Internal market,

industry,

entrepreneurship and SMEs

2016 SBA Fact Sheet

Finland

Key points

Past & future SME performance1: SMEs in Finland experienced a solid recovery in 2010-2015. During this period, SME added value

and employment rose by 12 % and 6 %, respectively. In 2015, SMEs were estimated to have exceeded their pre-crisis levels of 2008

in both areas. They recovered better from the crisis than large firms did. Their recovery was particularly driven by the service

industries, most notably those linked to ICT. The SME sector´s expansion is set to continue in 2015-2017, albeit at a more moderate

pace. SME employment is predicted to increase by 1 % net, or around 6000 jobs. Total SME added value is expected to increase more

rapidly, by some 4 % over this period.

Implementing the Small Business Act for Europe (SBA): Finland has one of the most competitive SBA profiles in the EU. It surpasses

the EU average in seven out of nine SBA principle areas. Only in State aid & public procurement and Internationalisation does it trail

behind the EU average. One reason for concern, however, is that Finland has not significantly further improved its position in any of

the SBA principle areas since 2008, with the exception of the Single market. There is, therefore, a genuine risk that Finland may lose

its competitive advantage in the future. In terms of policy implementation, the areas that saw most significant progress were: ‘Second

chance’, Skills & innovation and ‘Responsive administration’.

SME policy priorities: Finland has been very active in implementing SME-supportive policies in all SBA areas since 2008. The

remaining problems are confined to a small number of specific areas. In public procurement, more efforts are needed to reduce the

size of lots and of the time it takes to review proceedings in the courts. SME access to credit support instruments needs to be further

improved. Start-up conditions should be improved and brought in line with the SBA goals, and administrative burden should be further

reduced. The existing support mechanisms in the area of innovation need to be reviewed so that they yield more tangible results.

About the SBA fact sheets The Small Business Act for Europe (SBA) is the EU’s flagship policy initiative to support small and medium-sized enterprises (SMEs). It comprises a

set of policy measures organised around 10 principles ranging from entrepreneurship and ‘responsive administration’ to internationalisation. To

improve the governance of the SBA, the 2011 review of it called for better monitoring. The SBA fact sheets, published annually, aim to improve

the understanding of recent trends and national policies affecting SMEs. Since 2011, each EU Member State has appointed a high-ranking

government official as its national SME envoy. SME envoys spearhead the implementation of the SBA agenda in their countries.

Ref. Ares(2017)1735504 - 31/03/2017

2016 SBA Fact Sheet — Finland 2

Table of Contents Key points ..................................................................................................................................................................................................................................................................... 1

1. SMEs — basic figures ....................................................................................................................................................................................................................................... 2 2. SBA profile ............................................................................................................................................................................................................................................................. 4 3. SBA principles ....................................................................................................................................................................................................................................................... 6

3.0 ‘Think Small First’ ............................................................................................................................................................................................................................................. 6 3.1 Entrepreneurship............................................................................................................................................................................................................................................... 7 3.2 ‘Second chance’ ................................................................................................................................................................................................................................................. 8 3.3 ‘Responsive administration’ ........................................................................................................................................................................................................................ 9 3.4 State aid & public procurement ............................................................................................................................................................................................................ 10 3.5 Access to finance........................................................................................................................................................................................................................................... 12 3.6 Single market .................................................................................................................................................................................................................................................. 13 3.7 Skills & innovation ........................................................................................................................................................................................................................................ 14 3.8 Environment ..................................................................................................................................................................................................................................................... 15 3.9 Internationalisation ...................................................................................................................................................................................................................................... 16

4. Interesting initiative ....................................................................................................................................................................................................................................... 17

1. SMEs — basic figures

Class size Number of enterprises Number of persons employed Value added

Finland EU2 8 Finland EU2 8 Finland EU2 8

Number Share Share Number Share Share Billion € Share Share

Micro 213 895 93.0 % 92.8 % 361 881 25.0 % 29.5 % 19.4 22.4 % 21.2 %

Small 13 165 5.7 % 6.0 % 313 595 21.6 % 20.2 % 17.4 20.0 % 18.0 %

Medium-sized 2 304 1.0 % 1.0 % 260 169 18.0 % 17.0 % 16.6 19.1 % 18.2 %

SMEs 229 364 99.8 % 99.8 % 935 645 64.6 % 66.8 % 53.4 61.5 % 57.4 %

Large 521 0.2 % 0.2 % 513 406 35.4 % 33.2 % 33.5 38.5 % 42.6 %

Total 229 885 100.0 % 100.0 % 1 449 051 100.0 % 100.0 % 86.9 100.0 % 100.0 %

These are estimates for 2015 produced by DIW Econ, based on 2008-13 figures from the Structural Business Statistics Database (Eurostat). The data cover the ‘non-financial business economy’, which includes industry, construction, trade, and services (NACE Rev. 2 sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such as education and health. The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries. The disadvantage is that for some countries the data may be different from those published by national authorities.

SMEs are an important part of the Finnish non-financial business

economy. They account for 62 % of added value, which is

four percentage points higher than the corresponding EU

average. They also account for around 65 % of total

employment, which is similar to the EU average. In terms of the

relative importance of different sectors for SMEs, Finland is

fairly similar to the rest of the EU, with SMEs in wholesale and

retail trade, manufacturing and construction together accounting

for more than half of total SME employment and added value.

Unlike the non-financial business economy as a whole, which

stagnated in 2010-2015, SMEs experienced strong growth

during this period. SME added value and employment rose by

12 % and 6 %, respectively. In 2015, Finnish SMEs exceeded

their pre-crisis levels of 2008 in both areas. In contrast, the rest

of the non-financial business economy has still not recovered

from the crisis.

