The Finnish Commerce Federation urges the Government to quickly decide on direct subsidies for companies to cover costs such as rental expenses. The specialty goods trade is facing a critical situation due to the coronavirus epidemic, so there is a pressing need for decisions. According to information that has been discussed in public, the use of subsidies from ELY Centres for paying salaries and rent will be possible going forward, and the Government Decree that will enable this is currently being drafted. Even if the legal drafting process for the Government Decree is completed next week, it is essential for this decision to be given preliminary confirmation as soon as possible. The Finnish Commerce Federation proposes that the solution should follow the lead set by the other Nordic countries that have introduced direct subsidies.
Particularly in brick-and-mortar stores and specialty goods stores that operate in shopping centres, such as fashion retailers, turnover figures are down by as much as 80–90 per cent compared to normal levels. This means that sales have practically ground to a halt as people avoid public places.
For these companies, rental expenses represent the most significant fixed costs in addition to personnel expenses. Unsold inventories are also a burden on company finances. The companies that operate as lessors, such as various property investment companies, have in many cases been unwilling to negotiate on discounts on rent in spite of the exceptional circumstances. SMEs have very little negotiating power in the lease relationship for commercial premises if the lessor is not willing to make changes.
“The situation threatens to lead to a wave of bankruptcies in the commerce sector. Preventing this calls for quick decisions by the Government. We are pleased that the Government has recognised the plight of the specialty goods trade and quickly increased the direct subsidies distributed through Business Finland and ELY Centres by hundreds of millions of euros. Nevertheless, it is essential that direct subsidies can also be granted to compensate for rental expenses because borrowing and taking on additional debt are not an option for SMEs in particular. Lessors must participate in bearing the costs of the crisis,” says Mari Kiviniemi, Managing Director of the Finnish Commerce Federation.
The measures implemented in Denmark, Sweden and Norway serve as useful examples of solutions to the problems presented by rental expenses.
“In the subsidy models adopted by the other Nordic countries, rental expenses are compensated by paying direct subsidies to the lessee if their turnover has declined significantly. Lessors may also be entitled to subsidies. This would encourage and expedite negotiations on rent discounts: if the lessor were to agree to implement temporary discounts on rent, part of the discount would be compensated to the lessor as direct subsidies,” says the Finnish Commerce Federation’s Chief Policy Adviser Janne Koivisto, who has studied the models implemented in the other Nordic countries.
“What we need now is quick confirmation that rent subsidies are coming, even if the details of the model are only confirmed later. Policymakers in Finland must do everything in their power to avoid a wave of bankruptcies. Direct subsidies for companies are needed because borrowing and taking on additional debt are not an option for SMEs in practice,” Mari Kiviniemi adds.
For more details, please contact:
Mari Kiviniemi, Managing Director, Finnish Commerce Federation, tel. +358 50 511 3189, mari.kiviniemi(at)kauppa.fi
Janne Koivisto, Chief Policy Adviser, Finnish Commerce Federation, tel. +358 50 321 3639, janne.koivisto(at)kauppa.fi