Expectations of SMEs show modest recovery, use of AI grows
The economic expectations of small and medium-sized enterprises (SMEs) have remained largely unchanged since last autumn, but they show some improvement from a year ago. Lower inflation and interest rates have had a positive impact on companies’ outlook. According to the SME Barometer published on 11 February 2025, the challenging situation of companies in the retail sector is gradually easing.
The number of SMEs expecting the economy to improve equals the number of those expecting the economy to deteriorate. The trajectory of the economy will depend greatly on the recovery of private consumption and the fall in interest rates, for example. Both of them involve uncertainty and are monitored with anticipation.
“Despite economic uncertainty, the expectations of SMEs have remained unchanged since last autumn. I find the results of the barometer encouraging during such exceptional times,” says Minister of Economic Affairs Wille Rydman.
Willingness to invest remains subdued, retention of labour force is high
The willingness of SMEs to invest has remained modest. In all main sectors, companies reducing their investments outnumber those planning to increase them.
Despite the uncertainty, the plans of SMEs to recruit employees have not changed considerably compared to the autumn barometer. Of all SMEs, 14 per cent intend to increase the number of staff, while 12 per cent expects the number of staff to fall. However, most SMEs (74 per cent) plan to retain the current number of employees.
“A broad-based recovery in employment looks unlikely before the end of 2025 and it may take longer than that. Understandably, SMEs are cautious about hiring new staff before the turn to growth and higher demand appear sustainable,” says Juhana Brotherus, Chief Economist at the Federation of Finnish Enterprises.
Decline in growth orientation causes concern
The growth orientation of SMEs has decreased for a long time, but now the decline seems to have levelled off. More than one third of SMEs are either seeking strong growth or seeking growth when it is possible. The proportion of strongly growth-oriented SMEs has risen slightly from the record lows of last year. Nevertheless, the growth orientation remains modest compared to previous years.
On a more upbeat note, the economic outlook of SMEs established after 2019 continues to be optimistic. Growth companies play an important role because they create new innovations and act as drivers of growth spurring other companies on. Some of them will also develop into leading international companies.
“The alarming decline in the number of growth-oriented companies seems to have come to a halt. Finland needs a growth-oriented approach and reforms that encourage more entrepreneurs to take risks and seek growth,” Brotherus adds.
Digitalisation at SMEs accelerates with growing use of AI
The introduction of artificial intelligence (AI) and other digital services and tools among SMEs has grown. Around one in three SMEs states that the use of AI is relevant for their activities now or will be in the next year. Slightly over ten per cent of SMEs use AI regularly and nearly 30 per cent occasionally. Lack of skills and knowledge slows down the introduction of AI in SMEs.
“Finland has traditionally been among the top countries in digital skills in Europe. I believe that artificial intelligence becoming more common will improve the competitiveness of Finnish companies in the longer term,” says Rydman.
“The leap in artificial intelligence raises hopes for future productivity of SMEs. Finnish SMEs are well prepared to deploy new critical technologies,” says Brotherus.
SMEs’ struggle with financing emphasises Finnvera’s role
The bottom of the business cycle for SMEs appears to have passed, but there are still challenges in the availability of financing. In the autumn barometer, 38 per cent of the companies requiring financing stated that they had not obtained financing nor applied for it despite the need. The corresponding figure in spring 2021 was 25 per cent.
“In addition to its financial situation, the size, location and development stage of the SME has a significant impact on the availability of financing,” says Juha Ketola, Executive Vice President for SME and midcap financing at Finnvera.
Increasingly, Finnvera is required to guarantee the bank loans of companies. Up to 67 per cent of SMEs seeking strong growth were required to obtain Finnvera’s guarantee before being granted bank financing.
“Finnvera’s guarantees are vital for growth-oriented companies. The growing role of guarantees reflects changes in the financial sector regulation, lending policies of banks and the general economic situation. Some SMEs are not able to obtain bank financing even with a guarantee from Finnvera, which may limit their growth. Our aim is to find a financing solution primarily by using guarantees and by working together with the banks. If necessary, we can also offer direct loans to enable the growth of viable companies,” Ketola adds.
The SME Barometer describes the activities and the economic operating environment of small and medium-sized enterprises. It is published twice a year by the Federation of Finnish Enterprises, Finnvera and the Ministry of Economic Affairs and Employment. This time, approximately 4,550 companies responded to the SME Barometer survey, which was conducted from mid-December 2024 to mid-January 2025.
Inquiries:
Lars Aikala, Special Adviser to the Minister of Economic Affairs, tel. +358 50 401 6410, [email protected]
Juhana Brotherus, Chief Economist, Federation of Finnish Enterprises, tel. +358 50 384 9479, [email protected]
Juha Ketola, Executive Vice President for SME and midcap financing, Finnvera, tel. +358 29 460 2658, [email protected]
Katri Lehtonen, Development Director, Ministry of Economic Affairs and Employment, tel. +358 50 526 2515, [email protected]