“OP Corporate Bank” survey: Businesses fear tax increases more than geopolitical instability

Stability – the foundation for investment

"A predictable tax environment and geopolitical stability are essential conditions for investment. Tax reform has been under discussion since the autumn, and recently the debate has become particularly active. The key issue now is the uncertainty surrounding the upcoming changes. The implementation deadlines for the new taxes are likely to be quite tight, leaving little time to prepare, which is causing concern," says Leda Iržikevičienė, Country Manager of "OP Corporate Bank’s" branch in Lithuania.

More than half of the surveyed companies in Lithuania (52%) identified the threat of war and geopolitical instability as a risk factor. In comparison, only slightly more than a third (39%) in Latvia and over two-fifths (42%) of businesses in Estonia considered it a concern.

In Lithuania, geopolitical challenges rank only sixth among business risks – behind taxes, labor shortages, changes in consumer behavior, potential reputation crises, and fear of financial fraud. Nevertheless, Lithuania ranks the highest among the Baltic countries in terms of perceived war risk.

Concerns about employees

After tax increases, the shortage of competent employees is the second most cited concern among business leaders. In Lithuania, 82% of respondents identified this as a problem, compared to three-quarters (75%) in Latvia and 65% in Estonia.

"The lack of qualified labor and competencies remains a challenge for businesses. This is especially relevant for companies operating in innovation, technology, engineering, and manufacturing sectors that seek a competitive edge in tight markets. Training experienced employees takes time. Artificial intelligence helps to mitigate this shortage somewhat but does not fully solve the problem," says Leda Iržikevičienė.

Uncertainty about consumer behavior

The survey revealed that businesses are increasingly concerned about changes in consumer behavior. This is particularly true in Estonia, where three-quarters (75%) of entrepreneurs agree that rapidly shifting consumer habits complicate their operations. In Lithuania, two-thirds (60%) of companies face this risk, while in Latvia, it's fewer than half (43%).

Cancel culture was identified as a separate risk – Lithuanian businesses fear it the most. One in eight companies (12%) in Lithuania named it as a risk. In Latvia, only one in twenty companies (5%) see consumer boycotts as a real threat, and in Estonia, it's even fewer at just 3%.

"The business environment is rapidly changing, and companies are facing new challenges. Consumer expectations significantly impact the economy – in Estonia, they have remained very low for several years, suppressing consumption and economic growth. A new trend is that consumer sentiment toward a company can shift quickly, which can greatly affect performance. As a result, forecasting consumer behavior is becoming an increasingly important issue for strategic planning," notes Leda Iržikevičienė.

Reputation and financial crime

The survey showed that Lithuanian businesses fear loss of reputation or brand crisis more than war or geopolitical instability. However, this factor is viewed differently across the Baltic countries – Lithuania stands out the most in this regard.

While less than one-fifth (17%) of Latvian companies are concerned about their reputation, more than half (57%) of Lithuanian companies pay significant attention to it, recognizing that negative public opinion can have long-term consequences. In Estonia, a little over one-third (37%) of businesses consider this a real risk.

Another notable difference between the Baltic countries is the fear of financial crime. In Lithuania, financial crime is seen as a greater threat than a potential war – more than half (54%) of companies worry about fraud and money scams. This figure is significantly higher than in Latvia (18%) or Estonia (23%).

According to Leda Iržikevičienė, the business environment is becoming more dynamic, and the risks companies face are growing more complex and changing rapidly. Companies will need to adapt to this shifting landscape and look for new opportunities that arise from change.

The survey, commissioned by "OP Corporate Bank", included 313 companies of various sizes from different sectors in Lithuania, Latvia, and Estonia. It was conducted between February 11 and 25 of this year. The survey data provides insights into the challenges the business community is facing in the current economic and geopolitical environment.