Weak demand puts two Finnish textile firms at risk of bankruptcy

Two Finnish textile businesses are facing bankruptcy after a prolonged period of weak demand, Yle reports. Blaa clothing brand owner Besign has filed for bankruptcy, while Finland’s Tax Administration is seeking bankruptcy proceedings against Kiteen Tekstiilitehdas over unpaid taxes.

The tax authority says the factory owes more than 31,000 euros. Kiteen Tekstiilitehdas makes about half of the clothing for Tampere-based brand Nouki and also works as a subcontractor for Marimekko.

Domestic demand has remained weak

Ville Salonen, an economist at the Finnish Textile and Fashion Association, said the cases reflect difficulties that have persisted across the industry. The biggest problem, he said, has been weak domestic demand in recent years, a trend also visible in official statistics.

“The past few years have been very challenging. In fact, the whole decade has been such that there have not been many good quarters,” Salonen said.

Besign chief executive Minna Linna said the Covid-19 pandemic and the war in Ukraine changed consumer buying habits, and the market has not returned to its 2019 level. The company had been growing before the pandemic, but demand fell sharply during the crises.

Besign tried to improve its finances by selling off stock, cutting costs and closing shops. Its products were made in Portugal, Lithuania and Finland during the past year, Linna said.

During corporate restructuring, the company managed to make its core operations slightly profitable, but sales were not sufficient to meet its overall obligations, she said.

Some signs of recovery

Salonen said rising costs and weak sales have drained cash reserves and reduced profitability at struggling businesses. Companies that have grown their exports have performed best, he said.

He expects consumer demand to improve, although more bankruptcies may follow during the rest of this year and next year. Forecasting organisations expect clear economic growth next year.

“The broader picture shows some signs of a slight improvement. Perhaps the economic cycle has now reached its bottom,” Salonen said.