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.”
After almost five months in the White House, Donald Trump’s trade policy is still unclear. This uncertainty is affecting Swedish export companies.
“The only concrete things we have seen is that he wants to renegotiate the North American free trade agreement Nafta, and that he has withdrawn the USA from TPP, the deal with Asia. We do not know more than this,” says Anna Stellinger, director general for the National Board of Trade. She continues, “Uncertainty is never positive. Not for trade and not for companies that want to invest.”
Anna Stellinger points out how important a market the USA is for Swedish companies. The board has calculated that 139,000 Swedish jobs are linked to Swedish exports to the USA.
Both the government and business are hoping for a boost to exports to Canada as duties are waived on the world’s tenth largest economy. Despite protests the CETA agreement will be implemented in February and trade minister Ann Linde (S), says, “I believe that CETA will be a vitamin injection and a lift for Swedish exports to Canada, bringing both new jobs and more growth to Sweden.”
DI reports that exports to Canada fell by 23% between 2006 and 2015, something Ann Linde puts down to high duties and complicated procedures.
The government is making a serious attempt to sell the fighter jet Gripen to India, a deal that would be the largest ever in Swedish history with a value far over SKr 100 billion. The Indian government recently sent an invitation to defence group Saab to participate in the tender for fighter jets.
Next week a delegation from Sweden, including enterprise minister Mikael Damberg, travels to India, on the initiative of Marcus Wallenberg, who is leading a new Swedish-Indian business cooperation. ABB’s CEO Johan Söderström, Alfa Laval’s CEO Tom Erixon, financier Carl Bennet and Saab’s CEO Håkan Buskhe will also be part of the delegation.
Mikael Damberg comments on a possible sale of Gripen: “It would not only be the largest deal ever, it would also mean a close partnership between Sweden and India for decades to come, which of course would mean a great deal for Swedish industry and our potential to grow in the whole of Asia.”
The value of Swedish exports of goods to the UK fell by 19 per cent, or by some SKr 10 billion kronor, between January and July.
Fresh data from the Stockholm Chamber of Commerce shows that exports of medicinal and pharmaceutical products to the UK fell by 38 per cent, chemical products by 23 per cent and paper products by 15 per cent, compared to the corresponding period last year. This is equivalent to a collapse in export value of SKr 2.5 billion.
Andreas Hatzigeorgiou, the Stockholm Chamber’s chief economist, sees cause for concern. “If the effect were to persist, this could lead to fewer jobs and lower growth in Sweden,” he warns.
Olle Grunewald, an analyst at the National Board of Trade, believes it is too early to establish a link between the fall in the value of exports and Brexit. However, the uncertainty that prevailed ahead of the referendum may have affected exports.
Enterprise and innovation minister Mikael Damberg unveiled a new 22-point plan on Monday, seeking to encourage growth and increase Sweden’s exports.
Expressing concern over the country’s weak export growth, the minister said the government intended to allocate SKr 800 million to stimulate Sweden’s presence in global markets.
The plan includes the opening of new embassies and consulates in export markets, financing to facilitate the export of goods and services, as well as proposals to attract foreign investment and improve Sweden’s image overseas.
Damberg noted that Germany and the Netherlands have both enjoyed better export growth than Sweden. He also pointed out that Asia is expected to growth twice as fast as Europe, to where some 70% of Sweden’s exports go. “Sweden will miss out on more than half of the expected growth in value, unless it is able to redirect its exports,” he said.
On Monday the government announced a new package of measures designed to boost Swedish exports and the innovation climate. SKr 226 million will be earmarked towards the initiative this year and SKr 315 million annually thereafter up to the end of the government’s term of office.
However, Dan Olofsson, owner of Danir AB, does not give much for the drive, pointing out that the government intends to raise taxes by SKr 20 billion in 2016, but will invest just 1 per cent of the revenue generated on export promotion. He also slams the argument put forward by the government that higher taxes on businesses and on labour will create more jobs.
“They transfer billions from enterprise to the state and believe the state is some kind of expert in creating jobs and in economic dynamics, which I do not believe. Globally, competition is stiff and we should look after our businesses. Heaping costs onto companies is fundamentally wrong,” he says.
The Confederation of Swedish Enterprise is also critical, saying the funds allocated for the initiative, which may or may not have an impact, are nothing compared to the taxes that will shortly be levied on companies.