State-owned investment company Tesi has charted the impacts of the Corona pandemic on Finnish SMEs with a survey based on collaboration amongst a broad spectrum of experts. The survey was conducted between 3 April and 5 May 2020. Altogether 1,639 companies with annual net sales less than €200m and personnel of 5-250 people participated. The first results of the survey were published on 24 April 2020. Now the survey is supplemented with data from twice the original number of companies. The survey will be repeated at monthly intervals. The aim is to form a broad-based and neutral overview of SMEs’ current situation from a range of perspectives: external factors, internal procedures, and the impact of intervention to support SMEs.
“Disrupted supply chains, shortened order books and deferred investments are worrying signs of the problems industry is facing. Possible changes in global demand will be reflected in order books for a long time yet. The first respondents to our survey were not able to assess the impact of the crisis on investments. As we move towards summer, it is clear that the volume of investments has contracted. The deferral of investments has multiplier effects that spread the impacts of the crisis from one sector to another. The IT and construction sectors, for example, suffer if other sectors refrain from investing. For this reason, a reduction in investment is bad news for all Finland’s economy,” says Tesi’s Chief Digital Officer Henri Hakamo.
- The Corona crisis substantially depressed SMEs’ net sales compared to 2019: around 63% of respondents estimate net sales decreased by April and 30% of respondents believe net sales decreased by over 40%. Somewhat half of the respondents (53%) saw a decrease in net sales during March, as compared to last year, while 55% expect a further decrease of those levels during April. Some sectors are exceptions: for instance, about one-half of grocery businesses have increased their net sales during the corona crisis.
- About 55% of SMEs believe the Corona crisis will depress their EBITDA, whereas 20% estimate it having depressed more than 40%. Still, circa 65% of the SMEs consider their business profitable despite the crisis. The hospitality & catering, administrative & support as well as wholesale & retail sectors are expecting the largest fall in EBITDA.
- Most companies (68%) currently expect their cash reserves to be sufficient for more than two months but roughly 11% of SMEs do not believe they will manage over the next month. According to bankruptcy data, the number of bankruptcies has doubled compared to last year. The results of the survey appear more pessimistic compared to estimates drawn from annual account data, in which the cash reserves of more than 70% of SMEs are estimated to last for more than six months.
- Companies have limited options to adapt because some 60% of companies are able to reduce their cost levels by at most 20% compared to pre-corona levels. The hospitality & catering sector appears more capable adapting costs than other sectors (more than 40% of companies have been able to do so by more than 40%). The most common option used by companies to reduce costs is to lay off employees (roughly 40% of companies that responded to the questionnaire) while 5% have dismissed employees.
- The corona crisis has had profound impacts on supply chains across all sectors covered by the survey: 60% of respondents reported disruptions to their supply chains. The companies experiencing most disruption operate in the industrial sector and in the wholesale & retail trade, with roughly 70% reporting disrupted supply chains. These disruptions are occurring in the supply of raw materials and materials and in logistics.
- 30–40% of SMEs estimate there will be a reduction of at least 30% in the value of tangible and intangible investments and of development projects during the rest of the year compared to the corresponding April-December 2019 period. In total, the estimated decrease in investments could represent roughly a decrease of 10% from the overall tangible investment levels made by SMEs in 2018.
- Of the SMEs that have received support from Business Finland or Finnvera, some 50% estimate that the support facilitated the company’s operations. Until now, the number of companies that have received state support during the Corona crisis is fairly limited: less than 10% of SME respondents reported that they had received support from Finnvera or Business Finland. According to the application data (dated 7.5.) by Business Finland, 12% has received and 25% applied for support.
About the survey
The questionnaire survey commissioned by Tesi was prepared and compiled by Helsinki GSE, Finland’s Ministry of Economic Affairs and Employment, Professor Vihriälä’s working group, Business Finland, Finnvera, and other experts from both the public and the private sectors. The aim is to provide a real-time and sector-specific overview of Finland’s economy, thus making up-to-date information available to policymakers to target correctly-timed measures for mitigating Corona impacts. The survey will be repeated at monthly intervals.
The sectors chosen for the survey focus on: industry; wholesale & retail trade; professional, scientific and technical activities; information & communications; hospitality & catering, construction; transport and warehousing, and administrative & auxiliary activities.
“Tesi aims to help Finnish companies and public authorities by offering financial instruments and by providing timely market data. A positive aspect of the crisis is the extremely pleasing opportunity to observe the wide-ranging collaboration between academia, private companies and government ministries. Everyone has a genuine desire to work in close collaboration to find the best solutions,” says Henri Hakamo.
Henri Hakamo, Chief Digital Officer, Tesi
email@example.com, +358 40 050 2721
Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raise Finland to the front ranks of renewing economic growth by investing in funds and directly in companies. We invest profitably and responsibly, hand-in-hand with co-investors, to create the world’s new success stories. Our investments under management total 1.3 billion euros. Ambition for ownership and success www.tesi.fi | www.dtg.tesi.fi | @TesiFII