Wednesday November 29, 2023
Construction industry faces challenges amid economic downturn
Published : 17 Sep 2023, 23:05
Updated : 17 Sep 2023, 23:09
The Finnish economic research institute PTT has indicated several factors contributing to a recession this year, among which the construction sector stood out as one of the worst, reported Xinhua.
Statistics showed that since the beginning of 2023, nearly 400 companies in the construction industry have closed their operations in Finland, surging from approximately 250 bankruptcy applications submitted each year between 2019 and 2022.
One heavyweight bankrupt is Jukkatalo. With a reported turnover of around 95 million euros (101.4 million U.S. dollars) in 2022, it is one of the largest bankruptcies in the construction industry so far. In addition to its 200 employees, Jukkatalo's construction sites employed approximately 500 outsourced workers last year.
Jukkatalo's bankruptcy revealed a total of outstanding debts up to at least 2.3 million euros, with the Finnish Tax Administration serving as the company's largest creditor.
This year, a total of seven companies with annual turnovers exceeding 10 million euros and 56 companies with turnovers surpassing 1 million have filed for bankruptcy.
Recent data from Statistics Finland paints a grim picture as well. It showed that the turnover of construction enterprises contracted by 4.1 percent in July year-on-year, and the turnover in the construction of buildings plummeted by 10.6 percent compared to the previous year.
Liisa Larja, a special expert at the Ministry of Economic Affairs and Employment, has noted an alarming increase in the number of unemployed and laid-off construction workers.
Local analysts have also warned that the worst is yet to come. Jouni Vihmo, chief economist at the Confederation of Finnish Construction Industries, highlighted a downturn akin to the global financial crisis but with even greater challenges. He predicted that the housing construction will be halved this year and the outlook for next year remains bleak, which is estimated to affect up to 20,000 jobs in Finland.
The recent rise of interest rates by the European Central Bank has cast a shadow over residential construction, and the wave of bankruptcies in addition pushed the public apprehension high about a broader slowdown in the construction industry, the Finnish economic research institute Etla said.
In response to these challenges, Finnish Prime Minister Petteri Orpo said that the government will consider support measures for the beleaguered construction industry and has set up a working group comprising representatives from the Ministry of Finance and the Ministry of the Environment.
According to Minister for Economic Affairs Wille Rydman, the cabinet will address the situation of the construction industry during budget discussions.
Aleksi Randell, director general of the Confederation of Finnish Construction Industries, expressed hope that the government would invest in subsidized housing production, renovation projects and infrastructure initiatives to boost employment within the construction sector.