In 2010-2015, SMEs in the information and communication

sector generated growth of 26 % in added value and 11 % in

employment. However, this overall growth masks significant

variation between individual subsectors. For example, while there

was almost no change in the added value generated by SMEs in

the publishing subsector, the added value of SMEs in media

services increased by almost 150 %. The gaming industry in

particular has grown strongly, with revenue of EUR 2.4 billion in

2015, an increase of 33 % compared to 2014. Most of the

revenue — 95 % — originated from exports, with games for

mobile devices constituting the majority of sales.2 SMEs have

been able to thrive in the gaming industry because the barriers

to entry are low. This is due to the ease of the development

2016 SBA Fact Sheet — Finland 3

process for mobile devices, widely available distribution

channels, and low investment requirements.3

In the construction sector, SME added value increased by 14 % in

2010-2015, and employment rose by 10 %. Growth was

strongest in 2010-2012, partly due to recovery from the

financial crisis. The main drivers were the steady demand for

urban housing, along with the commissioning of new public

construction projects and an increase in renovation activities.4

However, since 2013 SME added value in this sector has

stagnated. In response, the government included measures

specifically to support housing construction and renovation in its

2015 budget.5

In 2008-2015, SME added value in the manufacturing industry

stagnated and SME employment fell by more than 10 %. This

weak performance can be attributed mostly to the decline of the

electronics industry, which depended heavily on Nokia.6 A

challenge for SMEs in particular has been the rise in cross-

border subcontracting by larger companies, at the expense of

domestic companies.7 In the future, stronger government efforts

to promote the greater use of internet-based technologies in the

manufacturing industry might contribute to growth in the

sector.8

SMEs in professional activities generated growth of 14 % in

employment and 19 % in added value in 2010-2015, mainly as

a result of the increasing outsourcing trend.9,10 Economic

uncertainty seems to have made companies more cautious and

therefore more likely to outsource professional services as a

way of managing risk. This may have also been a factor behind

the growth of the legal and accounting activities and

management and consulting activities subsectors, in which

added value increased by 12 % and 26 %, respectively. The

public sector also increased its use of outsourcing, especially in

healthcare and social services, but also of other external

professional services.11

During the first three quarters of 2015, company registrations

declined by 4 % against the same period in 2014.12 A total of

22 209 new companies were registered during the first three

quarters of 2015, compared to 23 087 during the same period

in 2014. De-registrations totalled 11 762 over the first two

quarters of 2015, a fall of 7 % compared with the same period

the previous year, but still higher than in 2013. However, overall,

registrations have continued to outnumber de-registrations. As a

result, the number of active companies has increased steadily

over recent years, despite a slight drop during the first two

quarters of 2015. The fall in bankruptcies is another positive

economic sign. There were 2 574 bankruptcies in 2015, 14 %

fewer than the previous year, and 18 % fewer than in 2013.

The non-financial business economy is projected to grow

modestly in 2016. SME added value is expected to rise by

approximately 1 %. In 2017, SME added value is expected to

increase by 3 % and SME employment in the non-financial

business economy is forecast to remain virtually unchanged,

with only around 6 000 jobs being added. This is an increase of

less than 1 %.

2016 SBA Fact Sheet — Finland 4

2. SBA profile13

Finland has one of the most competitive SBA profiles in the EU.

It surpasses the EU average in seven out of nine SBA principle

areas. In ‘Second chance’ it even claims the top position in the

EU-28. There are only two areas — State aid & public

procurement and Internationalisation — where it trails behind

the EU average. This is due to a technical phenomenon, however,

as the drop compared to last year was caused by a change in

the definitions of certain important indicators. There is still cause

for concern, though, as Finland has not significantly further

improved its excellent position in any of the SBA principle areas

since 2008, with the exception of the Single market. Even there,

the progress was slower than in the EU in general. There is,

therefore, a genuine risk that Finland will lose its competitive

advantage in the future.

The Finnish Government has not adopted any formal strategy

for implementing the SBA. SBA-oriented activities are typically

included in the government programme and related key projects,

as well as various campaigns and competitions coordinated by

the Ministry of Employment and the Economy (which includes an

SME Envoy). Since 2008, national policy initiatives have focused

on the growth of companies working in international markets or

aiming to internationalise. With the reduced relative role of large

companies in the national economy, attention has been shifting

towards SMEs as drivers of economic growth.

In 2015 and the first quarter of 2016, which is the reference

period for policy measures in this year’s fact sheets, Finland

achieved moderate progress in implementing the SBA. It adopted

only six policy measures, addressing five out of ten SBA

principles.

The areas for which the most significant progress was reported

during the reference period were: ‘Responsive administration’,

Access to finance, Internationalisation, Skills & innovation and

‘Second chance’. Under the Access to finance area, junior loans

for SMEs and mid-cap companies were introduced, aiming to

attract investment in higher-risk projects. Under the

Internationalisation area, Team Finland’s organisation and

internationalisation services have been further developed, with

internationalisation activities including market research,

networking, training and business development support and

financing. In the Skills & innovation area, the ‘Investment fund

for early-stage research-oriented enterprises’, set up by Tekes

Venture Capital, aims to assist early-stage businesses that

commercialise innovation based on public research. Despite the

overall positive activity in the area of ‘Responsive administration’

(two measures adopted in the reference period), there is a

recognised need for further measures to cut red tape by

speeding up consents and appeal processes, as well as

decreasing notifications for SMEs. Moreover, the role of the SME

Envoy, part of the Ministry of Employment and the Economy, has

been limited during the reference period, and the Envoy is

largely unknown outside the Ministry. Managing structural

changes in the economy and its key industries has become a

policy priority over the past few years, particularly in the labour

market with regard to reforms in social and unemployment

security. These changes may also improve the position of SMEs

in the labour market in the future.

The areas with least significant progress during the reference

period were: ‘Think small first’, Single market and Environment,

with developments consisting mainly of amendments to

currently existing regulations, laws and financial instruments, as

a consequence of constraints in public spending. ‘Think small

first’ is an area that is not prevalent in new initiatives. Although

SMEs are a specific focus group for many new projects, this

seems to be mainly associated with their increasing role as

drivers of economic development.

2016 SBA Fact Sheet — Finland 5

SBA performance of Finland: state of play and development from 2008 to 201614

2016 SBA Fact Sheet — Finland 6

3. SBA principles15

3.0 ‘Think Small First’ The ‘Think Small First’ principle is meant to be a guiding principle

for all policy- and law-making activities. It requires policy-

makers to take SME interests into account at the early stages of

the policy-making process. It calls for newly designed legislation,

administrative rules and procedures to be made simple and easy

to apply.

