The number of commerce industry businesses has crumbled this year as slowed consumption eats away at the profitability of the industry. Things are not set to improve in the immediate future either: According to predictions by the Finnish Commerce Federation, commerce will take a downturn this year. Starting next year, the trend will turn towards slow growth.

Over the past few years, the number of companies in the industry has remained very stable. The figure took a downturn this year, however, when around 6 per cent of companies in the commerce industry ceased operations between January and April. The most significant losses have been seen in specialty sales.

“Slowed private consumption is reflected in the decreased number of stores. Additionally, foreign e-commerce has eaten away at small specialty stores in particular. There have been warning signs of this development for a long time, and now it appears to have materialised,” says Jaana Kurjenoja, Chief Economist at the Finnish Commerce Federation.

Overall commerce went into the red last year, but retail sales volumes continued to grow by one per cent. To date, commerce has bolstered growth in Finland in recent years. However, the declining national economy and the decrease in the number of employed persons no longer provide conditions for sales growth. Commerce has also faced crackdowns due to taxation, which has been tightening for a long time now.

According to predictions by the Finnish Commerce Federation, turnover for the entire commerce industry, when adjusted for price variance, will decrease this year by four per cent. Retail volumes will shrink by one per cent and wholesale volumes by four per cent. The decline in car sales has been the steepest, although car sales development will even out towards the end of the year.

Next year, sales will take a slow turn upward, reaching less than a couple of percentage points of growth, but retail growth will remain at less than half a per cent.

Dark times can also be seen in employment rates for the largest private sector employer. The slow sales growth is not enough to keep commercial employment at the level of the previous years. This year, overall employment in the industry will decrease by two per cent. Next year, employment is expected to remain at the 2009–2010 level.

The Finnish economy is in a difficult situation, and no clear sources of growth in demand can be seen. The current economic policy has had unfortunate consequences for commerce: low interest rates have encouraged households to go into debt, while taxation policy has cut purchasing power.

“Clamping down on private consumption will not lead to growth in the national economy or exports. Economic policy has chastised commerce and services. Decision-makers need to understand that growth cannot be created through political decisions, and that such decisions can actually destroy the conditions for growth,” says Juhani Pekkala, Managing Director of the Finnish Commerce Federation.

Investments in commerce threaten to shrink

Last year, investments were still growing in commerce and creating demand for other industries. Last year, fixed-price investments in commerce were five per cent higher than in 2008. At the same time, investments in industry shrunk by 12 per cent.

“Unfortunately, based on investment enquiries we have made to our member companies, it appears that investments in commerce are now shrinking, and they are not set to grow next year either. The decline in investments has unfortunate impacts on other industries, too, as commerce is the second largest investor out of all sectors of economic life and the largest investor in terms of construction and means of transport,” Kurjenoja comments.

Weakening demand has the greatest impact on the decrease in commercial investments. Increases in financing costs and difficulties in acquiring financing also have the effect of shrinking commercial investments.

Sales forecasts 2013–2014

Further information:

Managing Director, Juhani Pekkala, juhani.pekkala(at)kauppa.fi, tel. +358 (09) 1728 5111, +358 400 419 560
 Chief Economist, Jaana Kurjenoja, jaana.kurjenoja(at)kauppa.fi, tel. +358 (09) 1728 5134, +358 40 820 5378

The Finnish Commerce Federation represents commerce - the largest sector of economic life. 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 politics and labour market lobbying. www.kauppa.fi