Region Stockholm reports a profit for the period January to August 2020 of SEK 3,536 million. The budgeted profit for the period was SEK 2,500 million. Accordingly, the positive deviation for the period is SEK 1,036 million. This is seen in Region Stockholm’s interim report. Both the profit for the period and the forecast for the full year have improved considerably compared to the four-month report to April 2020.
The forecast for the whole of 2020 is an expected surplus of SEK 3,323 million. The budgeted profit for the year amounts to SEK 311 million. Compared to the previous year, the profit is expected to improve by SEK 1,826 million. This surplus over budget is mostly attributable to larger government subsidies, lower costs for the pension liability and capital gains from property sales.
- “The pandemic makes it more difficult to provide a reliable forecast for the full year, in part because of the uncertainty about how long the pandemic will continue and in part because of the difficulty in assessing the effects of postponed healthcare and reduced numbers of passengers using public transport. A large discrepancy concerning Region Stockholm’s compensation from the government for the additional costs associated with falling public transport revenue also remains. The high forecast surplus would enable a provision to be made to a profit equalisation reserve, which would enable us to manage the risks associated with the pandemic over the coming years,” says Katarina Holmgren, Finance Director at Region Stockholm.
The financial outcome for the period includes additional costs and lower revenue as a result of the pandemic totalling SEK -5,139 million, with SEK -2,438 million attributable to additional costs and SEK -2,701 million to reduced revenue. Staff expenditure accounts for 41 per cent of the additional costs. The reduced revenue is attributable to lower ticket sales in public transport, a total of SEK -2,207 million, and lower patient revenue, such as fees for adult dental care, within health and medical care totalling SEK -494 million.
The forecast for the full year includes a negative net effect of SEK -4,900 million as additional costs and lost revenue due to Covid-19 totalling SEK -7,400 million are not covered by the forecast government subsidies. The forecast for the full year for additional costs and lost revenue due to Covid-19 within health and medical care amounts to SEK -3,700 million. After compensation from the government of SEK 1,150 million, a negative net amount of SEK -2,550 million remains. Reduced passenger revenue and additional costs due to Covid-19 within public transport are also forecast to total SEK -3,700 million. After compensation from the government of SEK 1,350 million, a negative net amount of SEK -2,350 million remains.
- “It’s a show of strength that Region Stockholm can present a profit for the period, despite the fact that we’re experiencing one of the greatest challenges of modern times. But it’s not over yet. The economic situation remains difficult and we must continue our efforts, in both managing the pandemic and strengthening Region Stockholm’s finances. This is also why it’s important that the government keeps its promise to provide reasonable compensation to the regions and municipalities for the effects of the pandemic, but we’re still not there yet,” says Katarina Holmgren, Finance Director at Region Stockholm.
Profit equalisation reserve
Provided the profit for the year allows, Region Stockholm plans to allocate funds to the profit equalisation reserve in the annual accounts for 2020, which will provide an additional opportunity to manage the transition associated with the pandemic over the coming years. Region Stockholm is forecasting considerably lower tax revenue for the coming planning period. The profit equalisation reserve will enable this drop to be equalised.
The growth seen in the Stockholm region entails demands on good availability and quality in health and medical care as well as public transport. Accordingly, major investments are being made to remodel and renovate properties used within health and medical care. Within public transport, the metro and light rail line are undergoing expansion, while Roslagsbanan and the Red Line are being overhauled.
The consolidated investment outcome to August amounted to SEK 6,301 million, which corresponds to a conversion rate of 42 per cent in relation to the budgeted volume of SEK 14,934 million. The forecast for the full year shows an outcome of SEK 12,837 million, which is SEK 2,097 million under budget and corresponds to a forecast conversion rate of 86 per cent. The reasons for the lower forecast are the postponement of the schedules for certain property investments within health and medical care and the postponement of the schedules for certain larger investments in public transport.
Facts about Region Stockholm’s Interim Report 2020
The summarised consolidated accounts for Region Stockholm provide an overall picture of the committees’ and companies’ finances and operations. The interim report presents the financial outcome for the period January to August together with the forecast profit for the year, which are compared to the budgeted figures.
Facts about the profit equalisation reserve
Sweden’s local government act regulates how part of a profit can be allocated to a profit equalisation reserve (resultatutjämningsreserv or RUR in Swedish). The purpose of this reserve is to enable municipalities and regions to, in certain circumstances, reserve funds to cover deficits in the coming years.
Read more about this and the actual report (in Swedish).