not only taxes but also competition grows

Fewer orders

Fabrica Viridis, the largest market in the Green Furniture Factory, is Germany and the main direction is the production of non -standard furniture for hotels. According to Erika Bauer, the head of the company, the Fabrica Viridis has been exporting its most powerful economy for two years, and the work to stay in this market is really intense – a lot of offers, constant preparation for various projects, requests and many calculations. However, for some time now, due to economic uncertainty, not all inquiries have turned into approved projects.

« The Germans themselves were very important for the elections, the creation of a new government and what the policy will be – saving or not. The decision has been made not to save but to grow the economy, to release it. As I understand it, in Germany, we are looking forward to investors

« The stagnation was actually because there seemed to be a lot of calculations, proposals, but not many as they would like. The Germans themselves acknowledged that investors were hesitant and the interest of banks was higher, but with the new government, the moods changed. »

The complicated economic situation is further aggravated by growing competition. It is not only Poland that has long adapted to the German economy and has a huge amount of production, but also with almost all Eastern European countries. The Balkan states are also very active in the market: Serbia, Kosovo, Montenegro. Their advantage is cheap labor and high quality of products.

It is difficult to compete when the minimum monthly salary (MMA) is growing so fast in Lithuania – according to Bauer, the salaries of the company’s production chain have risen by about 7 percent a year, and more to the administration. « The rise of salaries with all the other increasing taxes for us is a challenge, because not only did we have a carpet, inflation was probably all over Europe. In this case, I am glad that the costs have come up in Germany as well, » she says.

In order not to fall out of the market, when both competition and costs are growing, you have to look for new solutions and offer more added values. It is the preparation of technical drawings of furniture, which in Western countries is indeed very expensive, gives an advantage.

« The reputation, quality of competing is also very important, but we cannot offer the lowest price, we are average and above. But we are given projects that really require high quality, we prove our reliability. We see that we are more reliable than Poles.

Direction: According to E. Bauer, the Western countries know little about Lithuania, and there are still various myths, so the state’s contribution to promoting the country’s business achievements and opportunities would greatly contribute to well -being. / Photo by E. Bauer Personal Archive

According to statistics – leaders

According to SEB chief economist Tadas Povilauskas, due to the complicated economic and geopolitical context, the business mood can actually be inferior, which is equivalent to expectations that indicate a possible future. In addition, the factor of different experiences should not be overlooked. However, economists are based on the overall factual results, and they show that in the first quarter of this year the Lithuanian industry has continued to be among the best in Europe.

“As far as the growth of manufacturing companies, the growth of industrial production, growth in the first quarter was more than 8 %, and according to this indicator, we are one of the leaders in Europe – we grew up last year, growing this year. Again, one of the main sectors is the furniture industry and its first quarter. In the quarter.

T. Povilauskas tends to compare the dynamics of production growth in the period from 2019, ie the last one -year -old. These were times before the Covid-19 pandemia and a large-scale Russian invasion of Ukraine with all subsequent economic consequences.

Competition is very high because Poland has grown very similarly. When it comes to tax, MMA changes, energy, you need to look at Poland.

« Lithuania has been leading in Europe in terms of furniture production for the last five years. To say that competitiveness is lost, we cannot on the factual point of view. However, competition is very high because Poland has grown very similarly.

He agrees that when looking at the future, it is necessary to consider business expectations and observe what the government is doing. There are certainly anxiety and unfavorable signs due to tax reform. « Probably the increase in income tax is 1 % automatically reduces capital returns to the country’s business shareholders. As far as different sectors (…) see that the profit tax in Lithuania may rise for the second consecutive year, it is clear that you start to consider what happens next because there is a growing taxation dynamics.

More threats

Personal income tax (PIT) is equally relevant for Lithuanian business. « Although now it seems that the highest income is already being retracted at 36 % at a rate, if the shareholders would like to sell their shares, it would be much more expensive for natural persons. The dividends would be less attractive.

There are also more changes to reduce business profitability, such as commercial real estate (real estate) fee. It is to increase it by 0.2 % by linking this to the national defense. « Obviously, in this case, commercial real estate fees for factory owners would increase. Some security fee, which would be calculated from the insurance premiums, would also affect the insurance rates, and again, it would be costs, » says Povilauskas.

« The last thing is to look at how MMA changes. How many people in the industry are a little higher than MMA – it affects them. After all, MMA grows, salaries are growing and a similar layer is. Procrement would be a strong negative step, ”says the economist.

E. Bauer also turns to productivity: the efficiency in Lithuania is still quite low – especially in manufacturing businesses, but this does not affect the rise of wages. « Definitely employees require higher salaries, and this is understandable, because everything in our country is expensive. But performance does not do, they do not make it any more, so we need to think, implement such decisions so that the same person does much more work with various tools – artificial intelligence, robotization to help that employee.

It distinguishes that it is because of the purpose of remaining competitive export markets to transfer various tax growth to company pricing practically impossible. « When we started working, on a similar way, we went to pricing almost all the costs, as we imagined it should be. We felt that we were completely uncompetitive our pricing, had to be adapted to the market conditions in the West, or in the markets where we work. Reduces the profits earned by shareholders and owners, ”E. Bauer confirms the claims of T. Povilauskas.

Group: According to T. Povilauskas, in the first quarter of this year, Lithuanian industrial indicators continued to be some of the best in Europe. / A. Ufarto / Photo by ELTA

Search for markets

Fabrica Viridis works not only in Germany but also in the United Kingdom (UK), Scandinavia, gradually trying to have opportunities in France, the United Arab Emirates (UAE). But everywhere you need to work: the first year of starting work in new markets checks the company’s offers, price level, quality, reaction, communication, and small projects.

There was a G-Spot advertising campaign, but we are advertised as a tourist country. I would suggest that we are more promoted from the industry, which businesses really have achieved.

« We are lucky that Germany is our first and most absorbed market. The UK is that sometimes the opinion and ordering are sometimes changed, because, for example, the customer eventually comes up with local, UK -made furniture. – In Scandinavia, the market is slowly coming alive, but it was in complete stagnation. However, there are Latvians outdoors, because they work for a longer period of time in the Scandinavian countries and have achieved greater reliability. ”

The UAE has heard little about Lithuania at all. « First of all, I present the country and what Lithuania looks like in the furniture market, so we always mention that we are one of the five largest suppliers of IKEA-Baldai.

In her opinion, Lithuanian business would be greatly helped by the initiative of the state to strengthen business councils to make them more active: « There are activities, but as I understand it, we are still aware of us abroad. The government can allocate more funds for the presentation of Lithuania and what we produce as our industry is developed. »

“There was a G-Spot advertising campaign, but we are advertised as a tourist country. I would suggest that we would be more promoted from the industry, which businesses really have achieved because foreign investors are surprised by what we have and we can. In Western countries, we still think that it is Eastern Europe. They know the situation to Poland, and behind it, – E. Bauer shares his experience. – They are still scary that these countries cannot be of high quality, that we cannot be very advanced. We now need to sell the country itself and prove who we are and, by the way, that there is no war here. ”