Generally, the ‘Think Small First’ principle is taken into account in

the Finnish system. Policies are increasingly prepared with the

aim of minimising costs and administrative burden for

businesses, and the principle is increasingly applied to

administrative procedures e.g. with more streamlined reporting

obligations.

The SME test and assessment of impact on business

competitiveness are integrated in the legislative process16.

However, the thoroughness with which they are applied varies

across ministries. Important recent examples of the SME test´s

application include: the revision of the Accounting Act, where the

principle was well applied, resulting in the design of less

bureaucratic procedures for SMEs; the revised ‘Land Use and

Building Act’ (increasing competition); and the upcoming

‘Environmental Protection Act’ (with e.g. more streamlined permit

procedures). The government's strong pressure on getting

significant reforms implemented may have recently somewhat

hampered the thoroughness of the consultation process.

Consultation results are typically published by the government or

the parliament. There is an open eService at

www.lausuntopalvelu.fi where various government bodies can

open consultations and where responses can be read. In 2014,

the government set up an independent advisory body to

evaluate the quality of impact assessments.

However, although the Ministry of Employment and the Economy

provides statements on the impact of new legislation on

business competitiveness, the process is not always very

comprehensive and would benefit from greater stakeholder

consultation. The most pressing issue related to the ‘Think Small

First’ principle is procurement. Decreased public spending,

together with structural changes in public service production

(towards bigger units), make it difficult for SMEs to participate in

tenders.

There are very few specific measures specifically to support

small and micro-enterprises, for example with transition periods

or exemptions. Furthermore, common commencement dates

have not been introduced yet. The threshold for VAT registration

has been raised but is still only EUR 10 000.

Although some of the provisions of the ‘Think Small First’

principle still need to be addressed, there has been some

progress in its implementation during 2015 and the first quarter

of 2016; no significant measures have been adopted, however.

The new government has announced several new initiatives

supporting the ‘Think Small First’ principle, but none of them had

been implemented by the end of the reference period (March

2016).

2016 SBA Fact Sheet — Finland 7

3.1 Entrepreneurship

Finland performs above the EU average in this SBA principle

area. It has an entrepreneurship-friendly environment. Its

performance has not much changed as compared to last year.

On the level of individual indicators, the indicators measuring

entrepreneurial activity have developed mostly to the positive

since last year. The most significant increase was in

entrepreneurial intentions, which went up from 9 % last year´s

fact sheet to 10.9 % this year. This is an unprecedented record

level and an indication of a start-up renaissance fuelled by the

IT-industry, after a slump in the direct aftermath of the financial

crisis. In terms of entrepreneurship, Finland has an interesting

profile. On the one side, the portion of the population that sees

entrepreneurship as a desirable career choice is much smaller

than in the EU in general. Early-stage entrepreneurship rates still

trail behind the EU average despite a modest increase as

compared to last year, and early-stage entrepreneurs tend to be

less internationally oriented and see their businesses as less

innovative than their peers in other Member States.17 However,

those for whom entrepreneurship is an option pursue it much

more often than is the case elsewhere in the EU. They do this

proactively with a clearly defined business opportunity in mind.

Hence, the proportion of opportunity-driven entrepreneurship is

more than a quarter higher than in the EU on average. This is

important, as this type of entrepreneurship tends to be more

sustainable and successful than that born out of necessity, i.e.

for lack of other options. The other factor which underpins

Finland´s good performance in this area is the favourable

enabling environment for entrepreneurship. In general, Finland

scores much better than many of its EU peers in terms of media

attention given to entrepreneurship, social status given to

successful entrepreneurs, and the way in which entrepreneurship

is integrated into school curricula, with the exception of post-

secondary education where there is still room for improvement.

The survival rate of start-ups in Finland is higher than in many

other Member States: of all Finnish SMEs started in 2008, over

70 % still existed four years later.18

Finland's positive performance since 2008 was accompanied by

a flurry of policy measures. Several measures were put in place

to improve funding for start-up companies, improve business

advice services for new companies, and support

entrepreneurship in education.

2016 SBA Fact Sheet — Finland 8

The most important direct instrument is the ‘Start-up grant’

(Starttiraha). It provides entrepreneurs with a small but secure

income when setting up a business, for a maximum duration of

18 months. There are also specific courses for the unemployed

offered by the public employment and business services (TE-

services). These include both career coaching and training on

how to set up a business, and are available particularly in

specific regions with high unemployment (abrupt structural

change areas).

Some large companies have also set up programmes to provide

additional support and training to their redundant workforce, in

collaboration with public services. The most notable example is

the Bridge programme set up by the Nokia Corporation (2011-

2014). It appears to have been successful: between 2011 and

2013 around 500 former Nokia employees chose the

entrepreneur path under the Bridge programme; of the

companies they started (predominantly in ICT, consulting,

communication and business services), almost 90 % still existed

in late 2013 and tended to generate more jobs and turnover

than the average Finnish SME.19

Local and regional governments also play an important role in

supporting entrepreneurship, by actively participating in activities

organised by other actors. A good example is Slush, a start-up

and venture capital trade fair held in Helsinki. In November

2015, Slush brought together 1 700 start-ups, 800 venture

capital investors and 630 journalists from 100 countries.

The most significant gaps in Finland's entrepreneurship policy

are related to workplace flexibility, social security of self-

employed people, and some relatively rigid labour regulations.

During 2015 and the first quarter of 2016, no significant

additional measures were adopted in this field. This can be

explained by the fact that essentially all SBA recommendations

had been addressed already.

3.2 ‘Second chance’

‘Second chance’ means ensuring that honest entrepreneurs who

have gone bankrupt get a second chance quickly. Finland is not

only performing above the EU average in this area, but holds the

top spot in the EU. There has been only one significant change

compared to last year: the fear of failure dropped from 36.7 %

to 32.6 %, a reflection of the improving economic climate for

SMEs and the decline in bankruptcies. Since 2008, Finland´s

performance has slightly deteriorated. However, the country still

offers one of the best environments for entrepreneurs seeking a

second start after a failed venture. In particular, the insolvency

framework is competitive. In Finland it only takes half the time it

takes in the EU in general to conclude an insolvency procedure.

