Focus on: Finland
Grant Thornton International Business Report 2013
Focus on: Finland

200
business

Introduction

interviews

Finland is a country in northern Europe of approximately
5.4m p...
Focus on: Finland

Economy

Economy
expanded by

Finland was left relatively unscathed by the first wave of the eurozone
s...
%

Focus on: Finland
10%

8%

12%

47%

9%

47%

Key indicators: short to medium-term forecasts

5
4

17%

1

12%

9%

5

...
Focus on: Finland
59%

59%

Business growth prospects

10%

8%

7%

6%

6%

8%

7%

10%

6%

9%

Similarly, profit increas...
Focus on: Finland

Constraints on expansion
A pervading sense of economic uncertainty is the key challenge business
leader...
Focus on: Finland

Finland in Europe
Despite the travails of the single currency and the rise of Eurosceptic
party, The Fi...
IBR 2013 methodology
The Grant Thornton International Business Report (IBR) is the leading mid-market business survey in t...
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Focus on Finland (IBR 2013)

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Drawing on data sources such as the Grant Thornton IBR, the EIU and the IMF, this short report considers the outlook for the economy, including the expectations of 200
businesses interviewed in Finland, and more than 12,500 globally, over the past 12 months.

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Focus on Finland (IBR 2013)

  1. 1. Focus on: Finland Grant Thornton International Business Report 2013
  2. 2. Focus on: Finland 200 business Introduction interviews Finland is a country in northern Europe of approximately 5.4m people. In 2012, its GDP was approximately US$250bn, making it the 42nd largest economy in the world and the seventh largest in the eurozone. Drawing on data sources such as the Grant Thornton International Business Report (IBR), the Economist Intelligence Unit (EIU) and the International Monetary Fund (IMF), this short report considers the outlook for the economy, including the expectations of 200 businesses interviewed in Finland, and more than 12,500 globally, over the past 12 months. Joakim Rehn Grant Thornton Finland Managing partner T +358 (0)9 5123 3344 E joakim.rehn@gtfinland.com W www.gtfinland.com US$250bn gross domestic product 5.4 million inhabitants Focus on: Finland 2
  3. 3. Focus on: Finland Economy Economy expanded by Finland was left relatively unscathed by the first wave of the eurozone sovereign debt crisis, growing strongly in both 2010 and 2011. However as the currency bloc’s troubles have continued, the economy has stagnated, contracting in 2012 as demand slowed in key regional export 10% markets. Despite this, the economy remains dynamic; it ranked10% in fifth the Global Dynamism Index 2013, the highest in Europe, due to fertile 59% 8% science and technology investment (third globally) and a sound business operating environment (fifth globally). Germany and Sweden are7% the 6% principal trade partners. 0.4% Export destinations in Q3-2013 10% 10% 17% 59% 8% 12% 47% 7% 6% 9% 17% Sweden Germany Russia 47% United States Netherlands Other 12% 9% 6% 6% 9% 9% 5 Key indicators • the economy expanded by a seasonally adjusted 0.4% in Q3 from Q2, up from 0.3% in the previous three-month period • the economy contracted by 0.2% compared with the same period in 2012, although this was an improvement from the 1.1% decline observed in Q2 • services declined by 1.2% in Q3, highlighting the ongoing weakness in domestic demand 5 Import originations • however, consumer confidence may have turned a corner, rising to 6.4 in 10% November, the highest value in five 10% months, although still 10% way below some the long-run average (12.2) 10% 59% • a current account deficit of €1.5bn was 8% recorded for the first nine months of 59% 8% 7% the year, a marked improvement from 6% a shortfall of €3bn in the same7% period of 2012. 6% 4 4 3 3 17% 17% 2 47% 12% 12% 47% 1 9% 0 6% 6% 9% 9% Germany Sweden China Russia Netherlands Other 2 1 0 -1 9% -1 Source: Observatory of Economic Complexity (2013) 5 -2 5 4 -3 4 2013 2014 2015 3 3 -2 -3 2013 2016 2014 Focus on: Finland 3 2017 2018 20
