OREANDA-NEWS. December 09, 2014. Estonian small and medium-sized enterprises (SMEs) have a rather good outlook on their perspectives for 2015 as they are forecasting a moderate turnover growth, activity on export markets and recruitment of employees, as shown by the survey “Business Barometer 2015” organised by SEB.

The innovation readiness of SMEs is pleasurably high, but investments are being cut down.

According to Indrek Julge, SEB Management Board Member and Head of Corporate Banking, a slight drop in business optimism can be noticed, but generally, the key indicators are pretty good. “Regardless of the uncertain external environment, there is still readiness to invest and recruit new employees. What is great to see is that Estonian enterprises do not just sit around during these unstable times, but instead, review the current processes and look for new business strategies that hopefully will give enterprises more boost in the next year,” Julge said.

A fifth of enterprises forecast turnover growth of more than 15 per cent

As evidenced by the survey conducted among 2,837 SMEs, a modest drop in business optimism can be noted – from 25 per cent last year to 20 per cent. The enterprises that forecast a turnover growth of more than 15 per cent were deemed to be optimistic. At the same time, 20 per cent of enterprises forecast a drop in turnover for the next year. Sixty per cent of the enterprises responded that their turnover growth will remain below 15 per cent.

Enterprises in Harju County were the most optimistic as every fourth out of these forecasts a turnover growth of at least 15 per cent. Last year, the highest drop was witnessed in Parnu County (a drop of 17 percentage points / pp) and Ida-Viru County (11 pp), which had been the most optimistic. Jogeva, Jarva and Polva Counties stood out with their increase in optimism.

While last year, the trade and industry sectors were the most optimistic, then now trade, construction and accommodation and catering sectors make the greatest contribution, with about 30 per cent of optimists in each.

Activity on foreign markets continues

The export outlook is still good, although the proportion of the enterprises planning to enter new markets or expand on the existing export markets has dropped down to near 28 per cent from last year’s 31 per cent. Fifteen per cent of the responding enterprises will enter new markets and 12 per cent are planning to grow on the same export markets.

Considering the fact that the largest exporters in the country, such as technology, food industry, oil shale and energy sector enterprises and the largest agriculture and forestry sector enterprises are not part of the sample, the drop can rather be deemed indicative. Enterprises from Harju County remain the most active on foreign markets.

Modest investment plans

The largest drop can be witnessed in the field of investments: the proportion of companies planning investments in the amount of at least 30,000 euros next year has dropped from 42 per cent down to 16. Forty-one per cent of enterprises are investing without limiting the amount, which is 20 percentage points less than last year.

The most actively investing counties are Ida-Viru and Jarva, where every fifth enterprise is planning investments, whereas enterprises in Valga County have the lowest investment-readiness with every tenth enterprise ready to invest.

Surprisingly, the transport and logistics sector, which has a pessimistic outlook towards 2015, is planning the most investments as 55 per cent of the respondents are planning to make investments. This can be explained with the peculiarity of the sector, in which the machinery needs constant updating. Also, traditionally, the agriculture and industry and energy sectors are more prone to invest.

More employees recruited

Next year, the responding enterprises are planning to create almost 1,500 new jobs, which is an unexpectedly high figure considering the current economic situation. The most jobs are planned to be created in Ida-Viru County, regardless of the fact that the proportion of the enterprises planning to create new jobs has decreased by 18 percentage points within the year. The average figure in Estonia this year is 23 per cent, which is 4 percentage points less than last year.

The most active sectors where jobs are created are construction, accommodation, catering, transport and logistics. Creation of jobs is supported by the higher turnover growth forecast in these sectors and the readiness to invest more than the average in Estonia. Investment readiness in enterprises that plan to create new jobs is twice as high. This pleasing trend is also supported by the fact that only 4 per cent of the enterprises forecast a decrease in the number of employees.

SMEs focus on innovation

The field that showed a clear positive trend this year is innovation. The number of enterprises planning innovation has increased from 59 per cent to 73, indicating a drop in only four of Estonia’s counties.

According to Mart Maasik, Head of Business Innovation at SEB, this is a great indicator that confirms the ambition of enterprises to look for new growth sources even in this complex economic situation. “In case of active enterprises, taking up innovation activities is related to the fear of deviating from the main business and opportunities for innovation are still mainly seen in the development of products and technologies. Hidden opportunities are considerably wider; innovation may not necessarily need substantial additional investments, development activities can be organised step by step and by getting feedback from the clients.

About the survey
This year, SEB ran a counselling project in October-November for the third time already, in the framework of which the survey “Business Barometer 2015” was organised amongst small and medium-sized enterprises (SMEs) in Estonia, mapping the expectations of the enterprises for the next business year. The survey was responded to by 2,837 small and medium-sized enterprises. Enterprises from Harju, Tartu and Parnu Counties were the most active to participate. The sectors that were the best represented were service, trade and education.