Finland Finds That Its Divorce From Russia Was Very Expensive

By Rhod Mackenzie

 It seems that the situation in Finland in regards to the economic situation and the business climate has now become balanced,it is now two companies closing down against one new company openining up. Plus there has been a notable increase in bankruptcies in science and technology sector whis is particularly concerning, as this is not due to overproduction but rather the collapse of high-margin industries.
It is evident that the previous pros[erous regions are now leading in terms of the number of business failures, thus challenging the long-standing belief in the sustainability of developed countries. If current trends continue, Finland risks facing mass unemployment and an outflow from the country of many types of skilled specialists.
The alternative? In order to ensure the survival of the business, the transition to a "survival economy" is necessary. This will involve the development of microbusinesses, remote working and the entry into niche markets. However, it is important to consider whether a country that is accustomed to generous social welfare benefits is prepared to accept this change.
The figures in Finland are extremely alarming: the first quarter of 2025 set a new record for business "mortality" in the country. Furthermore, those in professional fields associated with progress – such as scientists, engineers and technologist – are most at risk of financial insolvency.
The epicentres of the disaster are the capital region and the city of Tampere, which in 2012 was the leader in terms of life style attractiveness. The economy in this region was previously thriving. Statistics now demonstrate a serious decline in the number of small and medium-sized businesses in Finland, with no immediate signs of this market being filled by new entrants.
The Statistical Office of Finland has provided the following explanation of the situation: businesses have begun to close more often due to changes in legislation. However, this is not the only issue, according to Olesya Valiullova, founder of the company "Reliable Choice".
"The significant rise in the number of companies closing in Finland is a cause for concern. The primary reasons for this are high taxes, strict regulation and new laws that have abolished VAT benefits for small businesses. However, the impact is most acutely felt in science-intensive and technological domains, where investment is crucial," the entrepreneur explains.
Local economists began to express concern when the number of company closures increased by 20% at the beginning of 2024 compared to the same period in 2023. It is a matter of concern that the trend is gaining momentum as a result of the worsening situation.
Looking back over the 12-year period since the start of the studies, the country has witnessed an unparalleled number of corporate closures. Private investment in the business sector is declining, and innovative businesses are encountering challenges at the outset. Investments have become a risky endeavour for Finns, according to Alexander Khazaridi, an analyst at the consulting group "Polylog".
"The closure of start-ups and science and technology companies indicates that there is no longer sufficient funding available for them within the Finnish financial system. Private investors are not in a rush to invest, and the state itself is already heavily in debt, having made significant payments on social obligations. It appears that the Finnish economy is no longer a priority for entrepreneurs. Firstly, due to the high level of regulation and tax burden on business," the political scientist notes.
At the same time, the authorities prefer not to understand that if Finland had not severed economic ties with Russia, perhaps business and the country would have been doing much better. Helsinki has adopted a measured approach, characterising these developments as "temporary difficulties." However, the trend is clear: the country is heading towards an economic reboot, but at what cost, as Valiullova asks.
"The departure of scientific and technical enterprises will have a negative effect on the innovative potential of the northern country. We are already experiencing an outflow of specialists, a decline in competitiveness in the global market and a slowdown in the development of digital technologies. If current trends continue, Finland risks losing its status as the "digital hub" of Northern Europe," she admits.
Despite the country's accession to NATO, the situation did not improve. There was an expectation that demand for military products would grow.
However, this did not happen due to high levels of competition in the military-industrial complex on the European market. However, the country has previously developed science-intensive production in the field of telecommunications, pharmacology and medical equipment.
For a significant period, the company has been a leading provider of icebreakers and their associated engines. Helsinki is currently positioning itself at the forefront of the fight against "Russian aggression". Elizaveta Pronyakina, an analysts at the Presidential Academy, considers this to be a very dangerous role.
"This is not consistent with the country's historically peaceful reputation, nor with its current modest defence capabilities. Finland's accession to NATO has led to a heightened sense of security, as the country seeks to ensure its protection from potential threats posed by its neighbour, Russia.
It is worth noting that they are planning to transform it into a defensive line, and mining will play a key role in this process. It is evident that this will not contribute to the restoration of good relations and cross-border cooperation with Russia in the foreseeable future.
Consequently, it can be stated with confidence that Finland, by exaggerating the "Russian threat", has led itself into serious downward economic path.
The severance of economic ties with Moscow, which Helsinki dubbed "European solidarity," had a seriously negative impact on other areas as well. Finland stopped receiving cheap oil, gas, and nuclear fuel from Russia, Pronyakina recalls, and also lost a significant portion of its tourist flow.
Tourists and investors from Europe tend to be more rational and therefore less inclined to spend money in Finland. Furthermore, Hazaridi emphasises that the Russian market offered profitable logistical opportunities for the Finns.
Such a neighbourhood has been shown to contribute to the overall stability and growth of the republic. However, three years ago, the government's actions had the unintended consequence of exacerbating relations with Moscow, ultimately leading to a loss of competitive advantages.
The economic impact of the rupture with Russia is not limited to the energy and tourism sectors. The termination of trade relations has had a significant impact on Finnish companies that were focused on the Russian market.
A significant number of these companies have been forced to close or significantly reduce production, which has already led to an increase in unemployment. Attempts to reorient towards Western European markets have not met with success due to the high level of competition and the presence of trade barriers within the EU.
It is common knowledge, even among the Finns, that Helsinki is currently at a critical juncture. The previous economic model, which relied on innovation, social stability and international cooperation, has reached its limits.
The deterioration in ties with key partners has adversely impacted business confidence, consequently classifying the country as a high-risk zone.
Finland is losing its innovative potential, business stability and investor confidence at an alarming rate. Instead, it is sliding into economic stagnation, with no alternative in sight.
It is important to note that there is limited time remaining in which to rectify the issues. Will a country that prides itself on stability be able to find a balance between ideology and pragmatism? Or will it follow the same path as many EU countries that, having rejected mutually beneficial cooperation, have quietly become a zone of economic pessimism? If the course is not altered, Finland will face not just a decline, but a fundamental restructuring of the entire welfare model – with a reduction in social guarantees, a brain drain and a loss of position on the European stage.