Situation and Outlook of the Finnish Technology Industry 3/2015: Growth in new orders and order books – cost competitiveness has fallen steeply

The companies that took part in the Federation of Finnish Technology Industries’ survey of order books reported that the monetary value of new orders between April and June was 14 per cent higher than in the corresponding period in 2014, and 28 per cent greater than in the preceding quarter.

At the end of June, the value of order books was up 22 per cent from the corresponding period last year, and seven per cent higher than the value reported at the end of March. However, there are major differences between individual companies. Fifty per cent of companies reported an increase in the level of order books from March, while 41 per cent reported a drop and nine per cent had seen no change.

The slight improvement in calls for tenders in the industry in the first half of 2015 also speaks to the modest improvement of the market situation.

Judging from order trends in recent months, the turnover of technology industry companies is expected to be slightly higher in autumn than in the corresponding period last year. Turnover in the January-April period was four per cent higher than in the corresponding period of the previous year.

Between January and June, the number of personnel employed by Finnish technology industry companies saw a slight year-on-year decrease. Technology industry companies have recruited a total of almost 15,000 new employees in 2015; some companies were increasing their personnel, while others were hiring new employees due to retirements and employee turnover.    In addition, 13,000 summer employees were hired.

No turn for the better in Finnish unit labour costs

“This year, Finland ranks among the weakest countries in Western Europe in terms of development, along with Greece. Even in the best-case estimates, only slight growth is forecast for total production volume,” says Jorma Turunen, CEO of the Federation of Finnish Technology Industries.

The production volume of Finland's key export sector – industry – has fallen short not only of the previous year, but also of the worst period of the financial crisis. In the January-May period, production was as much as 25 per cent lower than in the corresponding period of 2008.

The decline in industrial production and investments has significantly reduced the number of jobs in recent years. Since early 2008, almost 100,000 jobs in industry have been lost.

According to the statistics of the European Central Bank, Finland's unit labour costs (labour costs / productivity and effect of exchange rates) have increased by about 20 per cent since 2007 compared to the eurozone countries. No improvement in cost competitiveness has been seen this year, either.

The Finnish government is seeking to decrease unit labour costs by about five per cent. In the light of the above information, that is the absolute minimum requirement for improving Finland's current cost competitiveness.

Making greater use of local bargaining is a key factor in managing cost competitiveness. “In international wage cost comparisons, we should examine the actual labour costs instead of contractual pay increases. Due to Finland's rigid wage model, wage development exceeds contractual pay increases, unlike in Germany, for instance,” says Eeva-Liisa Inkeroinen, Director, Labour Markets.

Situation and Outlook of Finnish Technology Industry (Report, pdf)

Presentation slides (pptx)

Further information:                             
Jorma Turunen, CEO, tel. +358 (0)500 445 444
Eeva-Liisa Inkeroinen, Director, tel. +358 (0)40 089 4220
Jukka Palokangas, Chief Economist, tel. +358 (0)40 750 5469