarly to consumers. These are positive and important signals about the state of the economy. At the same time, economic conditions are also improving in Finland’s trading partners. I encourage companies to seize the market opportunities that the growth phase offers as the pandemic subsides,” said Minister of Economic Affairs Mika Lintilä at the publication of the SME Barometer on 1 September 2021.
“The economy is recovering rapidly now. However, the expectations of SMEs still involve a considerable amount of uncertainty as to the future course of the pandemic and the restrictions it has caused,” said Mika Kuismanen, Chief Economist at the Federation of Finnish Enterprises.
The near-term expectations of larger SMEs, in particular, are more positive than those of micro-sized companies. Nine out of ten companies operating in Finland are micro-sized companies employing fewer than 10 people.
The SME Barometer was conducted as an online and telephone survey by Taloustutkimus Oy in June and July 2021. In all, 4,592 representatives of Finnish SMEs responded to the survey, which was commissioned by the Ministry of Economic Affairs and Employment, the Federation of Finnish Enterprises and Finnvera.
Rapid rise in costs a threat to good expectations
Entrepreneurs are concerned about rising production costs. The prices of raw materials and other intermediate products, in particular, are expected to increase more than before.
“Although companies can increase the margins for their products and services, it will not be enough to compensate for the higher price of intermediate products,” said Petri Malinen, Economist at the Federation of Finnish Enterprises.
“This is a challenge, because production costs are expected to rise sharply while the exceptionally uncertain situation continues and companies have weaker economic buffers at their disposal. That is why, negotiations on pay rises this autumn should not be solely based on expectations of economic growth,” Malinen added.
Coronavirus support has worked reasonably well and companies are preparing for the new normal
The Government has provided funding to companies during the coronavirus crisis. Although the amount of subsidies has been moderate in Finland compared to some other countries, 45% of companies here have applied for coronavirus support or funding. Applying for support has been most common in industry. Business subsidies from Business Finland and ELY Centres and business cost support from the State Treasury were the most often used forms of aid.
The amount of loans applied for has been significantly smaller than the amount of aid. Almost 9% of entrepreneurs have made use of fixed-term labour market support – a new form of aid available to them.
According to the companies, coronavirus subsidies and other types of funding have worked reasonably well: 39% and 38% of respondents said that the aid has met the needs of companies well or at least to some extent, respectively.
“This support and funding has helped prevent unnecessary bankruptcies of viable companies and job cuts. It is important now that the support system is not wound down prematurely as that would put companies, jobs and subsidies used so far at risk,” Malinen said.
Demand for financing normalised
Of companies planning to increase external financing, 49% said they would apply for funding for machinery and equipment investments. Such plans have increased by five percentage points compared to the previous barometer. It is also positive that 25% of companies applying for funding plan to use it for growth and development projects.
“Loan financing plays an important role in the generation of new growth and its availability has remained at a good level. Approximately 35% of the companies applying for a bank loan reported that funding required a guarantee from Finnvera. Meanwhile, 60% of companies with strong growth prospects reported using Finnvera’s guarantee as collateral for a bank loan,” said Juuso Heinilä, Executive Vice President at Finnvera.
Mika Kuismanen, Chief Economist, Federation of Finnish Enterprises, tel. +358 50 356 0705, email: mika.kuismanen(at)yrittajat.fi
Petri Malinen, Economist, Federation of Finnish Enterprises, tel. +358 50 434 5952, email: petri.malinen(at)yrittajat.fi
Juuso Heinilä, Executive Vice President, Finnvera, tel. +358 29 460 2576, email: juuso.heinila(at)finnvera.fi
Katri Lehtonen, Development Director, Ministry of Economic Affairs and Employment, tel. +358 29 506 4926, katri.lehtonen(at)tem.fi