Little market impact

Wednesday’s news that Sweden’s centre-right alliance parties are planning a vote of no confidence in three government ministers over a security breach at the Transport Agency had little impact on markets.

According to SEB economist Robert Bergqvist, the strong foundations of the Swedish economy and broad political agreement over the budgetary framework provide protection against political crises and a political vacuum.

Concerns about undermining monopoly

Backed by the Sweden Democrats and the other centre-right alliance parties, local Liberal politicians in Skåne have proposed to the government that wine producers in the region should be allowed to sell their produce at their vineyards for a trial period of three years.

Green politician Anders Åkesson opposes the idea, saying it would undermine Systembolaget’s monopoly. Two government inquiries have already concluded that such an initiative would put the state monopoly at risk

Concerns over tighter monetary policcy

In 2016 Sweden’s national pension funds reported aggregate earnings of SKr 118 billion, corresponding to an average return of 9.7%.

After five years of exceptional growth, which has primarily been fuelled by expansionary monetary policy, there are now indications that monetary policy will tighten.

Kerstin Hessius, the CEO of the Third Swedish pension fund (AP3), has expressed concerns over what will happen when Sweden’s central bank, the Riksbank, starts raising interest rates. She wonders if the adjustment will be dramatic, or orderly, saying that in the worst case scenario it will lead to significant “destruction of capital”.

Skills shortage slows housebuilding

The National Board of Housing, Building and Planning (Boverket) has said Sweden needs to build 700,000 homes by 2025 to solve its housing shortage.

However, a shortage of electricians and plumbers is slowing the process of meeting the housebuilding target. Jens Albrektsson, a spokesman for the employer organisation Installationsföretagen, says the industry would need to recruit an extra 20,000 to meet the target.

Johansson could face vote of no confidence

Sweden’s much-criticised Public Employment Service (Arbetsförmedlingen) plans to split into three, providing a job matching service, and two centres, one for employers and one for job seekers. The agency describes the reorganisation as a “quantum leap” but does not intend to cut its 14,700-strong workforce.

The board has already approved a change in IT service management, and will decide on the other changes in the autumn.

Employment Minister Ylva Johansson does not wish to be interviewed, but suppliers are critical, with one saying that the proposal shows the agency is out of touch with reality.

Elisabeth Svantesson, the Moderates’ labour market policy spokesperson, slates the agency’s timing, given that a majority in Parliament want to close the Employment Service. Johansson is taking a risk by defying the wishes of the Riksdag and not ordering an inquiry into its possible closure and could face a vote of no confidence, according to Svantesson.

 

Time for reflection

Sterling suffered a steep fall on Friday after the shock election result in the UK, wallowing at 1.2735 against the dollar and 0.8783 against the euro.

The weakness of the pound is negative for Swedish export firms as well as for those in the UK importing components to their end products, comments Ulla Nilsson, head of the Swedish Chamber of Commerce in London.

Kitchen company Nobia, which is exposed to the UK market and saw its share price fall by 2.6% on Friday, is already feeling the effects, while construction firm Skanska says it is not greatly affected since it has its revenues and expenses in the same currency.

Claes Jacobsson, head of Scania UK, argues that the outcome of the election will allow time for reflection. “A hard Brexit is not what companies and industry want; it creates too much uncertainty,” he says.

Finance Minister Magdalena Andersson is cautiously optimistic, saying, “If the outcome is that the British want a close relationship to us after they have left the EU then that is good.”

Digitalisation challenging postal services

Much remains to be done before PostNord can win back public trust, says Enterprise Minister Mikael Damberg (S) in a comment to a fresh report on postal services in Sweden.

The Swedish Post and Telecom Authority (PTS) has found that the number of complaints against PostNord and Bring Citymail has decreased since last year, but is still too high.

In the case of PostNord one of the problems is that the company has reduced the number of employees in a cost-cutting campaign, as more letters are sorted by machine. Longer postal rounds and the company organisation are also seen as contributory factors to the poor service.

Digitalisation is also challenging the postal services: the number of letters sent in Sweden has fallen since 2000, and PostNord has consequently lost market share. Bring Citymail’s problem is that the company has grown fast and not adapted its organisation to its increase in market share.

Sten Selander of PTS summarises, saying that when the quality of the postal service falls, more people go over to email.

Threat of strikes hangs over companies

Next week there is the threat of three strikes within Almega’s contract areas. The heart of the Swedish vehicle industry could be paralysed and it could cause commuters major problems. A twenty-year-old Swedish negotiation model is on the line in the dispute.

In the past few days the agreement negotiations have become heated, and it is the Swedish Trade Union Confederation’s (LO) proposal to increase the wages of low-wage workers by 6.5% over three years that is causing the problem. The painters at Volvo Cars, the assembly in Torslanda, vehicle support at Volvo Powertrain but also Ringhals’s nuclear power station are at risk of being called out on strike. There could also be a strike within the rail agreement, which could hit commuters.

Considering legal proceedings against 3i

 

In February 2015 3i put Eltel, which provides technical services for infrastructure services, on the stock market and then dumped the rest of its shares several months before an accountancy problem was discovered in the autumn. Buyers included well-known Swedish funds and pension companies which now feel that they were kept in the dark. According to DI’s sources several of the major shareholders are considering taking legal action against 3i.

The huge power transmission project in Africa, which was accounted for wrongly, causing Eltel major losses, goes back to 2014 when 3i and BNP Paribas owned the company. On Tuesday evening the board decided to report former CEO Axel Hjärne to the police for accounting violations and/or fraud. The shock decision sent the share price plummeting.

Crackdown on estate agents

The Swedish Consumer Agency (Konsumentverket) and the government want to put more pressure on estate agents. From a consumer perspective, the estate agent market is one of the ten most problematic markets, according to a new report by Konsumentverket. “When we buy a property, it is often the biggest purchase we make and there are high risks associated with these kinds of purchases,” says Minister for Consumer Affairs Per Bolund.

Konsumentverket highlights problems such as excessively low prices being set to attract interest, lack of knowledge about the role of the estate agent and lack of independent advice. The agency wants to see a consumer agency for property purchases with personal, qualified and independent advice. The agency also wants a law or regulation that forces estate agents to state an “assessed market value” for the property.