Deepening pessimism prevails among small businesses in Finland
Expectations plunge, although financing is no problem yet
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Finnish small and medium sized business owners see their futures as exceptionally grim. Cyclical expectations, which had taken a downturn in the summer already, took a deep dive, according to a survey implemented by the Federation of Finnish Enterprises this week.
The views of 2,800 entrepreneurs are based specifically on their expectations for the future. At present, things are going relatively well, even in financing, which is the centre of the current global crisis. Only slightly over half of respondents say that problems in getting credit have become more difficult, but even among them, the difficulties have generally been minor.
With respect to turnover, sentiments are actually rather optimistic, although those expecting a decline in turnover doubled since the previous survey from the late summer. Evaluations on profitability were pessimistic, as were those on investments. One in five expected to increase their personnel somewhat. Slightly more, 23 per cent, expected to cut staff.
The Federation of Finnish Enterprises has long measured the cyclical expectations of its members with a “balance number”. If the percentage of respondents who expect better times exceeds that of respondents expecting things to go worse, the number is positive. But if 38 per cent of entrepreneurs expect worse times and 13 per cent expect improvements, the balance number is -25.
Now the figure is deep in negative territory. The balance number of the new study is -12. The last time that the figures were below zero was in connection with the recession in the yearly 1990s. In the past 20 years, the average balance number has been +16.
“I have not seen such a sharp turn for the worse in these figures during the whole time that I have been here. The risk of a recession is very high right now. At least two quarters will be in the red”, says Jussi Järventaus, who has been managing director of the Federation of Finnish Enterprises for 12 years.
Järventaus says that the federation’s surveys have been a good indicator of coming development at least until now.
The financing crisis would seem to be spreading into the real economy, according to this survey. Järventaus feels that now is the time to take action..
He feels that customers need to be taken into consideration in the conditions to be set for emergency financing for banks.
“We need to avoid the big mistake of the banking crisis of the 1990s, when banks were rescued, but tens of thousands of customers were ruined”, Jäeventaus says.
He recommends that bank supports should be channelled to the banks’ customers. The same medicine has been seen to be the best from the point of view of the real economy in a recent report on 42 banks by the IMF.
Järventaus feels that the state should be prepared to take part in the financing of enterprises. One instrument could be Finnvera.
He is not yet proposing any further stimulation beyond the tax cuts and other measures that have already been agreed upon. However, he would be in favour of increased state investments in infrastructure projects.
The federation also calls for lowering the threshold for employment. Järventaus feels that fixed-term jobs should be permitted in situations in which future demand is uncertain. He also feels that an experimental programme in place in 164 municipalities, which are providing incentives for taking on a first employee, should be expanded to cover the whole country.
The views of 2,800 entrepreneurs are based specifically on their expectations for the future. At present, things are going relatively well, even in financing, which is the centre of the current global crisis. Only slightly over half of respondents say that problems in getting credit have become more difficult, but even among them, the difficulties have generally been minor.
With respect to turnover, sentiments are actually rather optimistic, although those expecting a decline in turnover doubled since the previous survey from the late summer. Evaluations on profitability were pessimistic, as were those on investments. One in five expected to increase their personnel somewhat. Slightly more, 23 per cent, expected to cut staff.
The Federation of Finnish Enterprises has long measured the cyclical expectations of its members with a “balance number”. If the percentage of respondents who expect better times exceeds that of respondents expecting things to go worse, the number is positive. But if 38 per cent of entrepreneurs expect worse times and 13 per cent expect improvements, the balance number is -25.
Now the figure is deep in negative territory. The balance number of the new study is -12. The last time that the figures were below zero was in connection with the recession in the yearly 1990s. In the past 20 years, the average balance number has been +16.
“I have not seen such a sharp turn for the worse in these figures during the whole time that I have been here. The risk of a recession is very high right now. At least two quarters will be in the red”, says Jussi Järventaus, who has been managing director of the Federation of Finnish Enterprises for 12 years.
Järventaus says that the federation’s surveys have been a good indicator of coming development at least until now.
The financing crisis would seem to be spreading into the real economy, according to this survey. Järventaus feels that now is the time to take action..
He feels that customers need to be taken into consideration in the conditions to be set for emergency financing for banks.
“We need to avoid the big mistake of the banking crisis of the 1990s, when banks were rescued, but tens of thousands of customers were ruined”, Jäeventaus says.
He recommends that bank supports should be channelled to the banks’ customers. The same medicine has been seen to be the best from the point of view of the real economy in a recent report on 42 banks by the IMF.
Järventaus feels that the state should be prepared to take part in the financing of enterprises. One instrument could be Finnvera.
He is not yet proposing any further stimulation beyond the tax cuts and other measures that have already been agreed upon. However, he would be in favour of increased state investments in infrastructure projects.
The federation also calls for lowering the threshold for employment. Järventaus feels that fixed-term jobs should be permitted in situations in which future demand is uncertain. He also feels that an experimental programme in place in 164 municipalities, which are providing incentives for taking on a first employee, should be expanded to cover the whole country.
Helsingin Sanomat