Summary

Small and medium-sized enterprises’ (SMEs) expectations about the economy have improved significantly following the negative first half of the year. Reduced inflation, interest-rate cuts and successful decoupling from Russian energy and Russian trade turned the negative expectations of the spring into a positive increase: the economic outlook balance was zero. That means that business owners expect the state of the economy to remain the same over the next year. The balance rose by 14 points from the spring.

Just under a quarter, 24.4%, of SMEs believe economic conditions will improve during the next 12 months, while 24.6% believe they will worsen. Just over half of SMEs think that the economic conditions will remain the same. The direction of the economy depends on factors such as revived personal consumption and interest-rate cuts. These trends will be followed expectantly in all our key market areas over the next 12 months.

SMEs’ expectations about the Finnish economy generally match most other forecasts. Economic growth assessments based on GDP predict the Finnish economy will not grow or shrink at all on average, while most assessments for 2025 see DGP increasing by 1–2%. In any event, the economy and SMEs’ expectations are in a state of exceptionally high uncertainty.

Rising expectations of increased turnover, but uncertainty cuts investments

Small businesses have begun to expect their turnover will increase at the same time as their general expectations of the economy have risen from the figures of the spring. The balance regarding turnover expectations rose by six points from the spring barometer to ten points.

SMEs’ expectations about profitability have dropped considerably, while simultaneously general confidence in the economy has decreased. Businesses’ expectations about profitability have not yet returned to a positive level following the decline which lasted from autumn 2021 to spring 2023. Their uncertainty about the future has now eased slightly, but the balance regarding profitability expectations remained the same at -9.

SMEs expect to significantly reduce their investments in the near future. As a consequence of extended uncertainty and a weak economy, all sectors contain more companies that are reducing their investments than companies that expect to increase investments. The investment expectation balance is still deeply negative at -15. The prolonged weak investment expectations are linked to an exceptionally large uncertainty regarding the return of demand, increased geopolitical risks and other business factors, such as the availability of skilled labour. Changes in interest rates also have a direct effect on SMEs’ investments and investment intentions.

SMEs cautious about hiring staff

The negative effects of increased interest rates and geopolitical instability have in recent years reduced expectations about hiring more employees. Fourteen per cent of SMEs intend to hire more staff over the next year, and 11% expect to reduce headcount. The balance of expectations was 3, six points higher than the spring barometer. A large majority, 74%, of SMEs continues to intend to retain its current staff levels.
The changes in businesses’ headcount are linked to investment appetite: the availability of workers is a requirement for investments. On the other hand, the willingness to invest is one of the reasons behind increasing headcount.

Costs still high, albeit plateaued

Businesses’ expectations about increased production costs grew slightly compared to the spring of 2024. These expectations have levelled off since the peak in the autumn of 2022, but are still high compared to the average level in the 2010s. Businesses also increasingly have greater scope for raising the prices of their products and services, but not enough to compensate for the increased prices of intermediate goods. The situation is made slightly easier by the expectations of wage increases, which are more moderate than increases in intermediate goods’ costs. Following the large swings which began in 2020, the upward pressure on wages seems to have plateaued to the level of 2016–2019.

In all key sectors, the primary challenge continues to be that the price of intermediate goods is rising faster than the prices of finished goods. If the growth in intermediate goods’ prices continues to outstrip businesses’ capacity for increasing their own prices, that will make it harder for companies to operate.

Growth potential from reinvention and RDI

The numerous crises of recent years have not significantly dampened companies’ growth appetites. Over one third of SMEs continue to want to grow either strongly or as much as possible. The share of SMEs with strong growth appetites rose by two percentage points since the spring, when the level was 5%. The share of SMEs with strong growth appetites continues to be modest, and a downward trend over the longer term is concerning.

Sixteen per cent of SMEs have started using new technology, and 46% have invested in digitalization over the past year. Around half of businesses have trained their staff. In addition, just under three businesses in ten have brought new products or services to the market.

In this barometer, research and development (R&D) means creative, systematic activities to increase knowledge, as well as using information for new purposes. A relatively high share of SMEs, 25%, reported that they were conducting R&D activities in some form. As expected, there are marked differences in the level of R&D between sectors. It is most common in industry, where 40% of SMEs have R&D activities.

The strongest barrier to developing business activities is the general trend in and state of the economy. Even though the rise in costs and the problems in securing labour have eased slightly since the barometer last year, they continue to feature as the biggest barriers to development in businesses’ responses.

Economy and stringent regulation reduce use of external finance

The state of the economy and the consequent reduced credit eligibility of businesses, combined with banking regulation, is visible in SMEs’ use of external finance: the barometer shows that under half of SMEs have a loan from a bank or other lender. The share of SMEs with a loan from a bank or other lender has changed very little in recent years.

Finnvera has remained a significant financing player, even if its role as an alternative to bank loans and as a top-up lender has decreased slightly. Finnvera guarantees are highly significant in obtaining finance: one in three SMEs that had applied for financing from a bank said that securing the finance required a Finnvera guarantee. In particular, growth-focused companies are interested in Finnvera as a financial backer.

SMEs continue to cooperate closely with education and research

A significant group of SMEs cooperates with educational institutions, training providers and enterprise promotion agencies. SMEs’ cooperation with educational institutions and research institutes has stayed at the same level since autumn 2022, when the question was first asked.

The forms of cooperation are diverse, but many of the answers referred to internships, apprenticeships and other forms of learning on the job. Almost half of SMEs cooperated with educational institutions and research institutes in this way, while 68% of SMEs cooperated in this way with other education providers.

Businesses’ experiences of the results of cooperation with educational institutions and research institutes have changed somewhat since the autumn of 2022, partly because a new answer option was added regarding the recruitment of new staff. Among SMEs who cooperated with educational institutions and research institutes, the most commonly provided result of cooperation was the strengthening of SMEs’ knowledge base and skills. Among SMEs who cooperated with other education providers and enterprise promotion agencies, cooperation most frequently led to the recruitment of new staff.