Finnish SMEs

Twice a year, Finnish Entrepreneurs (Suomen Yrittäjät), Finnvera and the Ministry of Employment and the Economy publish an SME Barometer, which presents “the activities and the economic environment of [Finnish] small and medium-sized enterprises” (SMEs). The latest publication is the autumn 2022 SME Barometer, based on the responses of 4,829 SMEs. It presents Finnish SMEs’ perceptions of changes in the economic environment and the factors which influence business as well as business development prospects. 

At the beginning of 2022, the prospects for Finnish SMEs clearly improved after the exceptional pandemic period. Economic expectations increased as well. The situation changed when the Russia-Ukraine war began. Price increases were significant, and they continued for a long time. At the same time, there was a decrease in foreign trade and increased uncertainty, which in turn weakened investment prospects and private consumption.

The autumn 2022 SME Barometer also measured expectations. It was observed that turnover expectations follow general economic expectations to some extent: turnover expectations decreased at the same time as general expectations weakened strongly. Profitability expectations weakened even more than turnover expectations. Expectations about solvency development clearly weakened compared to the previous year.

Expectations of revenue growth are low, and uncertainty decreases investments. SMEs project that they will significantly reduce their investment in the near future. The majority of businesses are going to reduce their investments. Investment expectations are weak as there is high uncertainty about the progress of the war and the COVID-19 pandemic, increased interest rates and the speed of economic growth.

To secure their competitiveness, companies need to renew their operations. Due to the pandemic, the economy is facing unpredictable changes, which require new technology and work methods. Only about one fifth of Finnish SMEs introduced new technology, and slightly more than half trained their staff. Only about a third of companies introduced new products or services to the market. 

Strict banking regulations and the weakened creditworthiness of SMEs encouraged them to seek external funding. Still it was observed that the proportion of SMEs that took a loan from a bank or any other financial institution has changed very little in recent years.

The COVID-19 pandemic increased the pressure for business digitalization as face-to-face interaction decreased and an increasingly large part of daily business activities took place digitally. Once the pandemic normalized, the speed of business digitalization decreased. The most common digital tool used by businesses is their own websites. SMEs also rely on social media and cloud services.