In 2020, Finland’s GDP stood at EUR 223.7 billion, representing an increase by 6.2% from 2010 level. However, it has declined annually by 2.8%, which reflects the impact of COVID 19 global pandemic on the country’s economy.
The number of enterprises in the broad construction sector in Finland stood at 89,079 in 2020, representing an increase of 26.0% since 2010. This was driven by an increase in the number of enterprises in the real estate activities (+92.6%), the narrow construction (+7.1%) and the architectural and engineering activities (+2.2%) sub‑sectors, offsetting a decrease in the manufacturing sub‑sector (‑19.5%), over the 2010‑2020 period.
In parallel, the volume index of production in the broad construction sector witnessed a growth 13.3% over the 2015-2020 period. This was driven by a growth in volume index of construction of buildings (+13.7%) and construction of civil engineering (+11.5%) over the same period.
Similarly, the total turnover of the broad construction sector in 2018 amounted to EUR 65.8 billion, representing a growth of 55.0% over the period 2010-2018. It increased to EUR 70.8 billion further in 2020. This represented an increment of 66.8% since 2010 and 7.6% since 2018.
The gross operating rate of the broad construction sector, an indicator of the sector’s profitability, stood at 14.2% in 2018, slightly below the 2010 level (14.8%) and also below the 2018 EU‑27 average (16.7%). This may be partly explained by the increase in construction cost index, which grew by 10.9 index points (ip) over the 2010‑2018 period.
In terms of employment, there were 341,031 persons employed in the broad construction sector in 2020, representing a 27.8% increase since 2010. This was driven by increases in the real estate activities sub‑sector (+46.8%), the narrow construction (+33.4%) and the architectural and engineering activities (+30.0%) sub‑sectors, offsetting a decrease in the manufacturing sub‑sector (‑8.6%), over the 2010‑2020 period.
Growing households income, declining mortgage interest rates, and an increasing urbanisation rate contributed to a strong housing demand, which drove the housing index price up (+6.4% between 2015 and 2020). In parallel, the housing supply has grown – though not at the same pace as the demand. The residential building permits index grew by 25.0% in 2020 as compared to the 2015 level.
However, the market was significantly affected by the pandemic in March 2020. The total transaction volume amounted to EUR 5.6 billion, 13.0% lower than previous year.
In order to strengthen the country’s infrastructure, EUR 7.0 billion was invested by the public and private sector in the civil engineering market, forming 19.0% of the total value of construction in 2020 (EUR 36.9 billion). Out of this, EUR 5.1 billion was spent on new investments and EUR 1.9 billion under maintenance. The Finnish government is expected to invest EUR 748.0 million for the development and maintenance of the transport network over the 2022‑2025 period.
Finland will receive approximately EUR 2.1 billion in grants from the Recovery and Resilience Facility.
The Finnish Recovery and Resilience Plan (RRP), approved by the European Commission in October 2021, will significantly help the country emerging from the COVID-19 pandemic crisis and fostering its green and digital transition. The plan includes investments of EUR 110 million to reduce the climate and environmental impacts of the building stock. Among other initiatives, the plan encompasses a reform of the public employment services to increase the employment rate.
Despite such developments, the Finnish construction sector still faces some major hindrances. The most important relates to shortages of skilled labour. In a recent survey conducted by the Finland Chamber of Commerce, more than half of the respondents from various industries stated that they have not gotten enough applicants for job vacancies. Their operations have also been hampered by the shortage of skilled labour in the country.
The second most important issue faced by the construction sector is the implementation of digital technologies and innovation. The share of firms in the Finnish construction sector reporting ‘no innovation’ stood at 58.0%, being the highest as compared to manufacturing (30.0%), services (40.0%) and infrastructure (50.0%) sectors.
The COVID‑19 pandemic had impacted the entire Finnish economy as a whole and the construction sector in particular in 2020. However, since the gradual lifting of restrictions imposed in order to tackle the pandemic, signs of recovery, especially witnessed in the sales in housing market have been observed. The recovery in the economy and in the construction sector in particular were backed by government’s support measures. One such initiative, encompassing businesses from all the sectors, was the launch of Business cost support (Yritysten kustannustuki). This financial support (ranging from EUR 2,000 to EUR 500,000) aims to cover costs of businesses that experienced a marked decrease in turnover due to the adverse impact of COVID‑19.
As a result of such initiatives aimed at supporting small businesses along with gradual revival of the construction sector due to increased housing demand and sales together with the government's futuristic plans for infrastructure development, the outlook of the Finnish construction sector looks optimistic and promising.