A recession is clearly upon us, the only question is how long and deep. On the other hand, large Finnish companies have repeatedly proven their ability to pull through global crises.
Companies are already feeling the financial effects of the energy crisis, rising inflation, interest rate hikes and supply chain challenges as we move into the darkest season.
The economic outlook is at its gloomiest in years. In practice, economic activity is already at a standstill in western countries and private consumption, the traditional engine of growth, is sputtering badly.
The uncertain investment outlook and faltering global growth are deepening the gloom for industry. Bulging order books are maintaining activity levels for now, but the flow of orders has slowed.
Construction is also stalling; many companies in the sector are struggling, even if a wave of bankruptcies never arrives.
A recession is therefore at hand in western economies, the only question is how long and deep. In addition, Europe’s energy infrastructure will be put to a severe test over the winter.
We could be forgiven for failing to see a silver lining, but a silver lining is there.
The labour markets are running red hot. Unemployment is at its lowest since the 1950s in the United States and United Kingdom, and at a record low level for this millennium in Europe. In turn, the historically high employment level will support private consumption.
China’s faltering economy and the reshoring phenomenon are driving enterprises to localise their operations in places such as Europe. This may create new business opportunities for Finnish companies.
Finland has a strong foothold in the circular economy, a sector set to grow in importance as self-sufficiency and responsibility become vital for businesses.
Besides, companies seem unwilling to compromise on responsibility, even as the gloomiest of storm clouds gather.
In addition, responsible actions taken by companies send a strong message to society. Many corporations are progressing towards carbon neutrality, which benefits them by meeting society’s expectations and their own financial goals.
As Finland’s biggest lender to the private sector, we regard the situation of large corporations as stable. Many have a strong balance sheet and good liquidity.
It is also worth stating that large companies’ investment projects are often long term and not easily deflected by sudden market fluctuations.
History does not always repeat itself and the worst economic scenarios may not be realised this time. Large Finnish companies have proven their ability to pull through global crises time and again.
On the other hand, it seems clear that even big companies will not get through the coming winter without cutting costs.
Now, more than ever, we need the perspectives of large companies’ executives to light our way through the mist shrouding the global economy and Finnish enterprise.
This article was originally published in Kauppalehti on November 21, 2022 (in finnish)
Kirjoittaja on OP Yrityspankin toimitusjohtaja ja Harvardin alumni.
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