Weak demand and order intake in the technology industry continue to hinder economic growth
Order books have continued to shrink in Finland’s most significant export industry for over a year. The number of requests for tender received by technology companies continued to decline in the early months of the year, but not as substantially as earlier. The situation in the industry will remain difficult. In spite of this, companies have sought to hold on to their employees, according to the recent order book and personnel survey by Technology Industries of Finland.
Industrial production continues to decline in both Finland and the rest of Europe. The latest data on the trend in demand and the order intakes of companies in the Finnish technology industry still predicts a challenging economic outlook for the rest of the year. Demand remained weak in early 2024, and order intakes have been even more meagre than before. However, industrial companies have held on to their personnel for now.
“Companies have been delving into their order backlogs for more than a year to keep production up and running. The number of tender requests received by companies continued to decrease during early 2024 — and thus companies and the Finnish economy will continue to face a difficult financial situation,” says Petteri Rautaporras, Director, Chief Economist at Technology Industries of Finland.
Based solely on order trends, the rest of the year looks as downbeat as the end of last year; that said, companies now have slightly brighter expectations for the future.
“The slight improvement in companies’ expectations for the future is without a doubt largely linked to the anticipation that interest rates will be cut. However, it is unlikely that interest rates will be cut significantly in the near future, and it is uncertain how strongly and rapidly a slight decrease in interest rates will impact on the real economy and stimulate demand,” says Rautaporras.
The monetary value of new orders received by technology industry companies in the January-March period was 15 per cent lower than in the previous quarter, and 22 per cent smaller year-on-year. The total value of order books at the end of March was two per cent below the value reported at the end of December and 15 per cent less than a year before.
In mechanical engineering, which is the largest technology industry sector, the value of new orders fell by 10 per cent in the January-March period from the preceding quarter. The value of new orders was down 17 per cent year-on-year. In mechanical engineering, order intake has also declined for over a year.
“The last few months have gone largely as expected in the Finnish export industry. The downswing in production that was forecast in the autumn materialised, but a severe recession has still been avoided. The industry will continue to face difficulties until at least the beginning of the autumn. The first months of the year have been a challenging time for the Finnish technology industry, and the massive strikes experienced in the spring did not help.
The tender request balance figure for the entire technology industry was -10 in April. Data collected in April indicates that the overall demand situation in the market has remained weak throughout the spring. Although the balance figure was still negative, more companies reported that they had received a higher number of requests for tender.
Companies Say They Have a Shortage of Experts Despite the Current Business Cycle
Despite the difficulties they face, technology industry companies have sought to hold on to their employees. At the end of March, the number of personnel in Finland was around 333,000, only 0.2 per cent less than at the end of December. Approximately 17,000 people were laid off at the end of March, compared to 16,000 at the end of December.
“Despite the ups and downs of the business cycle, the industry is hugely concerned about having a sufficient number of skilled employees. The Government proposal on the fast expulsion of unemployed international experts and their families from Finland, which is being circulated for opinions, sends a very concerning message to international experts who play a vital role at export companies. Their desire to stay and work in Finland is essential for the competitiveness of the export industry, as is attracting new international talent,” says CEO Jaakko Hirvola.
On the other hand, the technology industry is pleased with the Government’s budget session decision to increase company-driven research, development and innovation investments, as well as the investment incentives proposed by the Government.
“Retroactive tax breaks for large investments will help Finland to thrive now that there has been a surprising surge in global competition with government incentives. Incentives must be targeted at investments that would not otherwise be made in Finland, or to ensure that investments will be made significantly earlier. A fixed-term tax incentive will encourage large companies to launch new green transition projects in Finland as soon as possible. There are abundant markets for them,” says Hirvola.
