Despite tariff turbulence, the Finnish technology industry expects demand to pick up
Finland's largest export sector expects demand to pick up towards the end of the year. Both the value of new orders and order books in the technology industry have held up well, and demand has not started to stall in spite of the erratic tariff policy of the USA. Global turbulence and instability must now be mitigated by continuing to foster investment-friendly policies at both the national and EU level.
According to the order book and personnel survey conducted by Technology Industries of Finland in July, member companies have coped reasonably well during this prolonged period of uncertainty. New orders and order books have strengthened slightly compared to the previous quarter, demand did not weaken in spite of tariffs and the number of employees in the sector remained stable during the first months of the year.
“The survey didn’t provide unambiguous indications of a clear economic recovery. That said, the massive uncertainty that prevailed in the spring didn’t lead to stagnation in demand, which is a positive sign. In the second quarter, order intake in the sector remained at a reasonable level in view of the circumstances, and that’s a significant defensive victory in the face of uncertainty and tariffs,” says Petteri Rautaporras, Executive Director and Chief Economist, Economy and Sustainable Growth, Technology Industries of Finland.
New orders and order books remain quite weak, but the threat of a trade war did not lead to further deterioration in the business cycle. The monetary value of new orders in the April-June period was 5 per cent higher than in the previous quarter and 15 per cent higher year-on-year. At the end of June, the value of order books was up 4 per cent from the value reported at the end of March, and 14 per cent higher year-on-year.
The balance figure for tender requests in July was +7, on a par with the spring. In the spring, the balance figure rose and turned positive for the first time in over two years, indicating that market activity has remained relatively upbeat despite the uncertainty. The buoyant market bodes well for an upturn towards the end of the year.
“No matter how you look at it, the US-EU import tariff agreement cannot be called a good thing for the Finnish export industry, but political agreement on the terms of trade reduces uncertainty for companies. As the financial environment in Europe is now more favourable than it has been for a long time, the preconditions for new investments have improved and it’s expected that companies will move ahead with projects that they had put on hold,” says Rautaporras.
He says that the conditions are now right for a turnaround, which could even happen fast, and it is hoped that growth will finally pick up more clearly towards the end of the year.
In mechanical engineering, which is the largest technology industry sector, the value of new orders increased by one per cent in the April-June period from the previous quarter. Year-on-year, the value of new orders increased by 13 per cent.
The positive momentum of companies must be supported with stable economic policies
The negotiated tariff agreement will have an almost unambiguously negative impact on the Finnish technology industry, albeit it is estimated that it will still be rather moderate.
“Despite all the uncertainty, companies have consistently been more upbeat than gloomy. Their positive overview of the situation is based on the fact that there is constant activity and interest in the market. All that we lack are decisions,” says Rautaporras.
In June, the European Commission announced a new state aid framework to stabilise state aid competition between Member States. Finnish companies developing state-of-the-art technology and innovations have to compete for market share with companies that are heavily supported with national state aid not only in Europe but also in China and the US.
“Global state aid competition, coupled with tariff turbulence, means that Finnish companies are in a very unhealthy competitive situation. Now that uncertainty is easing up and companies are in a better position to launch investment projects, it’s important for the Government to continue taking steps to increase Finland’s attractiveness in terms of investments,” says Minna Helle, CEO of Technology Industries of Finland.
The EU’s 2040 climate target, the rise of China as a green energy leader and global competition for critical raw materials both spur and challenge the Finnish export industry. Technology companies have the opportunity to provide solutions to global climate and environmental challenges and harness them to create new business opportunities.
“Businesses play a key role in growth in Finland and the rest of Europe. Policymakers must develop incentives for growth and innovation, and our competitiveness in this fragile situation must not be undermined by new taxes and regulation. We need to keep forging ahead with national and EU-level policies that support corporate investment and growth in the long term,” says Helle.
Further information:
Rautaporras Petteri
Executive Director, Chief Economist – Economy and Sustainable Growth Technology Industries of Finland