  4. 4. % Focus on: Finland 10% 8% 12% 47% 9% 47% Key indicators: short to medium-term forecasts 5 4 17% 1 12% 9% 5 4 3 2 1 0 -1 2 9% 3 -2 2014 2015 0 -1 -2 -3 2013 Source: EIU (2013) 2014 2015 2016 2017 2018 Real GDP growth (%) Export growth (%) 1.1% 2016 in 2013 2013 forecast growth 6% -3 -1.0% The sale by Nokia of its handset devices and services division to Microsoft for €5.4bn in September is unlikely to have too much of a negative effect on the wider economy. Nokia’s importance has declined significantly over recent years: in 2000 it accounted for 4% of total GDP, compared with just 0.4% in 2011. Its share of total employment declined from 1.0% to 0.7% over the same period but under the takeover deal, 32,000 Nokia employees will transfer to Microsoft, of whom 4,700 of whom are in Finland. The new-look Nokia looks set to concentrate on its mapping and networking divisions. 9% 6% The economy is expected to contract by 1.0% in 2013 as another difficult 7% year for the currency union draws to a close. However, growth rates 6% are expected to pick up across Europe in 2014 with expansion of 1.1% forecast for Finland, rising to 1.9% in 2015. This improved performance is expected to be supported by a recovery in trade. Exports are forecast to decline by 1.0% in 2013, but growth of 2.8% is forecast in 2014 accelerating to 4.5% in 2015. Any further deterioration in the eurozone is a serious downside risk to this forecast. Public debt is well under control; net government debt stands at -50% (indicating government finances are in credit) which compares to 35% in the Netherlands and 56% in Germany. However this strong position is expected to be somewhat eroded over the mediumterm with net debt falling to -36% by 2018. The budget balance is well within the EU target range of -3% at -2.2% in 2013 and is expected to fall further to just -0.5% by 2018. 8% 59% 10% 17% 10% 7% Economic outlook 6% 10% Budget balance (% of GDP) forecast growth 2017 in 2014 2018 Focus on: Finland 4
  5. 5. Focus on: Finland 59% 59% Business growth prospects 10% 8% 7% 6% 6% 8% 7% 10% 6% 9% Similarly, profit increase expectations across 2013 have averaged net 24% in Finland, down from 31% in 2012 and 38% in 2013. The eurozone average is actually slightly lower at 19% but the Nordic average is again much higher at 37%. Expectations for increasing investment in plant and machinery have also suffered over recent quarters, falling from 36% in Q1 to 24% in Q2 and 16% in Q3. The 2013 average of 28% is down on the 36% 2012 result. However, Finnish businesses remain more bullish that peers across the eurozone (25%) and Nordic region (23%). The labour market remains tricky. On average across 2013, net -2% have indicated an expectation to hire, suggesting more plan to lose staff than plan to hire. This is down from 6% in 2012 and is below both the eurozone (4%) and Nordic (15%) averages. 10% 10% Finnish business optimism declined sharply again in Q3, falling to net -56%, down from -20% in Q2. The 2013 average now stands at -36%, down from -17% in 2012. The decline in Finland actually came as both the eurozone (8%) and Nordic (34%) averages improved. 17% Business growth prospects also remain depressed compared with previous years. Just net 27% of business leaders have indicated an expectation of increasing revenues in 2013, down from 37% in 2012 and 50% in 2011. This is similar to the eurozone 12% average (26%) but well below the Nordic result (44%). 9% 47% 47% Net percentage of businesses optimistic for the economic outlook (next 12 months) Net percentage of businesses expecting an increase (next 12 months) 40 Investment 28 23 Profits 28% 17% 44 12% 9% 26 40 27 30 Nordic 20 eurozone 10 Finland 0 Source: Grant Thornton IBR 2013 -10 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 -20 -60 -30 -50 -40 -40 Revenue -50 -30 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1- -20 -60 12% 9% 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -10 9% 17% 9% 10 6% 20 0 25 6% 30 are planning to invest in plant and machinery 24 19 37 Employment -2 4 15 Source: Grant Thornton IBR 2013 Finland eurozone Nordic Focus on: Finland 5