The costs associated with the procedure are only a third of the

costs in the EU on average.

Policy-wise, since 2008 there has been moderate progress in

this area, as the basic framework (e.g. as regards insolvency

procedures) was put in place before the adoption of the SBA. It is

worth mentioning a measure from the last reference period,

which allows self-employed debtors to restructure their debt,

similarly to private households. This reform has helped

entrepreneurs manage their debts in cases of business failure,

and to get a fresh start.

During the reference period, one measure was adopted: the

‘deduction of capital loss allowed against capital income’.

Starting from 2016, all kinds of capital income may be subject

to a deduction for capital losses incurred when the taxpayer sold

property or otherwise transferred it and made a loss. This may

help SMEs to cope with downturns, facilitating a new start.

2016 SBA Fact Sheet — Finland 9

In general, the SBA agenda in this area has been covered

comprehensively; there is only one issue left unaddressed. So

far, there has been no nationwide awareness-raising campaign

to combat the stigma of business failure. However, public

opinion towards bankruptcies and closures has become more

positive in recent years, partly because of the positive

experiences in the software business (with several success

stories after earlier failures). Therefore, such a campaign could

be useful but is not an immediate policy priority.

3.3 ‘Responsive administration’

‘Responsive administration’ refers to public administration being

responsive to the needs of SMEs. Finland maintains its position

as a frontrunner in the EU for this SBA principle as it scores well

above the EU average. There has been little change compared to

last year. For the few indicators which saw a more significant

adjustment, the change was mostly a deterioration in

performance. In particular, there has been a change for the

worse in the overall administrative climate. The proportion of

entrepreneurs who state that fast-changing laws or regulations

are a problem has increased from 23 % to 36 %. At the same

time, the proportion of entrepreneurs complaining about the

complexity of administrative procedures has risen from 22 % to

49 %. Finland´s performance has not improved in this SBA policy

area since 2008.

2016 SBA Fact Sheet — Finland 10

However, this stagnation occurs at a very high performance

level. For most indicators, Finland continues to feature in the top

group of Member States. Next to the overall business-friendly

administrative environment, Finland's particular strengths

include the relatively simple tax administration and the

widespread application of e-government services.

Also, from a policy perspective reforms have been moderate in

scale since 2008. In general, the most significant gaps for

'Responsive administration' remain in the area of reducing and

simplifying business licences and permits. Although the

government started a programme in 2009 to reduce

administrative red tape related to entrepreneurial activities,

according to the National Audit Office of Finland results have

been limited, with potential impact on SME competitiveness.

Nonetheless, since 2008, there have been improvements in the

responsiveness of public administration through the increasing

use of eServices. A specific ‘Action Programme on eServices and

eDemocracy’ (SADe — Sähköisen asioinnin ja demokratian

vauhdittamisohjelma) started in 2009 and has steered the

development of services for citizens, companies and the

authorities. Governments have perpetuated this trend,

addressing the efficiency of services through digitalisation and

open public data. As a result, most of the procedures needed to

set up a new business can be done online.

During the reference period, several changes in this policy area

were implemented, with the following two measures being

adopted:

– The ‘liberalisation of shop opening hours’ was introduced at

the start of 2016. This provides SMEs with more freedom of

choice whilst, at the same time increasing competition with

larger stores (typically chains).

– In September 2015, implementation of the Government

Programme’s strategic priority on ‘digitalisation,

experimentation and deregulation’ (Digitalisaatio, kokeilut ja

normien purkaminen) started. It entails several actions that

aim to digitalise public services, improve legal provisions,

cut red tape, deregulate where necessary, make permit and

complaint processes smoother, and set up a body in charge

of ensuring the measures' effective implementation.

3.4 State aid & public procurement

This is one of the two areas where Finland´s performance

dropped this year. Finland now ranks below the EU average. The

main cause for this development was the drastic fall in the rate

of businesses participating in public tenders from 50 % last

year´s fact sheet to 35 % this year.20 There is not one obvious

factor explaining this change. The significant deterioration led to

the decline of the overall score, while the score on all other

indicators remained virtually unchanged. Since 2008, conditions

in this SBA area have not changed much, though. A particular

strength noted during the entire period was public authorities'

very short delays in making payments. Finland is one of the EU's

frontrunners in this category.

The use of e-procurement has been systematically expanded in

recent years. The most significant progress was made with

respect to electronic portals, widening access to information on

public procurement opportunities. For example, the volume of

public procurement announcements in the national HILMA-portal

increased from EUR 14 million in 2008 to EUR 32 million in

2014. However, the availability of electronic portals varies

across public sector institutions. Finland's low score on SMEs'

use of e-tendering can be explained by the relatively high

threshold of EUR 30 000 under which e-tendering is not

required.21

Policy activity has been moderate since 2008. No significant new

measures were implemented in Finland in this area, with most

2016 SBA Fact Sheet — Finland 11

developments consisting of fine-tuning existing actions and

modes of operation. However, according to a study published in

2014, 82 % of surveyed SMEs had experienced various problems

with public procurement practices, which highlights the need for

policy intervention in this field.

Action to simplify public procurement and improve the

competitive position of SMEs was taken both at state level,

where a reform of public procurement legislation was started in

2013 with SMEs as a specific target group, and at local

government level, where new public procurement tools have

been introduced to facilitate SME participation.

The ‘revised law on state subsidies for business development,

public employment and enterprise services’, which came into

force in July 2014, aimed to make public support for SMEs more

efficient and decrease the administrative burden related to State

aid.

