In commerce, hard times are still continuing, but there is light at the end of the tunnel. The Finnish Commerce Federation forecasts that the expected slow recovery of economic growth will give a boost to commerce as well. However, the Government’s tax decisions may still kill this budding growth.

The Finnish Commerce Federation forecasts that the volume of retail trade sales, from which the impact of prices has been eliminated, will continue to decrease this year, but will start to increase at a modest rate of 0.5 per cent next year.

The low price of oil, in particular, supports economic growth, boosting the world economy and the Finnish export market. Household purchasing power is supported by low inflation this year, but household consumption will remain weak because of the high unemployment rate.

‘As employment will slowly improve next year, it will create the conditions for growing household consumption. This year, however, the uncertainty about employment will drive people to save and reduce spending,’ says Jaana Kurjenoja, Chief Economist at the Finnish Commerce Federation.

Retail trade has been on a downward slide for years and we will not be seeing the growth rates of the early 2000s in the near future. The average growth in the retail trade in the early 2000s was about four per cent. If the forecasts materialise, there will be zero average growth for 2009–2016.

‘Although we forecast a slight increase for the retail trade for the next year, the growth rate of the past years cannot be achieved for a long time. When economic growth is slow, the retail trade cannot make investments and hire people as before,’ Kurjenoja says.

Wholesale trade may see growth already this year. The sales volume is expected to increase by one and a half per cent this year. Next year, the Finnish Commerce Federation predicts growth of two per cent. The increase in the wholesale trade is primarily attributable to the positive development in exports and in small and medium sized enterprises.

In car sales, the sales volume is expected to increase by one and a half per cent this year and by two per cent next year.

Employment in commerce taking a downturn

Commerce is the largest employer in the economy, but, in the past few years, employment in the sector has taken a sharp downturn. Last year alone, the commerce sector lost 8,000 wage earners.

‘The structural change in commerce will continue for the next few years both in retail and wholesale trade. Enterprises in the commerce sector will continue to enhance and restructure their operations through digitalisation, for example. They will also improve their competitiveness in the international market,’ Kurjenoja says.

With global competition, especially in the wholesale trade, there is a real danger that jobs will be transferred to countries where labour and other costs are cheaper. For companies offering services to small and medium sized enterprises, it does not matter whether they operate from Finland, Poland or from some other country. It is up to policy-makers to decide whether Finnish commerce is needed in Finland and what kind of operating environment would be competitive in terms of productivity and employment.

Tax wedge on labour must be reduced

The private sector is continuously improving its operations and undergoing structural changes. The public sector must do the same. By reducing taxes and cutting public spending we provide more resources to the market-driven private sector.

‘If we do not make decisions now for the adjustment of the public sector, it will mean more taxes. This will kill the budding growth and bring about unfavourable economic development. Postponing the adjustment decisions is not an option,’ says Juhani Pekkala, Managing Director of the Finnish Commerce Federation.

Regarding economic policy, we must not forget the significance of services to economic growth and employment. Politicians should not favour any sector at the expense of another, as this will not promote the development of a diverse and broad economy. Compared to Sweden, for example, the Finnish economic structure is too narrow.

To help the entire private sector, we must immediately reduce the tax wedge on labour. However, we must bear in mind that consumption taxation is part of the tax wedge on labour and has a direct impact on the actual purchasing power of households.

‘Direct labour taxes must be reduced. However, this must not be compensated by increasing consumption taxes and other indirect taxes,’ Pekkala says.

The labour market must be able to respond to the economic change. There has been discussion about the preconditions for the next centralised labour market agreement, even though we have not yet been able to reach a final consensus on the current one.

‘Commerce cannot accept a centralised or union-by-union agreement which sets additional restrictions on part-time labour. The commerce and service sector needs part-time labour, and the restrictions would significantly affect employment and business profitability. That is something Finland cannot afford,’ Pekkala says.

Attachment:

Outlook for commerce 2015–2016, abstract

For further information, please contact:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, +358 (0)9 1728 5134, jaana.kurjenoja(at)kauppa.fi

Juhani Pekkala, Managing Director, Finnish Commerce Federation, +358 (0)9 1728 5111,
+358 400 419 560, juhani.pekkala(at)kauppa.fi

The Finnish Commerce Federation represents commerce – the largest sector of the national economy. Commerce employs around 300,000 persons in Finland. The Federation has around 7,000 member companies and represents both retail and wholesale commerce in industry policy and labour market lobbying. www.kauppa.fi