SME Barometer: SME outlook plummeted following COVID-19

This year has been exceptionally difficult for SMEs due to the crisis caused by the coronavirus epidemic, as reflected in the SME Barometer on the expectations of small and medium-sized enterprises for near-term economic development, published on 9 September 2020. The SME Barometer is published twice a year by the Federation of Finnish Enterprises, Finnvera and the Ministry of Economic Affairs and Employment. This time, 5,100 companies responded to the survey.

“The coronavirus crisis has had remarkably dissimilar impacts on companies and sectors. Similarly, a wide range of policy measures has been implemented to mitigate the consequences of the crisis. The results of the SME Barometer widely reflect the effects of the crisis and the continuing uncertainty, but fortunately they also show faith in the future,” says Minister of Economic Affairs Mika Lintilä.

The balance figure for business outlook fell by 20 from the spring

“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.

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. The coronavirus crisis changed everything: 32% of small and medium-sized enterprises now believe that the economic conditions will deteriorate and 21% expect them to improve over the next 12 months.

Expectations for turnover growth and investment diminishing

Expectations regarding the development of turnover fell sharply: The balance figure was down by 24 from the spring barometer to minus two. 

“This is an exceptionally low value, but fortunately still slightly higher than during the financial crisis,” Malinen says.

SMEs 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.

SMEs strive to 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 minus two shows that the situation is very difficult.

“On the bright side, a large majority, or 70% of SMEs, are still doing their best to maintain their current number of employees.”

Financial buffers used

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.

Growing 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.

The biannual SME Barometer examines the economic outlook, growth, renewal and internationalisation of SMEs as well as investments and financial position.

» Click here to read the SME Barometer

Inquiries:

Jenny-Katariina Hasu, Special Adviser to the Minister of Economic Affairs, Ministry of Economic Affairs and Employment, tel. +358 40 6583 510, etunimi.sukunimi@tem.fi

Johanna Alatalo, Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 295 048 084, etunimi.sukunimi@tem.fi

Petri Malinen, Economist, Federation of Finnish Enterprises, tel. +358 50 434 5952, etunimi.sukunimi@yrittajat.fi

Juuso Heinilä, Executive Vice President, Finnvera Plc, tel. +358 29 460 2576, etunimi.sukunimi@finnvera.fi