The role of Mittelstand companies in developing the Finnish economy

As the economy continues its usual July slowdown, it is a good time to reflect on the current state and prospects of the Finnish economy and labour market from a slightly broader perspective. The Finnish economy has traditionally leaned on two cornerstones: it has been industry-intensive compared to other EU countries and its technology sector has been a world leader. However, the ever-changing global economy, with accelerating globalisation and technologicalisation, is also forcing us to adapt and find new pillars to ensure our economic prosperity.

Technology and industry are key to Finland's competitiveness

Finland has long relied on industry as a pillar of its economy. In 2022, industry's share of Finland's GDP was about 20% (Statistics Finland), which is clearly higher than the European Union average of 15% (Eurostat). The technology sector is another significant factor, as, for example, the ICT sector employs more than 6% of the workforce in Finland, which is among the top in Europe (Statistics Finland). This combination of industry and technology has been key to the growth and competitiveness of the Finnish economy.

The biggest challenge for the Finnish economy in the coming years is the ageing of the population. According to forecasts, the share of people over 65 in the population will increase from the current 23% to almost 30% by 2040 (Statistics Finland). This means that a larger share of Finns will be outside working life in the future, which will increase the pressure on the sustainability of the public sector. People often talk about the need for more workforce in Finland. Of course, this is true. But how can we create more interesting jobs here that will attract this new workforce?

Medium-sized companies important employers

Particularly interesting in terms of new job opportunities are medium-sized companies, that is, so-called “Mittelstand” companies, which employ 50-250 people. It has been observed around the world that companies of this size have resilience in economic cycles. They are also significant employers. In Finland, Mittelstand companies accounted for only about 0.7% of all companies in 2019. However, their employment impact was considerable, as they employed about 20% of private sector employees and covered about 20% of the total private sector turnover (Statistics Finland). In the light of these statistics, it seems clear that increasing the number of Mittelstand companies would serve as one solution for guaranteeing Finland's economic well-being in the future.

By comparison, in Germany, Mittelstand companies account for about 2% of all companies and, in relation to the population, about 60% more than in Finland. In addition, their employment impact is twice as high and German Mittelstand companies generate around 35% of the country's GDP (DIHK). This shows how important mid-sized companies can be for economic stability and growth.

Medium-sized companies are flexible and adaptable 

A broad base of Mittelstand companies brings stability and flexibility to the economy. The key impact of these companies on economic resilience is explained by their ability to adapt to rapidly changing market conditions and geopolitical situations. Finland has also seen examples of Mittelstand companies that have grown into major international actors.

It is also always interesting to compare with Sweden. There, Mittelstand companies make up about 1.2% of all companies and employ about 25% of private sector employees (SCB). The Swedish economy has benefited from a strong medium-sized enterprise sector, which has supported the country's economic growth and innovation.

More courage and risk-taking

In order to attract more Mittelstand companies to Finland, we need not only the strong support of society and decision-makers, but also more courage and risk-taking from entrepreneurs, owners and investors. Voland Partners is a private equity firm committed to supporting growth-oriented companies by providing not only capital but also business development expertise. Our goal is to be an entrepreneur's partner in the growth journey of Finnish companies.

The future of the Finnish economy is built on a diverse corporate base, where Mittelstand companies play a key role. When we are able to create a favourable environment for medium-sized companies, we can ensure that the Finnish economy remains strong and competitive also in the future. Voland Partners wants to contribute to this goal.