There is an ongoing discussion on improving public procurement

as an instrument to promote the competitive position of SMEs. In

fact, according to plans announced in May 2015, a new law will

be drafted in order to keep up with the reform of public

procurement legislation started in 2013. This law will: (i) limit

the submission of extensive studies as required by the

contracting authority, (ii) set the requirement of minimum

turnover at a maximum of twice the value of the tender, (iii)

propose that common European procurement documents are

sufficient to provide evidence of compliance with the suitability

requirements of the exclusion criteria, (iv) encourage

procurement bodies to split tenders into separate lots, to

improve SMEs’ participation. The new law is expected to enter

into force after the end of the reference period (March 2016).

A general assessment of state business services (including

financing) is also underway. The results of this assessment are

expected to be ready by spring 2016, as are subsequent reforms

to State aid legislation.

No additional significant measures were adopted in this area

during the reference period.

Overall, Finland has addressed the SBA recommendations in this

field in a comprehensive way. There are very few issues that

need to be addressed more fully. More efforts are needed to

systematically divide larger public tenders into smaller lots to

facilitate SME participation. Tender requirements need to be

better adjusted to the specific nature of SMEs — especially

micro firms — in particular with a view to their financial situation

and qualifications. Finally, more attention needs to be given to

competition neutrality. As an increasing number of public sector

activities (e.g. health care and day care) are privatised, it is

important to ensure that entrepreneurs who are setting up

businesses to provide services in these sectors are not put in a

less favourable position compared to dominant public sector

players.

2016 SBA Fact Sheet — Finland 12

3.5 Access to finance

Finland performs above the EU average in this SBA area. Its

performance has been further strengthened as compared to last

year, as its scores on a number of individual indicators improved.

These recent improvements are at the tail end of a downturn in

financing conditions for SMEs. In fact, access to finance was the

SBA area which deteriorated most significantly in Finland since

the SBA was introduced. As compared to last year, however,

financing conditions seem to have recovered on all fronts. There

has been an increase in venture capital investment linked to

Finland´s vibrant IT sector. Also, the indicators related to

companies´ cash-flow situation indicate improvement. The total

time it takes to get paid has been further reduced from almost

22 days to 20. Only the Baltic countries perform better in this

respect.

Finland is also an EU frontrunner when it comes to bad debt

losses, which dropped from the already low 1.6 % of total

turnover to an unprecedented low of 1.1 %. There have also

been improvements as regards credit financing, but the situation

seems to be more mixed. Generally speaking, it seems to be

easier for SMEs to get credit from banks than it was a year ago.

The proportion of SMEs who report a deterioration in banks’

willingness to provide loans, the rejection of loan applications

and access to public financial support fell drastically as

compared to last year. In 2015, only 3 % of SMEs claimed that

banks were more likely to reject loans or to impose unacceptable

lending conditions, as compared to almost 13 % the year before.

At the same time, there are signs that some aspects of credit

financing have become more difficult. The mark-up on small

loans as compared to loans over EUR 1 million has increased

from 33.5 % to a record 50.7 % in 2015. Also, there are reports

that recent changes in banking regulations may have worsened

access to financing, due to tighter lending terms.22 In addition,

despite the recent improvement, there is still a higher proportion

of Finnish SMEs who report that access to public support is

getting more difficult than in the EU in general.

Various policy measures have been introduced since 2008 to

facilitate access to finance, especially for SMEs. They use a

combination of loans, grants and equity investment to mitigate

the problems with access to finance. Moreover, existing

organisations and instruments have been given additional

funding. For instance, in March 2013 the government launched

a new growth–funding programme that aims to increase the

availability of funding for company growth through Finnish

Industry Investment Ltd (a government-owned investment

company), Tekes and Finnvera. The role of Finnvera has been

particularly important for SMEs and micro-enterprises, whereas

the other public organisations are more specific in their focus

and only cater to a limited group of companies.

2016 SBA Fact Sheet — Finland 13

Only one significant measure was implemented during the

reference period: ‘Finnvera Junior loans’ for SMEs and mid-cap

enterprises (Finnveran juniorilainat). The junior loan financing

programme aims to attract market-based financiers to finance

projects which they might not have otherwise joined. Junior

loans will particularly target SMEs and mid-cap companies with

plans for significant growth and/or major internationalisation.

The loans are granted by Finnvera. The main feature of this

measure is that the government compensates 75 % of any

credit losses. The total amount of loans is expected to be

EUR 300 million between 2016 and 2018 (see Section 4).

3.6 Single market

In this SBA area, Finland´s performance improved as compared

to last year and the country now scores above the EU average.

This is the only SBA area where Finland´s performance improved

significantly since 2008. The main driver of this steady

improvement is the progress in implementing the single market

legislation. As compared to not only last year but also to 2008

when the SBA was adopted, Finland improved its performance in

all relevant indicators. Hence, the average delay in transposing

overdue directives fell from nine months to the record low of

two months. The number of infringement proceedings dropped

from 18 to 13 between 2014 and 2015. During the same period,

the number of single market directives not transposed fell from

four to the record low of three.

The trading performance of Finnish SMEs was less dynamic. In

the first years of the crisis, the proportion of SMEs importing

from and exporting to the single market fell. It stabilised at a

lower level only from around 2011 onwards. In 2013, there were

still fewer SMEs trading than there were at the onset of the

crisis in 2008. These figures are only for the manufacturing

sector, however. Similar figures for Finnish SMEs trading in

services are not available. However, it is expected that the

dynamic development of the highly internationalised Finnish IT

sector will counterbalance the situation in the manufacturing

sector.23

Since 2008, several measures related to the single market have

been implemented. In November 2013, the government

introduced the obligation for ministries to enforce fair

competition in the development programme, thus generally

promoting the single market. However, different ministries have

implemented this to different degrees.

The main gap in this policy area relates to insufficient work on

electronic interoperability in the internal market. In general,

contrary to the progress elsewhere in the e-administration,

Finland lags behind other countries in terms of opening up e-

services and using electronic signatures. Some progress is

expected when the EU eIDAS Regulation comes into effect in

July 2016.

There has been progress in terms of services to SMEs. The

Finnish Standards Association launched a new web shop and

online subscription service to keep information on standards

updated online. The association also provides information

services and courses for SMEs, on how to better apply standards.

