Entrepreneurs: Lack of government support to blame for competitiveness fall

Wood industry.
Wood industry. Source: Ministry of Economic Affairs and Communications

Estonia's declining competitiveness lies with the government and its unwillingness to support businesses and industry during record energy prices, entrepreneurs said on Wednesday.

Standard, one of the best-known furniture manufacturers in Estonia, will scale down its operations and lay off 163 of its 200 employees.

The company has been producing furniture for almost 80 years, Wednesday's "Aktuaalne kaamera" (AK) reported.

Board member Enn Veskimägi said the factories will run until the end of the year and the Kose until January. But production in Tallinn's Mustamäe district will close.

"We just don't dare to take on anything new at the moment," he said, adding the company still has valid contracts with several companies.

Costs have risen due to high energy prices, raising the prices of Standard's products. Seventy percent of its goods are exported and many are sold to hotels.

"We've been in the international hotel market for 15 years. We've been very successful there but at today's prices we just can't compete," Veskimägi told AK.  

The board member said the company's fate rests with the recovery of the market, which no one can predict.

"We are monitoring it practically every day and seeing where the market is going. Today, when I ask somebody when the war [in Ukraine] is going to end, nobody answers."

Many companies facing similar trouble.

"I am absolutely sure that redundancies are to be expected," Estonian Furniture Industry Association CEO Eneli Org told AK.

"There have already been redundancies. Our input prices are the ones that are affecting us and the price of electricity has risen six times, the price of gas has gone up nine times compared to last year."

Another well-known manufacturer, Tarmeko, is able to cope for the time being but described the situation as "very difficult". One reason it can manage is that the company spread its risks between different industries, said manager Jaak Nigul.

But the whole wood industry has similar concerns.

"Both raw material prices and energy prices are up, which are very big inputs," Nigul said. "In Estonia, for example, the price of birch logs is around €200 per cubic meter, and in Finland, it's around €80. This should be a big enough difference to cause all sorts of problems for international competitiveness."

Both Veskimägi and Nigul said the main reason for the loss of competitiveness is caused by a lack of government subsidies. Other governments are providing support, which allows prices to be kept down in neighboring countries reducing interest in Estonia's more expensive products.

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Editor: Barbara Oja, Helen Wright

Source: Aktuaalne kaamera

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