Joel’s market pulse - Q1/2025
In this Q1/2025 market analysis, Joel Liukkonen takes us on a deep dive into the current state of the market. How are the current market conditions and how do they affect the Finnish IT consulting market?
One could say that the end of last year and beginning of this year haven’t provided much optimism due to increased uncertainty in the market with geopolitical events, tariffs, and potential for trade wars. Uncertainty is known to be poison for markets and especially for investments, therefore affecting global growth including companies in Finland. As economies are highly cross-connected, these events can turn out to be massive. Thus, the positive changes expected in the IT-service sector may still be waiting for a better future.
Uncertainty on the rise
AXA analysis states that the late regulatory changes in the market are expected to potentially cause disruptions in trade, cash flows, and investments, and increase the uncertainty in the market. Thus, making companies and investors fear for lack of economic growth, increasing inflation rates, and even political risks. The changes in the fundamentals of global free-trade modifying the landscape towards a more protectionist direction have negative effects as economies and companies are highly interconnected with each other. For countries that are highly reliant on free global trade, including Finland, the news is concerning as limited domestic demand can’t replace exports easily.
Moreover, the likelihood of going towards full-scale trade wars is becoming more and more possible. Based on Oxford Economics, the first steps towards it were taken back in February as the United States announced tariffs to Mexico, Canada and China, which immediately responded to these by announcing their own ones. Luckily, most of the measures and countermeasures have been paused at the time of this writing. However, as they have been on and off, the actions remain a major source for uncertainty.
The impacts of uncertainty were seen in the beginning of March as President Trump didn’t rule out a possible recession, which sparked a correction in the US stock market a few days later as investors started to fear an economic downturn. Whether the stock market movement was really caused by increasing uncertainty or was it a normal market correction, the events give an outlook on how political statements affect the investors’ view on the future.
Simultaneously, consumers’ fears for business conditions are record-high (Figure 1), highlighting the threats on the economic landscape. Fear on the market can decrease demand and thus reflect on the economy, leading companies’ views to become more negative, therefore postponing investments, decreasing their overall spending or becoming more fearful in their actions in general. All in all, these news and statistics highlight the rising uncertainty in the market which can be hard to fight by financial or monetary politics as the psychological aspects have already turned. Further, actions of western governments and institutions to calm the situation down haven’t been coherent as the reactions have variated too much.
Figure 1: Consumer expectations of business conditions
What will Europe do
One could say that Europe was caught off-guard by the new reality when it was brought into the potential trade-war as tariffs were threatened to be applied to European products. Moreover, the war in Ukraine is still far from peace and the political situation in different European countries is difficult due to political dispersion, causing difficulties in decision-making both nationally and on the EU-level. Therefore, the situation is nowhere close to optimal.
However, the EU is trying to find ways to provide solutions and one of them is the new investment plan that could brighten up and boost the economy. The package is planned to be used for new investments in Europe, mostly in the defense industry, yet it could provide a much needed boost for the whole economy as multiplier effects could be seen across the economy. This could also be seen as a strong indication to upscale European own production that could lead to new investments by private companies as well.
Another possible investment package could be coming from Germany which is aiming to increase its spend on military, infrastructure, and climate-related spending. Germany tends to be known as “the engine” of the European economy but has suffered from relatively low growth the last few years. Thus, this investment package has the potential to turn tides and provide a positive impact to the whole European economy. However, the uncertainty of whether the package will be accepted or not remains as there is a two-third majority in parliament’s lower house needed to accept the changes into German borrowing-rules.
These packages together could provide much needed stability to both the European economy and geopolitical situation, yet their passage is still unsure due to political differences both on the EU-level and country-level. Overall, the negative impact of the potential trade war brings uncertainty to European companies. However, the silver lining could be said to be the potential preferences to use European products and investing in the European market by the European players in threat of trade-war.
Impacts on Finland
Finland, being a small country, tends to bear a huge impact of events on the global market. On the negative side, the potential trade-war would affect Finland much as a lot of our business is coming from exports and the global market. However, the negativity would be felt differently in the different companies and fields. On the positive side, the investment packages in Europe could provide a boost for multiple Finnish companies as they have a relatively strong position in the defence industry and infrastructure. Also companies focused on other fields like Nokia are aiming for these markets. Benefitting from these packages could bring positive effects to the Finnish market overall, and in the medium term lead to more investments and scaling up the production. Therefore, the end-result of these two factors should be followed closely.
Despite uncertainty in the market, the TeknoBaro-questionary conducted by Teknologiateollisuus provides some positive insights of the expectations of companies this year. Companies are expecting the production and orders to increase during the year. The expectations between the companies, however, vary much and the majority expects these metrics to remain the same. Also, while the amount of jobs is expected to start increasing later this year yet, there is much of variance between the respondents.