Moreover, use of the SOLVIT problem-solving system located in

2016 SBA Fact Sheet — Finland 14

the Ministry of Employment and the Economy is actively

promoted in various SME portals. Finland has also set up a

Product Contact Point and a Point of Single Contact for service

providers to assist companies with various issues related to the

single market.

An assessment of the competition legislation is also envisaged.

The project will start in September 2016 and is expected to last

until February 2017. In this process, any necessary changes to

the legislation will be introduced, within the framework of EU

competition law. The Ministry of Employment and the Economy

has set up a working group to oversee the legislative reform.

No additional significant measures were adopted under this SBA

principle during the reference period.

The SBA agenda in this area has been almost completely

implemented.

3.7 Skills & innovation

Finland continues to perform above the EU average in this SBA

area. Despite its performance in some individual indicators

deteriorating since last year, it remains among the EU´s

frontrunners in Skills & innovation. Although there was little

change as regards the innovation indicators, some of the IT-

related ones fell as compared to the previous year, albeit only

slightly. This was true for the portion of SMEs who purchased

online and trained their employees in ICT skills. The biggest

change was the drop in the proportion of employed people with

ICT skills, from 26.4 % to only 23.2 % in 2015. However, despite

this unfavourable trend, Finland still retains its top position in

this area. Also, Finland still has the highest percentage of

companies that provide ICT training to their staff. However, the

recent trends underline the need for further initiatives so as to

not lose this competitive advantage.

Finland has many existing initiatives to build on in this area.

Skills & innovation was a priority for policy making even before

2008, as was a specific focus on ICT. Tekes, Finland’s most

important innovation financing organisation, has progressively

shifted its focus towards SME finance, through the introduction

of several smaller scale campaigns and a new SME innovation

financing instrument. This focus is also clear from the fact that

funding for SMEs has been largely left intact despite budget

cuts. Public procurement is also being pursued as a strategic

instrument for boosting innovation. According to the Finnish

2016 SBA Fact Sheet — Finland 15

Government’s 2015 Strategic Programme, the objective is for

5 % of public contracts to be dedicated to innovative products or

services.

Work is still needed to open up national innovation instruments

where this would also benefit SMEs from other Member States.

Not enough is being done to support SME access to transnational

research activities. Measures are still mostly domestically

oriented, although there have been attempts to open

programmes up internationally.

A key challenge in this area is that the relatively extensive

investment in R&D activities has not generated enough new

business as a result24. This has been one of the main reasons

behind the gradual shift in the focus of support, from

technology-based projects towards more business-driven

projects, with attention being paid particularly to business

development, marketing, internationalisation and growth. This is

especially relevant for SMEs, who often struggle to capitalise on

the benefits of their product and service development.25

The most notable new measure introduced during the reference

period is the ‘Investment fund for early-stage research-oriented

enterprises’ set up by Tekes Venture Capital. The fund aims to

assist early-stage companies that commercialise innovation

based on public research.

3.8 Environment

Finland performs above the EU average in this SBA principle

area. It has improved its relative position as compared to the

previous year, when its performance was on par with the EU.

Between 2013 and 2015, Finland improved in practically all

aspects of this area. There are now slightly more SMEs that have

invested in resource-saving measures. The proportion of SMEs

producing green products and services jumped from 24 % to

36 %. This large increase was accompanied by a rise in the

proportion of SMEs benefitting from public support for the

production of these goods and services from 27 % to 41 % in

2015. Only the proportion of specialist green producers, i.e. firms

which generate at least half of their turnover from green

products, fell, from 22 % to 16 %, emulating a similar fall in

almost all other EU Member States. Finland´s positive trend is

even more remarkable as it occurred against the backdrop of a

general drop in resource-saving and green investment in most

other EU Member States. Given that, despite recent progress, the

proportion of SMEs investing in resource efficiency still trails

behind the EU average, there is still some room for

improvement.

A number of policy measures in this area may have contributed

to this recent trend. In terms of policy support, several

organisations have put in place dedicated funding programmes

focusing on environmental solutions since the adoption of the

SBA. Examples include the Tekes ‘Water 2008-2012’, ‘Groove —

Growth from Renewables’ (2010-2014), ‘Green Growth’ (2011-

2015) and ‘Green Mining’ (2011-2016) programmes. Moreover,

‘Cleantech Finland’, a network of Finnish cleantech companies

and experts, was set up to connect companies and investors and

promote the adoption of environmental technologies.

Indeed, bioeconomy and cleantech have increasingly been seen

as strategic areas for the Finnish economy, providing new

growth opportunities for knowledge-intensive SMEs, as well as

SMEs in the more rural areas. According to recent data, SMEs in

the cleantech industry have more positive expectations about

the economy, are more internationally oriented, and plan to hire

more staff in the short term than other Finnish SMEs.26 The

government introduced the ‘Strategy to Promote Cleantech

Business in Finland’ in 2012, aiming to accelerate the growth of

the Finnish cleantech industry and to renew the traditional

industry through innovations in clean technology. The vision is

2016 SBA Fact Sheet — Finland 16

that in 2020 Finland will be a global superpower in the cleantech

business. This will be supported through close cooperation

between administrations.

Although no new significant measures related to this SBA

principle were implemented during the reference period, several

pilot and test projects are expected to be launched in 2016-

2018, particularly in relation to cleantech. Tekes is to receive a

total of EUR 23 million between 2016 and 2018 for various

business innovation projects. Furthermore, measures related to

innovative public procurement are planned, to facilitate licencing

for new green pilot projects (e.g. in low carbon traffic and energy

systems), and the projects’ start. All these plans are geared

towards supporting cleantech start-ups, but are also predicted to

have a positive impact on SMEs in general.

However, there are still some gaps to be addressed under this

policy area. For instance, Finland has few tax incentives,

regulatory schemes and subsidies to finance sustainable and

eco-friendly businesses, and the environmental approach does

not always appear to be a cross-cutting theme of SME policy.

There is also further work to be done to better leverage State aid

as a possibility for supporting investment in the environmental

and energy fields. Moreover, environmental issues and policies

are still partly perceived as a hindrance to entrepreneurship and

growth, especially if a regulation is implemented ineffectively.

