Large corporations ready for low growth

The Financial Group OP in its annual survey of large corporations operating in Finland found that uncertainty and low-growth expectations are prevailing in their plans to cope with the impacts of coronavirus pandemic in 2021.

Although corporate capital spending has declined, corporations are ready to react quickly, once demand increases, said OP in a press release, quoting the survey findings.

The continued uncertainty about the future is reflected in large Finnish corporations’ growth expectations and strategic choices.

Nearly 80 per cent of the responding large corporations said 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 per cent to 19 percent 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 per cent of the responding large corporations pledged 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,” said OP Corporate Bank CEO Katja Keitaanniemi.

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.

OP Financial Group carried out the survey with the NIBS think tank, set up by Aalto University professors, as its partner.