28.09.2021 -

Services recover from COVID-19 pandemic at varying paces: recovery still far from complete in many service sectors

Economic survey in brief

  • Recovery is still far from complete in many service sectors, reveals the new economic survey by Palta. According to the Palta forecast, the service sector turnover will increase by a total of 6% this year, yet the remaining year will not be enough to compensate for last year’s decrease.
  • Service export is expected to increase by only a couple of per cent this year. Last year, its value decreased by up to 16%, prompted particularly by the collapse of travel export.
  • Employment in the service sectors develops at different speeds. Entertainment and recreation, passenger traffic, tourism, as well as personal services, were heavily damaged by the COVID-19 pandemic and until next year, their employment numbers are still expected to remain thousands below pre-pandemic times. However, the total employment number of the service sectors is expected to grow by 22,000 employees.

Recovery from the coronavirus crisis is still ongoing in many service sectors, reports the new economic survey by Service Sector Employers’ Association Palta. The service sectors of traffic and logistics, entertainment and recreation, tourism and personal services, all represented by Palta and heavily damaged by the pandemic, still have 15,000 fewer employees than at the start of the pandemic. These sectors will not be seeing improvements in their employment numbers this year. Next year will see reductions to the gap, yet employment numbers will still remain thousands below the pre-pandemic level.

– Recovery in the most affected sectors will mostly be very slow. In traffic and logistics, the turnover is expected to increase by close to six per cent this year, whereas last year it plummeted by a fifth due to the challenging circumstances of passenger traffic. Tourism will also revive very slowly, says Martti Pykäri, Chief Economist at Palta.

According to Palta, the service sector turnover as a whole is expected to increase by approximately six per cent this year, yet the remaining year will not be enough to compensate for last year’s decrease. Finland’s service export is expected to increase by only a couple of per cent this year, since last year its value decreased by up to a sixth, particularly due to the collapse of travel export. The recovery of export will be delayed until next year.

– Internationally compared, Finland’s tourism incomes have plummeted exceptionally hard during the pandemic. Tour operators’ and tourism agencies’ turnover is still over 80 per cent on the minus side. The collapse in passenger traffic has been unprecedented. During the pandemic, the sector has lost approximately 9,000 jobs, with 3,000 more job losses expected for this year. Finland’s restrictions on entry are no longer justifiable and should therefore be discontinued. Otherwise, we will risk permanently losing some of our market shares in logistics and tourism, says Pykäri.

According to Pykäri, the recovery of culture, entertainment and recreation services also has a long way to go, and the sector will not return to its pre-pandemic level this year.

– A moderately quick recovery is still possible, however, it requires gaining back the consumers’ trust. Service consumption must be activated.

Employment in service sectors expected to increase by 22,000 next year, skills gap a growing problem for businesses

Employment in service sectors is expected to increase by 12,000 this year and by 22,000 next year. However, the improvement of employment is being threatened by an extensive skills gap. Skilled employee shortage hinders growth in every third business in the service sector. The shortage is particularly notable in services such as architecture, engineering and programming.

Employee shortage cannot be solved without foreign experts. Work-based immigration must be facilitated further. In addition to smoothing the application processes, support services for the immigrants’ families must be prioritised more. Furthermore, determination of the availability of labour should be given up on at least the largest needs sectors, says Pykäri.

Last year, employment in service sectors increased by only 2,000 in total, whereas during the two years preceding the pandemic, the total growth was 46,000. In 2020, employment mainly increased in information and communication and business and expert services, which have seen an increase in employment throughout the pandemic. The employment numbers of these sectors are expected to grow by approximately 9,000 in total also this year. However, the growth pace of these fields of expertise is expected to weaken towards the end of the year.

– Recovery happens at a very different pace in different service sectors. It is vital to consider the characteristics of each sector also in the upcoming negotiations round. Local solutions will play an even more important role.

The State of the Service Economy report surveyed the changes in the economic situation of private services. In Finland, private services employ more than one million people and have created more than 380,000 new jobs in the 2000s. The report analysed the development of the logistics, information and communications service, business and expert services, administration and support service sectors as well as other service sectors, excluding the trade, tourism, catering, educational and health and social services. In the report, the export figures of services cover the foreign trade of all economic sectors in terms of services.

Additional information:

Martti Pykäri, Chief Economist, Service Sector Employers’ Association Palta
tel. 044 363 9353, martti.pykari@palta.fi

Martti Pykäri

Chief Economist, Director, Information Services