3.9 Internationalisation

Finland´s score in this area dropped below the EU average this

year. The reason for the sudden fall is, however, mainly

technical: the definition of the indicators measuring the

administrative procedures related to trading with non-EU

partners has changed. The original source for these indicators,

the World Bank, had adjusted the indicator calculation in a way

that put land-locked countries at a systematic advantage vis-à-

vis the others, including Finland. Essentially, not much has

changed in the trading conditions and the trading performance

of Finnish SMEs. The proportion of SMEs exporting to non-EU

destinations has even increased over the previous year, albeit

only very modestly. This proportion has gradually increased since

2008, from around 10 % to almost 12 %. Also, as was

highlighted in section 3.6, the cited numbers refer to the

manufacturing sector only. In Finland, recent economic

dynamism has been concentrated in the service industries and

most notably those linked to ICT27. It is, therefore, very likely that

figures rather underestimate the true export dynamism of Finish

SMEs.28

The positive trend has been supported by a considerable amount

of policy measures since 2008. Finland has traditionally been an

export-driven economy. However, following the decline in exports

since the record year of 2007 and given the small domestic

market, specific measures to better support the

internationalisation of SMEs were needed, particularly in light of

their increasing role in the economy.

As a result, internationalisation measures were introduced, with

the ‘Team Finland’ initiative launched in 2012 being the most

important one. Since then, the first joint instruments have been

implemented, and some organisational changes have been

carried out. One example is the reform of Finpro, the main export

support organisation, to better cater to the internationalisation

needs of SMEs.

However, companies’ awareness of the new services should still

be improved. Consequently, further measures related to the

2016 SBA Fact Sheet — Finland 17

development of Team Finland are expected to be introduced in

the future.

During 2015 and the first quarter of 2016, Team Finland’s

revised service model, the ‘Team Finland Trade Fair Funding’,

was introduced as a new measure in late August 2015, in

cooperation with ELY Centres, Finnvera, Finpro, the Finnish

Industry-investment, Tekes and the Ministry of Foreign Affairs.

The new model further streamlines the activities of various

organisations that are working in Team Finland. The new

centralised contact points have made it easier for companies to

seek help. Moreover, companies with an ambitious

internationalisation plan will get a joint service plan from all

relevant organisations. The internationalisation activities include,

for instance, market research, networking, training and business

development support and financing.

Overall, Finland has addressed the SBA recommendations for

this principle area in full.

4. Interesting initiative

Below is an example of an initiative from Finland to show what governments can do to support SMEs:

Finnvera Junior loans (Finnveran juniorilainat)

Announced in December 2015, ‘Finnvera Junior loan’ financing aims to attract market-based financiers to finance riskier projects,

which they might not have otherwise agreed to support. Junior loans will particularly target SMEs and mid-cap companies with plans

for significant growth and/or major internationalisation. The main idea of the measure is to enable SMEs to access ‘riskier’ financing,

at more affordable terms. The government compensates 75 % of any credit losses on junior loans granted by Finnvera, with money

from the state budget. Junior loans refer to a borrowing condition which has a lower priority compared to other loans, with each case

to be agreed based on corporate liabilities. Junior loans are not a new instrument per se, but are very important in securing funding

for riskier business activities, such as internationalisation. This is particularly relevant for SMEs, who often face problems in accessing

financial support for such projects. Finnvera’s Junior loan programme is expected to grant junior loans of up to EUR 300 million

between 2016 and 2018, with government spending for compensation of losses amounting to around EUR 31 million. The measure

ultimately seeks to strengthen the financial position of SMEs and promote their competitiveness.

References:

https://www.tem.fi/ajankohtaista/tiedotteet/tiedotearkisto/vuosi_2015?119950_m=119699

2016 SBA Fact Sheet — Finland 18

Important remarks

The European Commission Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) produces the

SBA fact sheets as part of the SME Performance Review (SPR), its main vehicle for economic analysis of SME issues. They

combine the latest available statistical and policy information. Produced annually, they help to organise the available information

to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an

assessment of Member State policies. Rather, they should be regarded as an additional source of information to improve

evidence-based policy-making. For example, they cite only policy measures national SME policy experts consider relevant. They do

not and cannot reflect all measures the government has taken over the reference period. There is more policy information on a

database accessible from the SPR website.

SME Performance Review:

http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review/index_en.htm

grow-spr@ec.europa.eu

Small Business Act:

http://ec.europa.eu/growth/smes/business-friendly-environment/small-business-act/index_en.htm

European Small Business Portal:

http://ec.europa.eu/small-business/index_en.htm

Endnotes

1 The two graphs below present the trend over time for the variables. They consist of index values for the years since 2008, with the base year 2008 set at a value of 100. As from 2014, the graphs show estimates of the development over time, produced by DIW Econ on the basis of 2008-2013 figures from Eurostat’s Structural Business Statistics Database. The data cover the non-financial business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover companies in agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review/index_en.htm

2 Neogames Finland Ry: The Game Industry of Finland 2015, 10.03.2016, http://www.neogames.fi/the-game-industry-of-finland-2015/, last accessed 30.03.2016

3 Neogames Finland Ry. The Game Industry of Finland Report 2014, 24.03.2015, http://www.neogames.fi/fgir2015/, last accessed 30.03.2016

4 Confederation of Finnish Construction Industries RT, 16.02.2016, https://www.rakennusteollisuus.fi/Ajankohtaista/Tiedotteet1/2016/rakentamisen-suhdannetilanne-kohenee/, last accessed 30.03.2016

5 Finnish Ministry of Finance, Budget Review 2015, 22.01.2015, http://vm.fi/en/publication?pubid=3203, last accessed 30.03.2016

6 Bengt Holmström, Sixten Korkman and Matti Pohjola, 21.02.2014, ‘The nature of Finland’s economic crisis and the prerequisite for growth’, http://vnk.fi/documents/10616/339615/The+nature+of+Finland’s+economic+crisis+and+the+prerequisites+for+growth+-memorandum/07f3b69a-25cb-4347-a713-b0f91c23a931, last accessed 07.06.2016