  6. 6. Focus on: Finland Constraints on expansion A pervading sense of economic uncertainty is the key challenge business leaders in Finland feel is stopping them from growing their operations. Three in five business leaders cite this as a constraint, highlighting the continuing difficulties caused by a lack of robust resolution to the eurozone crisis. This is similar to the southern European average (59%) but well above the wider Eurozone (42%) and Nordic (27%) averages. A lack of demand is hampering the growth efforts of more than a third of Finnish businesses. At 35% this is level with the eurozone average. Again, the Nordic average – which includes Finland’s neighbours, none of whom use the single currency – is lower at 28%. However, the situation remains far more crtitical in troubled southern Europe where 51% of business leaders cite a lack of demand as a constraint. Finland’s business leaders are relatively unconcerned by a shortage of finance (18%) compared with Eurozone peers (27%), although the Nordic average is again lower (13%). And at 16% the proportion citing a lack of skilled workers is below both the eurozone (23%) and Nordic (21%) averages. Similarly bureaucracy in the form of regulations and red tape is constraining just one in ten Finnish businesses compared with one in three across the eurozone and one in six across the Nordic region. 42 18 27 Shortage of finance Regulations & red tape a lack of demand 35 Economic uncertainty 11 uncertainty on growth 60 37 economic weighing Percentage of businesses citing factor as a constraint on growth Source: Grant Thornton IBR 2013 35 Lack of demand 23 16 Lack of skilled workers 2 8 Transport infrastructure Finland eurozone remains a challenge Focus on: Finland 6
  7. 7. Focus on: Finland Finland in Europe Despite the travails of the single currency and the rise of Eurosceptic party, The Finns (PS), an overwhelming majority of Finnish businesses remain positive about their country’s adoption of the euro; 85% say that entry has been positive for their business, behind only Ireland (88%) and Germany (86%) and well above the eurozone average of 78%. And just 6% of Finnish business leaders would like to exit the euro. Finland’s business leaders are keen to see further European integration: 98% want to European countries develop closer ties, compared to 91% across the eurozone and just 71% of non-euro EU countries. Four in five business Finnish business leaders would like to see closer economic integration, above the 66% single currency average, with a further 52% backing further industrial integration and 44% developing closer political ties. What should happen to the number of countries in the single currency? 38 Ireland 86 Germany 85 Finland 82 Spain Source: Grant Thornton IBR 2013 78 17 They are less keen on any further expansion of the single currency however; just 25% want to see enlargement, compared with 38% across the eurozone. Indeed 36% want to see some countries drop out of the euro, more than double the regional average (17%). As a country with no debt burden and a small budget deficit, Finnish business leaders are resistant to call for debt mutualisation in the form of eurobonds: 50% are against the idea, double the eurozone average (25%); only peers in Germany (62%) and Estonia (56%) are less interested. eurozone 76 Estonia 74 Belgium 73 Greece 67 Italy 64 35 25 Increase Source: Grant Thornton IBR 2013 Percentage positive about euro adoption 88 39 36 64 Decrease Stay the same Finland eurozone 85% positive on Euro France Netherlands Focus on: Finland 7
  8. 8. IBR 2013 methodology The Grant Thornton International Business Report (IBR) is the leading mid-market business survey in the world, interviewing approximately 3,300 senior executives every quarter in listed and privately-held businesses all over the world. Launched in 1992 in nine European countries, the report now surveys more than 12,500 businesses leaders in 45 economies on an annual basis, providing insights on the economic and commercial issues affecting companies globally. The data in this report are drawn from interviews with chief executive officers, managing directors, chairmen and other senior decision-makers from all industry sectors in businesses with 50-499 employees in Finland. Q3 data is drawn from 3,300 interviews globally (50 in Finland; 300 in the Nordics) conducted in September 2013. 2013 data is drawn from over 12,500 interviews (200 in Finland; 1450 in the Nordics) conducted between November 2012 and September 2013. To find out more about IBR, please visit: www.internationalbusinessreport.com. Dominic King Grant Thornton International Ltd Global research manager T +44 (0)207 391 9537 E dominic.king@gti.gt.com Paula Frölander-Ulf Grant Thornton Finland Marketing manager T +358 (0)9 5123 3341 E paula.frolander-ulf@fi.gt.com © 2013 Grant Thornton International Ltd. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a seperate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. www.gti.org

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