Saturday 9/18/21

One in three Finnish SMEs predict further economic downturn

32% of companies reported they had resorted to external financing in the past 12 months.
A restaurant closed in Järvenpää amid pandemic. Photo: photo.

The year 2020 will be remembered for the coronavirus pandemic and, therefore, due to the economic difficulties derived from the restrictions imposed.

Since March, especially SMEs have had to operate in an exceptionally difficult environment. As reflected in the latest Barometer on the expectations of small and medium-sized companies, pessimism regarding the immediate future has penetrated one in three businesses.

The SME Barometer is published twice a year by the Federation of Finnish Enterprises (Suomen Yrittäjät), Finnvera and the Ministry of Economic Affairs and Employment. This time, 5,100 companies responded to the survey.

The previous SME Barometer was published just before the coronavirus spread to Finland. At that time, 17% of the respondents predicted a downward economic trend while 26% believed the opposite. But now the Covid-19 recession changed everything: 32% of small and medium-sized enterprises now believe that the economic conditions will deteriorate, while only 21% expect them to improve over the next 12 months.

“The change is exceptional; we haven’t seen a change this quick and dramatic since the financial crisis. Fortunately, the slump is not quite as deep this time,” estimates Petri Malinen, Economist at the Federation of Finnish Enterprises.

Expectations for growth diminishing

According to the survey results, expectations regarding the development of turnover fell sharply: The balance figure was down by 24 from the spring barometer to -2. 

SMEs also expect to significantly cut their investments in the near future. In all main sectors, companies planning to reduce their investments outnumber those planning to increase them.

“The poor result indicates an exceptionally high level of uncertainty in terms of economic growth and the business environment,” Malinen says.

Retain skilled labour

Although the economy has shrunk and the future outlook is exceptionally uncertain, small and medium-sized enterprises do not expect to significantly reduce the number of employees. However, the fact that the balance figure of expectations fell by 11 from the spring to -2 shows that the situation is very difficult.

The exceptional spring has caused a sharp deterioration in the cash funds of SMEs in the first half of the year. In this survey, 19% of companies reported difficulties making payments in the past three months.

“What makes the situation so difficult is that companies are already strapped for cash and therefore unable to prepare for a possible second wave of coronavirus,” Malinen says.

Demand for financing

Over the past 12 months, the number of companies that sought financing increased by 7 percentage points from the spring barometer conducted in December-January. This time 32% of companies reported they had resorted to external financing in the past 12 months.

Despite the crisis, the availability of financing has remained at a good level: only 5% of companies that had sought financing had been unsuccessful.

“Finnvera is prepared to ensure the availability of loan financing to viable enterprises at all stages of the crisis and during economic reconstruction. Finnvera will introduce its own products to the financial markets later this year to supplement the offering,” says Juuso Heinilä, Executive Vice President at Finnvera.