7 Ministry of Employment and the Economy, ‘Manufacturing as part of a vital enterprise structure’, September 2014, https://www.tem.fi/en/current_issues/publications/innovation/manufacturing_as_part_of_a_vital_enterprise_structure.98141.xhtml, last accessed 07.06.2016

8 Government’s Analysis, Assessment and Research Activities, ‘Finland – The Silicon Valley of Industrial Internet’, August 2015, http://vnk.fi/documents/10616/1456483/Finland+-+The+Silicon+Valley+of+Industrial+Internet/33256c4d-68ce-45a7-99e2-7ab16a2b9a6b?version=1.0, last accessed 07.06.2016

2016 SBA Fact Sheet — Finland 19

9 Toivonen, M. (2015). Oy Palveluliiketoiminnan mahdollisuudet ja haasteet Suomessa, In ’Palvelutalouden murros ja digitalisaatio – Suomen kasvun mahdollisuudet’. MEE Publications. Innovation 12/201. https://www.tem.fi/files/42534/TEMjul_12_2015_web_30032015.pdf, last accessed 30.03.2016

10 Honkatukia, J., Tamminen, S. and Ahokas, J. (2014): Suomi on jo palvelutalous, VATT Policy Brief 1/2014.

11 http://www.kunnat.net/fi/tietopankit/tilastot/kuntatalous/Sivut/default.aspx, last accessed 30.03.2016

12 Data on business demography from Statistics Finland, http://www.stat.fi/til/aly/2015/03/index_en.html, last accessed 30.03.2016

13 The 2016 SBA fact sheets benefited substantially from input from the European Commission’s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data.

14 The quadrant chart combines two sets of information. Firstly, it shows current performance based on data for the latest available years. This information is plotted along the X-axis measured in standard deviations of the simple, non-weighted arithmetical average for the EU-28. Secondly, it shows progress over time, i.e. the average annual growth rates from 2008 to 2016. These are measured against the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants provides information not only about where the country is located in this SBA area relative to the EU average at a given point in time, but also about the extent of progress made between 2008 and 2016. All SBA principles, with the exception of the ‘Think Small First’ principle for which there is not enough statistical data available, are calculated as composite indicators following the OECD/JRC Handbook guide. A detailed methodology can be consulted at: http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review/index_en.htm

15 The policy measures presented in this SBA fact sheet are only a selection of the measures the government took in 2015 and the first quarter of 2016. The national SME policy expert that CARSA Spain (DG GROW’s lead contractor for the 2016 SBA fact sheets) contracted made the selection. The experts were asked to select only the measures they considered the most important, i.e. the ones expected to have the highest impact in the SBA area in question. The complete range of measures the experts compiled in producing this year’s fact sheets will be published alongside the fact sheets in the form of a policy database on the DG GROW website.

16 http://www.europarl.europa.eu/RegData/etudes/etudes/join/2011/464437/IPOL-ITRE_ET%282011%29464437_EN.pdf

17 Country Report Finland 2016, including an in-depth review on the prevention and correction of macroeconomic imbalances. Commission staff working document, SWD(2016) 94 final

18 Ibid

19 Ibid.

20 It should be noted that while the number of tenders has dropped by 4.5% from 2013 to 2014 (2015 not available yet), the combined value of the tenders has grown over 30%, from €24 billion to €32 billion. (https://www.hankintailmoitukset.fi/fi/docs/tilastot). Although official figures on the average size of tenders were not available, it can be inferred from the above figures that the proportion of larger tenders which were beyond the capacity of regular SMEs increased, with a detrimental effect on the SME participation rate.

21 Another issue is that e.g. municipalities, who cover over half of public procurement, have various own portals for e-tendering (which might cover everything from EUR 1 000 to EUR 30 000), and these may not have been included in the statistics. Typical ‘e-tenders’ under EUR 30 000 are email calls for tenders for a limited number of companies (typically from 3 to 5).

22 PK-yritysbarometri – Kevät 2016, Suomen Yrittäjät, Finnvera Oyj, Työ- ja elinkeinoministeriö. http://www.yrittajat.fi/yrittajat/a/suomen-yrittajat/suomen-yrittajien-tutkimukset/pk-yritysbarometri-12016-319894 (This is a survey of SME views on various market and policy issues, including financing)

23 Exports of services grew strongly in 2015. (http://www.stat.fi/til/pul/2015/pul_2015_2016-05-27_tie_001_en.html.) Exports to non-EU countries are increasing more rapidly than those to the single market However, the proportion of service exports is still small and cannot fully compensate for the decrease in manufacturing exports ( http://www.stat.fi/til/pul/2015/pul_2015_2016-05-27_tau_002_en.html.

24 Tulevaisuuden uudistuva Suomi. Ministeriöiden yhteinen toimintaympäristökuvaus 2014. Osaaminen, luovuus ja innovaatio. http://www.tulevaisuudensuomi.fi/?id=18

25 There is no comprehensive review of all policies concerned, only of selected aspects and initiatives: Tulevaisuuden uudistuva Suomi. Ministeriöiden yhteinen toimintaympäristökuvaus 2014. Osaaminen, luovuus ja innovaatio. http://www.tulevaisuudensuomi.fi/?id=18 and Country Report Finland 2015, including an In-Depth Review on the prevention and

2016 SBA Fact Sheet — Finland 20

correction of macroeconomic imbalances. Commission staff working document. SWD(2015) 45 final http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_finland_en.pdf; OECD. Finland Fit for the Future. February 2013 (https://www.oecd.org/finland/Finland-Fit_for_the_Future.pdf)

26 Country Report Finland 2016, including an in-depth review on the prevention and correction of macroeconomic imbalances. Commission staff working document, SWD(2016) 94 final

27 Statistics Finland. 27.05.2016. Exports of services grew strongly in 2015. http://tilastokeskus.fi/til/pul/2015/pul_2015_2016-05-27_tie_001_en.html

28 http://www.stat.fi/til/pul/2015/pul_2015_2016-05-27_tie_001_en.html