Business optimism across the Nordic region is high, driven by healthy GDP growth. A spirit of cooperation also drives sentiment in these economies. With Nordic countries ranked among the world’s most competitive, we explore how a collaborative environment helps this business community grow stronger together.
The numbers from the Grant Thornton International Business Report (IBR) paint an encouraging picture for Sweden and Finland. When it comes to levels of optimism, Finland ranks highest of all the 35 countries in the survey. Optimism also surged by 22 percentage points in Sweden since the fourth quarter of 2017 to a seven year high of net 73%.
But what’s behind the growth in optimism? The Swedish economy grew by 2.7% last year, and similar growth is expected in 2018.[i] The national economy benefited from a combination of low interest rates, a recovering global economy, and an influx of foreign workers that helped to fill skill gaps in the labour market.
Swedish government finances look robust, too. The posting of an almost 62 billion kronor surplus in January was labelled 'crazy' by analysts at Danske Bank.[ii] The stellar performance clearly blindsided the experts.
The picture in Finland also bodes well for businesses. GDP reached 2.6% in 2017 and although predicted to slow in 2018, the forecast is still for growth of 2.5%.[iii] Furthermore, net 54% of business leaders in Finland expect profits to increase in the next 12 months.
The Nordics are highly competitive on the world stage using the World Economic Forum’ global competitiveness index as a gauge. Sweden and Finland are in the top 10 at 7th and 10th respectively while Norway and Denmark follow closely at 11th and 12th, outperforming economies such as China and France.
One factor in this growing story of success is collaboration. As Peter Bodin, CEO of Grant Thornton International and previously CEO of Grant Thornton Sweden, says: “Nordic businesses are mutually supportive. Certainly, they compete, but they also know when to combine.”
Lessons are being learned. Finland rode high on the success of companies such as Nokia. A business that at its height comprised 4% of the nation’s overall GDP.[iv] Today, new partnerships and models of working pave the way. A recent initiative, led by SEB chairman Marcus Wallenberg, saw 24 Swedish and Finnish industry giants pull together to form an alliance on Artificial Intelligence.[v] These firms recognise that sharing insights and exploring technologies together means they won’t fall behind and, as a group, can progress faster; even lead.
Much collaboration is done in pockets, with firms working together on projects or, as with the AI project, focussing on specific opportunities and markets. However, more formal structures are in place to facilitate Nordic cooperation. The Nordic Business Forum brings firms together to exhibit their products to peers across the border and further afield.[vi] It’s a showcase for big Nordic ideas and innovation.
Collaboration is built on a strong tradition of trading. Exclude Germany, and Sweden’s biggest export markets are Norway, Finland and Denmark. And volumes look set to increase. According to the IBR, 23% of Swedish firms expect to export more in the next year. In Finland that number is 32%.
On the surface, grouping the Nordic economies together may seem to be a geographic convenience. After all, as history shows us, a common border is not always a basis for an alliance. However, there is a will and a want for Nordic businesses to work together. And it’s yielding results. The area punches above its weight for competitiveness. For the economies of Sweden and Finland this growth in GDP is forecast to beat the average in the Euro area (forecast from EIU).
Despite this, Grant Thornton’s IBR raises important questions about the substance behind the optimism. The big question is the willingness of businesses to invest. Ongoing growth and competitiveness is arguably dependent on it.
Although net 24% of Swedish firms plan to invest in new buildings, just net 5% plan to increase Research and Development (R&D) spending – a reduction of 4 percentage points on the previous quarter. In Finland, while net 18% of firms plan to invest more in R&D, there has been a drop of 12 percentage points on investment plans for plant and machinery. The proportion of firms planning to invest in technology has also fallen in both countries in the last quarter (net 32% in Sweden and net 40% in Finland).
The optimism in the Nordics is real. But despite an enviable environment for business, future success is reliant on investment. The challenge for businesses across the region is to maintain investment levels now in order to yield future success.
Anna Johnson, Managing Partner for Grant Thornton Sweden, adds “Businesses across the Nordics find themselves at an advantage; cooperative neighbours, a competitive business environment and relatively high levels of growth. To sustain this is key to survival and prosperity. But businesses must invest. Invest in ideas, through research. In productivity, through technology. And in collaboration by bringing both ideas and experiences of new technologies to the discussion.”
[i] European Commission (ec.europa.eu) - Economic forecast for Sweden
[ii] www.bloomberg.com - Sweden has crazy surplus as soaring tax revenue swells coffers - 9 January 2018.
[iii] European Commission (ec.europa.eu) - Economic forecast for Finland
[iv] www.wired.co.uk - Finland and Nokia: an affair to remember - 4 October 2013
[v] www.nordic.businessinsider.com - Two dozen Finnish and Swedish industry giants are forming an AI alliance – ‘It’s a world-first’ - 25 April 2018