Impact of coronavirus on Finnish SMEs: Spur to transformation and renewed appetite for growth

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The results of Tesi’s SME survey indicate a strong trend of business transformation as companies permanently adapt their operations to meet the challenges of the coronavirus pandemic. On the other hand, the polarisation of SME’s is clearly reflected in the survey results.

Tesi’s spring 2021 survey to Finnish small and medium-sized enterprises (SMEs) shows that companies have suffered less hardship from the pandemic than feared. This survey measuring the pandemic’s impact on SMEs is the fourth conducted by Tesi. Altogether 1,683 companies participated in it. The survey encompassed sectors important to Finland’s economy and economic growth that were considered to suffer the most negative impacts of the pandemic. The survey was conducted in March 2021, amidst the harshest restrictions during the acceleration phase of transmission. This is reflected in the responses to questions about the future.

A spur to transformation

According to the results, companies in all the sectors surveyed have greatly adapted their operations during the pandemic. Some 73% of respondents have taken steps to boost their sales, either permanently or temporarily. Roughly 40% of SME respondents, for example, have targeted new customer segments or sought new ways of delivering their products and services to customers through digital channels.

The impact of this business transformation on revenue have so far been limited, but SMEs expect very positive benefits in the future. Alongside adapting their businesses, companies have demonstrated flexibility in adjusting their operational costs. Cost savings, lay-offs and the banking sector’s rapid response to the prevailing situation have prevented more damaging economic losses. Conversely, the survey results indicate that cost cutting alone has not kept companies afloat through the past year, and that active support measures have played an essential role. About one-half of survey respondents stated that support measures have helped their business operations.

The corona crisis, however, has not treated companies and sectors equally. The polarisation of SMEs into ‘winners’ and ‘losers’, the so-called K-curve, is just as strong, and the hospitality & catering sector in particular has suffered major setbacks over the past year. No fewer than 90% of SMEs in the hospitality & catering sector forecast lower net sales in 2021 than in 2019. Companies in the industrial sector are experiencing reduced order intakes, and the disruption to production caused by the pandemic has impacted many sectors. If, however, the pandemic abates over the summer as it did last year, private sector demand could rebound and boost companies’ net sales, at least in some sectors.

Renewed appetite for growth

The results of the March 2021 SME survey show that companies have considerably more appetite for growth than in previous surveys. Some 65% of survey respondents stated they were now seeking growth. All the sectors surveyed showed a renewed appetite for growth, although this was strongly linked to company size, larger companies being more growth-oriented than smaller ones. There was no sign of any unwillingness to grow amongst the companies surveyed.

The pandemic has forced many companies to drastically transform their business operations, and this should be exploited as far as possible. The focus for SMEs should now be on transforming a desire for growth into the capability for growth,” says Tesi’s Chief Digital Officer Henri Hakamo.

The post-pandemic future

The results of Tesi’s fourth SME survey indicate that the corona pandemic has had clearly less impact on companies than anticipated. Although the pandemic has impacted many companies’ operations, the ability of companies to adapt and their resilience during the crisis has exceeded expectations in all sectors. The EBITDAs reported by companies indicate that they have managed to continue profitable operation by and large. The survey results show that the pandemic has pushed only 4% of companies with a positive EBITDA before the crisis into making loss.

The polarisation caused by the pandemic, however, is clearly reflected in the survey results. Small companies with limited opportunities for adjusting their operations have suffered most. Also, most of the companies surveyed have reached their cost-saving limits. Subsequent cost-cutting measures will probably be more radical and have longer lasting economic impacts. The speedy progress of Finland’s vaccination programme, however, offers hope for the future and reassurance that the pandemic will have a relatively small impact on Finland’s economy.

The transformation of companies’ business operations brought about by the coronavirus pandemic is reminiscent of the period following the heights of Nokia’s success. This time it has been possible to build transformation onto existing business activities. Companies’ have been more resilient during the crisis than anticipated, and it seems that measures aimed at supporting companies have been effective. The overall impact of the coronavirus pandemic on Finland’s economy could, over the medium term, be positive – at least regarding the survey respondents,” Hakamo points out.

Finland is in dire need of new growth companies and the added value, investments and jobs they bring. The financing of Business Finland, Finnvera, Tesi and the Centre for Economic Development, Transport and the Environment can contribute to the renewal and growth of companies. The green digital transition of the economy offers growth opportunities also in emerging markets”, concludes the Director General of the Ministry of Economic Affairs and Employment Ilona Lundström.

Read more about the survey results (in Finnish).

Read more about previous survey results (in Finnish).

Further information:

Henri Hakamo, Chief Digital Officer
+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 transformative 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 1.9 billion euros. | @TesiFII