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LATVIA: SMEs focus on local market and new workforce

posted onMarch 15, 2018
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Almost 1 in 6  small and medium-sized companies (SMEs) in Latvia intend to increase the size of their workforce this year according a survey by SEB Bank. At the same time, the number of companies that are planning to reduce their number of employees has declined to 9%. 

In its annual Baltic Business Outlook 2018 the bank found that the number of SMEs has increased in Latvia compared to last year, when the proportion of such companies was 12%.

“Economic growth has helped increase the number of companies that plan to increase the number of their employees. This improvement is moderate. It is limited by high competition for workers. Cautiousness is the dominant mood. It is especially present among small companies. This is proven by the large number of businesses that have plans to accomplish goals with their current number of workers” Baltic News Network quoted SEB Bank’s macroeconomics expert Dainis Gašpuitis as saying. 

The survey also found that 17% of SMEs in Latvia will invest in developing their employees while 22% of companies will invest in improving their products or services and 7% will work on updating their business models. 

Investment appetite remained unchanged compared to the past year with 14% of SMEs planning to invest over 30 000 EUR to develop their businesses, 22% having planned investments of smaller size, while 19% of SMEs have no investment plans for this year. 

As regards business sentiment, the mood of Latvian SMEs has slightly improved over the past year. Most of companies (68%) are cautious optimists, but 9% are pronounced optimists and expect their turnover to grow by over 15%. On the other hand, 23% of Latvian SMEs consider their chances as rather bleak and are preparing for a decline in their turnover the survey showed.

SEB Bank’s macroeconomics expert Dainis Gašpuitis
SEB Bank’s macroeconomics expert Dainis Gašpuitis 

The highest share of optimists is observed in the manufacturing industry (17%) while the lowest share of optimists is recorded in public administration and services industry (4%) and agriculture (6%). 
The trade industry and agriculture have the highest share of pessimists, 28% and 24% respectively. Housing and catering industry is the most stable with only 9% of pessimists and 76% of cautious optimists.

According to the survey, the majority (83%) of Latvian SMEs will continue to focus on their home market most this year. Only 6% of respondents intend to acquire new export markets during this year. The share of companies planning to expand in existing export markets has dropped to 11% since the last year as well.

Below are some quotes by Latvian entrepreneurs who participated in the survey:

  • We are planning to finalize our investment program and start producing products with a higher added-value. 
  • Modernize or automate manual labour. 
  • I will increase production and look for new partners both in product design and finding new, lower-cost materials. 
  • To be able to attract qualified specialists in culture and building management industries, I have to pay higher wages.
  • In 2018 I can only increase salaries by 11%, which, naturally, increases costs for our services. 
  • We will introduce new technologies to reduce necessity for employees. 
  • We will work more efficiently next year, and look for new cooperation partners. 

Totally 4,200 Baltic SMEs completed the survey and 89% of the participants were SMEs with less than 10 employees. From Latvia 1941 companies participated.