Kreate’s market comprises infrastructure construction in Finland. In 2019, the Extended Market for Infrastructure Construction amounted to approximately EUR 7.0 billion and Kreate’s Core and Potential Market was approximately EUR 3.8 billion and Kreate’s Potential Market was approximately EUR 1.0 billion.1
Extended Market for Infrastructure Construction (2019)
The Infrastructure Construction Market has historically grown steadily during 2000-2019. In the coming years, the demand in the market will especially be driven by urbanisation, large renovation debt in construction and the stimulus programme in the public sector. Furthermore, in the coming years the growth is expected to be driven by the land use, housing and transport agreements, as well as the Finnish 12-year national transport system plan. The demand for large infrastructure projects is also expected to remain stable. However, the weakened municipal economy and the development of the housing construction market are expected to slow down the growth rate in the coming years.2
Infrastructure Construction Market in Finland, EUR billion (at present prices)3
Urbanisation increases the demand for infrastructure construction
Urbanisation is expected to continue, and the population of the five largest cities in Finland is expected to grow by 14 per cent in total in 2021–20404. Urbanisation also increases the need to improve connections between different parts of cities, such as roads and bridges, which increases the need to develop the infrastructure.5 Urbanisation also makes infrastructure construction more complex.
Large renovation debt causes large repair needs
In Finland, the renovation debt related to infrastructure is estimated at approximately EUR 6 billion.6 This large renovation debt leads to a large need to repair, for example, bridges, roads, streets, railways and sewage. The renovation debt of transport infrastructure is estimated at approximately EUR 5 billion and a third of roads and bridges need to be renovated in the near future.7
National transport system plan in Finland supports investments
In 2019, the Finnish government began preparations to create a national framework for a transport network and services including roads, railways, waterways and air transport in Finland. The national 12-year transport system plan will be prepared for years 2021–2032.8 The government’s transport system plan is expected to increase investments in infrastructure and add to their predictability. According to the draft plan, the government would allocate a total of EUR 6.1 billion to the development of the transport infrastructure network in the first 12-year planning period of 2021–2032, on average approximately EUR 500 million available for development projects every year.9
Land use, housing and transport agreements speed up municipal projects
Land use, housing and transport agreements are concluded between the state and largest municipalities concerning investments in, among others, infrastructure construction. The condition for government funding is that the municipalities commit to implementing the projects agreed in the negotiations and to investing in them.10
The state is committed to allocating a total of EUR 936 million to the initiatives, of which approximately EUR 756 million is related to transport initiatives, the costs of which would be distributed during 2020–2031.11 Together with the commitments made by the municipalities, the agreements will launch measures related to transport worth at least EUR 1.4 billion.12
COVID-19 pandemic stimulus packages support investments in infrastructure
The financial condition of the municipalities and public stimulus efforts impact on the investments in infrastructure construction. The financial condition of the municipalities has weakened due to the COVID-19 pandemic. On the other hand, subsidies from the government are expected to decrease the negative financial impacts of COVID-19. Due to COVID-19, the government’s budget proposal in September 2020 included a general stimulus package for the municipalities amounting to approximately EUR 1.45 billion for 2021.13
The largest municipalities are not expected to cut their investments in 2021. Finland has received EUR 2.3 billion from the EU stimulus package, and these funds will be allocated for use for 2021–2026. EUR 900–1,200 million will be allocated to projects, such as energy and transport projects, that support the transition to climate neutrality. A portion of this amount will be spent on infrastructure construction.14
[1] Source: Third-party Market Study.
[2] Source: Third-party Market Study
[3] Source: Third-party Market Study. CAGR = Compound average growth rate (%).
[4] Source: The figures are based on information of the Statistics Finland: Population Forecast and Population Structure. The figures include the population of Helsinki, Espoo, Tampere, Vantaa and Oulu.
[5] Source: Third-party Market Study.
[6] Source: Rakennusomaisuuden tila ROTI (Condition of Building Assets). 2017.
[7] Source: Rakennusomaisuuden tila ROTI (Condition of Building Assets). 2017.
[8] Source: The Finnish Government. The Finnish national transport system plan.
[9] Source: The Finnish Government. Finnish national transport system plan for 2021–2032 – Draft plan 13 November 2020.
[10] Source: Ministry of Transport and Communications. Release on 2 June 2020.
[11] Source: Ministry of Transport and Communications. Release on 2 June 2020.
[12] Source: Ministry of Transport and Communications, Ministry of the Environment. Release on 8 October 2020.
[13] Source: The Finnish Government. Release on 16 September 2020.
[14] Source: The Finnish Government. Budget negotiations 16 September 2020.