Green investment

At a meeting hosted by pension manager Alecta in Stockholm on Wednesday executives in the financial sector discussed the EU’s forthcoming sustainable finance agenda with Minister Per Bolund and FSA director general Erik Thedéen.

Alecta’s CEO, Magnus Billing, who is the only Swedish member of the European Commission’s high-level finance group, gave a summary of the group’s work. A final report is to be presented at the beginning of 2018. He also announced that Alecta will be investing SEK 800 million in NN-FMO Emerging Markets Loan Fund, which is managed by Dutch development bank FMO, and which invests in job creation, mainly in finance, energy and agribusiness.

Challenges face Sweden’s high streets

The Swedish Property Federation (Fastighetsägarna) reports that retail sales increased in town centres by 2.5% in 2016, while total sales increased by 5%. High streets now account for just 20% of the annual value of all retail sales while malls and out-of-town retail parks have a market share of almost 40%.

In a study of 52 town centres, the federation finds that food stores, tobacconists, Systembolaget and restaurants and cafés increasingly account for the small rise in high street sales and that new strategies are needed, as online sales take a greater share of the market. If town centres are to thrive, priority must be given to the construction of new housing and workplaces.

Plans to scrap tax on advertising in periodicals

On 1 January 2017 the government cut the tax on advertising in periodicals from 3 to 2.5%, costing the Treasury some SEK 20 million annually. It now plans to scrap the tax entirely as of 1 January 2018.

The cut will apply to daily newspapers and other publications that are issued at least four times a year. The move is expected to cost the Treasury a further SEK 15 billion.

Finance Minister Magdalena Andersson motivates the abolishment of the tax, saying a free and independent press is a vital component in a healthy, democratic society and stresses the importance of an independent press in this age of fake news.

Politicians need to act now

Politicians must guarantee Sweden’s research competitiveness, otherwise Huwaei’s R&D in the country is at risk, warns Kenneth Fredriksen, the CEO of the Swedish unit of the global ICT solutions provider. Stockholm risks dropping out of the list of the world’s best digital cities within five years if politicians are unable to guarantee universities of excellence, housing and efficient infrastructure.

Fredriksen believes 5G will fuel economic growth as the technology can resolve dilemmas such as the environment and transport but society must invest. However, he, like many others, does not envisage any real growth in the telecoms sector in the next few years. Nevertheless, he believes 5G will create 50-100 billion new connections within a decade, which will fuel growth in one way or another.

Government opens its purse

Finance Minister Magdalena Andersson promised a record election budget when she met journalists yesterday prior to budget negotiations in Harpsund. The investments so far presented for welfare, the police and defence amount to around SEK 10 billion, and she is willing to consider more reforms.

However, the National Institute of Economic Research’s (NIER) Ylva Hedén Westerdahl commented: “We are surprised that the government has so much room for reform. In our forecast, it would mean that they are moving away from the new surplus target.” She points out the government views the underlying potential of the economy more positively.

The Liberals’ economic spokesperson Mats Persson focused on what he sees as a lack of job reforms, which means new arrivals will not get into employment. “It is remarkable that a Social Democrat government is allowing a new underclass to develop,” he says.

Gothenburg losing out

Container volumes at the Port of Gothenburg collapsed by 22% during the first half of the year and in June fell by 60%. The catastrophic figures are due to the conflict between the union and APM Terminals. Magnus Kårestedt, the CEO of the Port of Gothenburg, is warning that the conflict will affect Swedish business and jobs.

“This is a tragedy. Volumes which gradually and arduously have been built up over more than a decade and a half have disappeared in a very short space of time,” says Kårestedt. He adds that the conflict is affecting business throughout Sweden since the Port of Gothenburg is Sweden’s largest port and is linked to vital markets.

The Port of Gothenburg considers the Swedish Dockworkers’ Union to bear the brunt of the blame for the damaging conflict as the union will not accept members’ proposals for a solution.

Two-front attack

One of the welfare sector’s heavyweights has attacked both the government and the alliance for the political handling of profits in welfare.

“This type of reform must have support in reality. We are talking about hundreds of thousands of children, thousands of health centres and elderly care homes. It is a very important part of the Swedish model,” says education giant AcadeMedia’s CEO Marcus Strömberg.

“Of course the government has the ultimate responsibility but I also think that the alliance parties have contributed to this polarisation,” he adds. He believes the threat of a vote of no confidence has damaged the climate for discussion and he defends compromising across the political divide.

He adds that one way of creating margins in the case of a profit cap on welfare would be to increase operating capital by buying school premises but “we do not want to be a property company. We are experts at education but since they have put forward the proposal we have to take a stance on how we go forward.”

Haldex conflict escalates

On Thursday an extraordinary meeting of Haldex’s shareholders ordered the board to fully comply with the bidder, German Knorr-Bremse. The board withdrew its support for the bid in June as it believed the European Commission would likely turn down the deal. Since then Haldex has chosen to break off all collaboration with Knorr-Bremse over the bid.

After the meeting CEO Jörgen Durban kept his stance to ignore the board’s order. “We cannot implement the decision as it would benefit one owner, but damage Haldex.”

Temporary factors help push inflation over 2%

The Consumer Price Index (CPI) rose by 0.5% in July. The 12-month rate was 2.2%. Price increases on package holidays contributed 0.3 percentage point to the change, while increased prices on international flights and electricity contributed 0.2 percentage points each.  The underlying inflation rate (CPIF) rose from 1.9% in June to 2.4% in July, its highest level since December 2010.

The Swedish krona strengthened on the news while the stock market fell. The reaction is justifiable given that the inflation rate is over the 2.0% target set by the Riksbank, which could bring forward plans to raise the benchmark repo rate, argues DI.

But, even if the July data may lift the mood at the central bank, it is too early to celebrate. A number of temporary factors contributed to the increase, as did a new way of measuring inflation and tax hikes on electricity.

Fall in global markets a threat to Sweden’s GDP

Oxford Economics has said that a stock market correction could affect global growth; a 10% fall in global markets could have the potential to pull down growth and consumption in developed economies by as much as 0.3%.

The actual impact on consumption would vary from country to country, depending on the circumstances. However, economies with higher market capitalisations would be worst affected by the correction, argued the think tank, noting that Switzerland has an unusually high market capitalisation in relation to GDP. The same is true of Singapore, the United States and Sweden.