The continued uncertainty about the future is reflected in large Finnish corporations’ growth expectations and strategic choices. Nearly 80% of large corporations say that they are prepared for a long period of low growth. Corporations believe that demand in international markets will grow 0.7% on average, whereas no growth in demand is expected for Finland. At the same time, the proportion of large corporations that have significantly expanded their business has fallen from 24% to 19% in two years.
Compared with previous years’ results, large corporations’ estimates on future capital expenditure have clearly declined. Investments to support current operations are focused on tangible assets, such as property, machinery and equipment. However, investments in tangible assets are defensive by nature, and the proportion of large corporations seeking growth through such investments dropped by as much as 13 percentage points within a year.
Even though corporate capital spending has declined, nearly 85% of large corporations pledge that they are prepared to invest quickly if demand is predicted to increase. Planned investments in intangible assets mainly focus on new business operations, such as digital distribution channels and revenue models.
“The challenges of the coronavirus pandemic are reflected in the choices corporations make for 2021. For example, they have the means to invest, but the weight of capital expenditure is clearly smaller than in the previous years. Nevertheless, it is encouraging to see that the pandemic has taught companies to be more agile and to seek new growth areas,” says Katja Keitaanniemi, CEO of OP Corporate Bank.
The exceptional business environment in 2020 has also forced large corporations to react more quickly to changes. The majority of the respondents estimated that their company has been able to increase the reaction time compared to previous levels.
Compared with normal conditions, large corporations have also been bold in their competitive moves. Nearly 70% of corporations said that they had launched more new services during the exceptional situation, and nearly 40% report having expanded operations to new markets.
“Business conditions and sentiment are now decisive factors. Large corporations are resilient and flexible when protecting their business. Preparedness to operate in an environment of prolonged low growth has improved over the past year, and large corporations are convinced that investments into long-term development are still necessary. However, the pace of economic recovery globally as well as in Finland will play a key role in defining business conditions,” says Keitaanniemi.
The results are based on OP's annual survey of large corporations, which measures large Finnish corporation executives’ views on business and economic developments. A total of 240 persons representing 161 large corporations based or operating in Finland responded to the survey, especially CEOs, CFOs and executive vice presidents. The data was collected in autumn 2020 and the survey results were published in their entirety on the 12th of January 2021. OP Financial Group carried out the survey of large corporations with the NIBS think tank, set up by Aalto University professors, as its partner. The survey of large corporations has been conducted since 2012.