Factors promoting industrial wood construction include the positive product properties of wood and product innovations that increase construction efficiency. Higher processing levels provide added value through innovations while economic growth prospects are strengthened. Factors slowing the adoption of wood construction include higher construction costs, prejudices related to product quality and maintenance needs, and unfavorable institutional practices.
The construction sector, dominated by small businesses, is highly sensitive to economic cycles. In total, construction and the building product industry employ up to 250,000 people in Finland, with an estimated 180,000 directly in the construction sector. In a broader definition, the wood construction value chain also includes the joinery industry, such as the manufacture of windows and doors, frames, thresholds, wooden stairs, and parquets. However, the current economic conditions in Finland's construction industry are quite bleak. The decline in construction industry production that began last year is expected to continue this year. According to the Statistics Finland, the number of building permits for housing construction granted from August to October 2023 was 45% less than the year before. The costs of building materials have risen in the past two years, affecting both the eagerness to build and the profitability of construction companies. Economic sensitivity affects companies' profitability, and there have been a significant number of bankruptcies in the sector over the past year.
For decades, the processing of domestic wood has had a positive impact on Finland's economy and employment. The construction sector has produced about six percent of Finland's gross domestic product (GDP) during the 2010s. Construction is strongly linked to the demand for domestic sawn timber, as about four-fifths of the sawn timber used in Finland is used for construction.
Increasing the use of wood construction and domestic sawn timber, especially for higher processing level products, has long been a national political goal. The Ministry of the Environment had a national wood construction program from 2016 to 2023, which aimed to diversify and increase the use of wood and its processing value. The current government program also mentions wood construction, with an aim to reform construction regulations and improve the sector's export opportunities. The Government's housing policy development program for 2021–2028 indirectly includes a goal that the climate emissions from construction and living are at a sustainable level.
Last autumn, we called through the small companies involved in the wood construction network. Many companies faced an uncertain future, with layoffs and adjustments to operations. There were also bankruptcies. However, some saw the quiet period as an opportunity to develop operations and innovate.
This year, the media has reported several new bankruptcies. Last year, over 100 more construction companies with a turnover of at least one million euros went bankrupt compared to the previous year (Asiakastieto 4.1.2024). In 2023, 299 construction companies with a turnover of over one million euros were declared bankrupt, compared to 190 companies in 2022. In total, nearly 800 construction companies went bankrupt. Recently, especially large companies have collapsed, but on the other hand, small ones are being established as unemployed construction professionals start new micro-companies (e.g., YLE 22.1.2024). Last year, more than 1,500 new companies were established in the sector.
It seems that the wood construction industry is undergoing change. According to Construction Newspaper (1.3.2024), for example, a new construction law coming into effect at the beginning of next year requires new expertise from companies. In addition, digitization and the green transition require adaptation and new operating methods. The traditionally conservative construction sector may find it difficult to adopt new ways of working. After a downturn, there usually comes an upturn, and the fear is that when the upturn comes, the construction sector will not have enough skilled labor, as young people do not pursue education in the field. The construction sector must also be able to renew itself so that future professionals still find it attractive.
From the municipalities' perspective, the benefits of wood construction include regional economic impacts, the use of local raw materials, and the economic added value generated by raising the processing level of the wood product industry. Thus, wood construction strengthens the realization of municipalities' own sustainability goals. Wood construction has been included in many municipal strategies, which can also support other important goals such as energy efficiency, diversity in housing, and the development of wood construction and the wood product industry. Wood construction was a key theme in the Government's Sustainable Cities program (2019–2023). The public sector can promote wood construction primarily through its procurement practices and as active end-users of public buildings (Torvinen & Ulkuniemi, 2016).
Urbanization leads to a concentration in the construction sector, although factory-made modular construction, suitable for wood construction, allows for production even further from the actual construction sites. According to the Ministry of Agriculture and Forestry, the greatest growth opportunities for wood construction in Finland are especially in wooden multi-story building construction and public construction. Wooden multi-story construction is relatively new in Finland and has few actors, which slows down the growth of the sector as a whole.
Sustainability requirements inevitably affect all companies and local government actors (Jussila, 2022, p. 57). Construction companies are key players that solve the increase in the use of wood in construction business. Wood is more suitable than concrete for prefabricated modular construction, which reduces costs and increases efficiency.
In Northern Ostrobothnia and Kainuu, there is a long tradition and strong expertise in wood and element construction, whose operating conditions are supported by the NOHEVA Project coordinated by MicroENTRE. New business opportunities may open up for companies that can meet the growing sustainability expectations of residents and future customers. Especially needed are companies that dare to act boldly in the production value chain, develop their construction technical capabilities, and prove wrong the prejudices related to the rigidity of the construction industry. However, the change is not solely dependent on the choices of (small) companies; the public sector is also needed as a client, informant, and educator to make strategic choices to accelerate wood construction.
Kirjoittajat:
Anna-Mari Simunaniemi, Ph.D., M.Sc., Research Director
Laura Veikkola, M.Ed., Project Researcher
University of Oulu Kerttu Saalasti Institute, Micro-Entrepreneurship Research Group MicroENTRE
NOHEVA - Low-carbon crisis preparedness from wooden construction and tourism -project. Funded by the
Centre for Economic Development, Transport and the Environment of Northern Ostrobothnia. The project's partners and funding public organisations are Nivalan Teollisuuskylä Oy, the City of Nivala and The Vocational Education Centre JEDU. The partner and financing companies are Suunnittelutoimisto Laukka Ltd, Jaloa Ltd, Tuomas Sarjanoja (trade name), Suunnittelutoimisto Hietala Ltd, Konepustistin Ltd, Arkkitehtitoimisto Toni Ylisuvanto Ltd, Sagatec Ltd, Iccuna Ltd, Edux-Ovet Ltd and Oy Crosslam Kuhmo Ltd. The project is also financed by the Kerttu Saalasti Foundation.
An industry report compiled by the project (in Finnish):
Simunaniemi, Anna-Mari & Veikkola, Laura. (2024). Puurakentamisen toimialan nykytila, riskit, lainsäädäntö ja tulevaisuuden näkymät. Oulun yliopiston Kerttu Saalasti Instituutin julkaisuja 1/2024.
Sources used in the text:
Jussila, J. (2022). Transformation towards sustainability in the construction market. Adoption of wood construction in Finland. Väitöskirja. Acta Wasaensia 494. Vaasan yliopisto, Markkinoinnin ja viestinnän yksikkö.
Torvinen, H., & Ulkuniemi, P. (2016). End-user engagement within innovative public procurement practices: A case study on public–private partnership procurement. Industrial Marketing Management, 58, 58–68.
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