SEB: Lithuanian start-ups are the most active on export markets

THE SEB Baltic Business Outlook survey compared the start-ups in Estonia, Latvia and Lithuania, which have been operating for up to three years. The survey revealed that Lithuanian companies are the most active when it comes to looking at new export markets, and Latvia is initially more likely to contribute to the domestic market.

According to SEB's BBO survey, expansion to new export markets is most eagerly focused on by Lithuania, with 27 per cent of companies actively seeking expansion opportunities. Estonian and Latvian start-ups are significantly more passive in the direction of exports – with 16 and 12 per cent of Estonian and Latvian companies, respectively, focusing on new export opportunities this year. According to SEB Management Board member Ainar Leppänen, it is worth looking for the cause of the export handicap primarily in the strong economy in the Baltic region. «A strong increase in private consumption in the Baltic economy makes the domestic market attractive to young businesses. At the same time, this is a path of least resistance, because in the long term the focus on the domestic market will limit the growth potential of these companies,’ Leppänen explained.

Among Estonian entrepreneurs, the most popular export markets are the Baltics and Scandinavia, while Latvian and Lithuanian entrepreneurs are also actively looking to the US, UK and Germany.

Compared to last year, Estonian and Lithuanian start-ups are more cautious when it comes to hiring new people. As SEB's BBO survey showed, in Estonia the reason may be the increase in labour costs and the shortage of available workers in the labour market, while in Lithuania finding new people is hampered by the emigration of recent years, making it difficult to find a young qualified workforce. At the same time, Latvian companies tend to be more open to new employees, as they have been in the past. «With regard to the share of foreign labour, Baltic companies are quite similar, and the share of foreign-employed workers in the companies is between 6 and 7 per cent. At the same time, given the rising standard of living and labour shortages, the hiring of foreign workers by companies in the Baltics is likely to be inevitable in the future,’ Leppänen finds.

As far as investment in innovation is concerned, Baltic companies are more conservative, and 40-44 per cent of companies are not planning any innovation activities for this year. In broader terms, this share has remained the same over the past year, but a slight increase in the threshold has been observed only in Latvia. ‘This passivity towards innovation is undoubtedly a concern. The shortage of non-EU companies compared to other European countries is noticeable and has a negative impact on the competitiveness of the region,’ said Leppänen.

In terms of the return on sales revenue this year, Lithuanian companies are the most optimistic, with more than a third predicting growth above the 15 per cent threshold. About a quarter of Estonian enterprises predict significant growth, with the number being only 21 per cent in Latvia.