Nevertheless, the uncertainty is seen in this questionnaire as well as companies were asked how the geopolitical uncertainty is seen in their business. 38% of the respondents were concerned about increases in cost which included tariffs. The potential trade-war is making companies hesitant about the future as it is making the cost-levels unpredictable and also has potential to reduce orders from certain countries. This could be seen as a reason why the majority of the companies are planning to decrease their fixed investments from last year, yet R&D investments are expected to be increased.
In the optimal situation where trade-wars don’t take place, the growth will however, be slow partly due to lack of visibility. Companies might be hesitant to make decisions in the environment where the changes in the market happen suddenly and without prior notice. This could lead to the situation that executives become extremely risk-averse in their decision-making and rather postpone investments and cut costs. Therefore, the potential positive effects in orders and production are partially lost as it will not lead to scaling up the business.
This is partly seen in the questionnaire as well as one third of the companies stated that they are either postponing or cancelling their investments due to the uncertainty. The answers highlight the current dilemma; the market is expected to take a cautious positive turn, yet the uncertainty affects the actions and initiatives negatively slowing down the economic growth and the bounce back from last year's difficult market situation.
Like discussed in the last market pulse, the level of investments have been concerningly low in Finland. The uncertainty doesn’t necessarily provide an optimal environment for investments which is why the situation might remain the same or even turn out to be worse. The change in investments also explains the ongoing recession in Finland the most (Figure 2), highlighting the negative impact of phenomena. In the future this has a risk of turning into even bigger problems, as companies start to lose their competitive advantage due to lack of investment in new technologies.
Figure 2: Investments explain ongoing recession in Finland
The IT-service market in the backseat
The IT-service market has been turbulent for the past year and the fast growth of the early 2020s is just a distant memory. Based on Inderes, the organic growth on average seemed to be negative last year when considering publicly traded companies. Also, both organic growth and EBIT were lower than predicted earlier that year. Last year provides clear indication that the IT-service market has been struggling, which is at least partly explained by the low investment levels. The public sector provided some relief on this as discussed last time but due the recent cost-savings, the relief is likely to be over. In some factors, Q4 seemed to be even worse than Q3 for IT-Service companies.
The situation has also affected the labour market of IT-professionals as multiple IT service companies have had change negotiations throughout last year. Unfortunately, they have continued during the beginning of this year as well. Moreover, smaller companies have reduced their workforce as well and overall the employees in the sector (in the companies employing fewer than 1000 people) fell by 2.2% compared to last year. Inderes analyses that many IT-service companies still have overcapacity and the competition in prices over the industry is still going on, therefore pointing out that difficulties in the labour market are likely to continue this year.
How is 2025 then looking for the IT-service sector? Many companies are expecting a bounce back this year. One could say that this has been heard before. H1 of 2024 was supposed to be better after partly difficult 2023, it wasn’t. H2 of 2024 was supposed to be better, which it wasn't. Now 2025 is expected to be finally better, which might be the case but it’s tempting to be skeptical. Some underlying trends offer hope for better market conditions, yet it doesn’t matter if predictions and expectations don’t convert into results. Thus, it is relevant to ask if the IT-service sector is expecting one more disappointing year.
The reason for this question is mostly related to the market situation. As Inderes discusses that demand should improve which will only happen if the economical situation improves and leads companies to invest more. Thus, it might be the case that uncertainty leads companies to postpone or cancel their investments which makes the demand stay relatively low. In this situation, one could see that there may not be much that IT-service companies could do and they are forced to “be at market’s mercy” and organic growth might be hard to find especially as competition remains high. The uncertainty and lack of investments caused by it are providing the biggest risks to the IT-service companies and market.
Despite the potential risks, the IT-service companies are not, of course, fully relying on market conditions although they are highly important factors. Companies that can demonstrate providing value to customers can perform relatively well in tough and competitive markets. Therefore, actively looking for new possibilities together with customers can provide new opportunities. Data and AI topics can boost customer productivity which might open up some investment opportunities for customers to develop more and increase their spend. IT-development overall could be seen to be lacking behind and big investments are still needed to catch the gap of low investment levels of past years.
All in all, IT-service market players should follow the overall market development and adjust their expectations accordingly. In tough times, human nature tends to trust that tomorrow is brighter than yesterday. However, the current situation of the global market makes the future so unpredictable that a realistic approach could be preferred. Some insights provide positive forecasts, others negative, yet one thing is certain, the uncertainty is increasing and is the biggest enemy of the market this year.
Stay tuned for the Q2/2025 market analysis and don't forget to subscribe to the Thriv Times newsletter to know what's happening in the tech freelancing market!

Joel Liukkonen
Key Account Manager
joel.liukkonen@thriv.dev