OREANDA-NEWS. January 21, 2015. The survey “Business Barometer 2015” conducted by SEB in October and November 2014 revealed that companies in Hiiumaa and Saaremaa have less optimistic expectations for turnover increase than in the previous year. Instead of expanding on export markets, companies in Hiiumaa and Saaremaa concentrate on the domestic market.

The companies planning to increase their turnover by at least 15% next year were classified as optimistic in the research. In Hiiumaa, the number of optimists has dropped from 25% to 17%, and in Saaremaa, from 22% to 15%.

The survey covering almost 3,000 small and medium-sized enterprises (SMEs) in Estonia revealed that average business optimism in Estonia has decreased from 25% to 20%. By counties, the companies in Harju County are still most optimistic. In sectors, trade and industry are continuously on an optimistic position, now also taken by the construction sector. Last year, it belonged among the most pessimistic sectors.

“Modest development plans of companies and low growth expectations are quite a normal reaction to fluctuating economic conditions,” said Tiina Ormisson, the Manager of SEB’s Western region. “As for the results, it is most important to understand, if the increased caution in the region is a marker of a longer economic situation or a short-term trend that could be turned in a positive direction in 2015,” she added.

Companies concentrate on domestic market, less than one fifth are planning major investments

The plans of the companies in Hiiumaa and Saaremaa concerning expansion on export markets have decreased much in a year. In Hiiumaa, the number of companies planning to enter new or expand on the existing export markets decreased from 33% to 28%, in Saaremaa from 31% to 13%. The average figure of Estonia is 28% percent, 3 percentage points less than in the previous year.

In Hiiumaa, 17% of the respondents are planning to make investments exceeding 30,000 euros. In Saaremaa, the relevant figure is 13%. In the previous year, more than 40% of the companies in both Hiiumaa and Saaremaa had a similar plan. Average figure concerning investment has dropped from 25 percentage points to 16 in a year. However, in Estonia, there are still examples of business regions with active investment plans, such as the Ida-Viru and Jarva counties, where every fifth company is planning investments. Investment readiness is the lowest in Valga County, where only every tenth company is planning investments.

“All economic crises or periods of change have their own peculiarities, specific sectors and regions that get major or minor impact. If we want to describe the entire business of the islands by a single trend, this would be mainly caution and expectations targeted at the future. The developments of this year will show, which regions are able to adapt to the changing conditions best – either actively developing companies, whose plans did not change, or more careful planners, who do not risk to draw development plans in the current situation,” said Ormisson.

Fewer new jobs; focus on innovation

The surveyed companies plan to create almost 1,500 new jobs in total in the coming year in Estonia. This is an unexpectedly high figure, taking account of the current economic situation. Only 4% of Estonian companies expect a decrease of the number of employees. SEB’s survey revealed that in Hiiumaa, 17% of the companies are planning to employ new employees in 2015 (50% last year), which is lower than Estonian average figure (23%). The relevant figure in Saaremaa is similar to the Estonian average (24%) and has decreased by 12 percentage points in a year.

The number of Estonian companies planning innovation has increased from 59% to 73% in a year. The companies of Hiiumaa and Saaremaa considered innovation important already in the previous year. This year, the research results of both counties are above the Estonian average (83% in Hiiumaa  and 78% in Saaremaa).

According to the survey, 36% of Estonian companies are planning innovation of a product or a service, 24% development of employees and 11% change of business model. In a year, the interest in innovation has essentially increased in Estonian construction sector, which is planning to intensify training and development of employees. The most innovative field is still industry, where competition is tight and companies are operating extensively on export markets. Innovation plans are the lowest in agriculture.