Bankruptcies in Finland hit 25-year high, construction sector sees year’s largest casualty

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ALMOST 3,300 COMPANIES in Finland have gone bankrupt in the past 12 months, marking an increase of 25 per cent from the preceding 12-month period.

“The number of bankruptcy declarations has risen higher than in the midst of the financial crisis in 2009. In other words, the number of bankruptcies is the highest in 25 years,” Tommi Veistämö, a senior statistician at Statistics Finland, commented on Wednesday.
“Even though the number of companies declared bankrupt in the past year is the highest in 25 years, it is still well below the bankruptcy numbers of the 1990s recession,” he reminded.

In 1992, for example, courts declared a total of 7,391 companies bankrupt.

Compared to the financial crisis, the number of bankruptcies has been high in agriculture, fishing, forestry and services, unchanged in construction and low in industry.

The numbers are bleak also for last month, with the number of bankruptcies jumping by 112 from the previous year to 345 – to the same level as in March 2014. The last time the monthly number of bankruptcies was higher was in October 1997.
The construction industry has been a cause of concern for much of the year.

Statistics Finland on Tuesday reported that the cubic volume of permits for new construction projects fell by 36 per cent year-on-year to six million cubic metres between August and October. The number of dwellings permitted during the three-month period plummeted by 45 per cent to 4,462, whereas the cubic volume of completed residential buildings decreased by six per cent.

There were some signs of recovery, too. The cubic volume of permits for new commercial and office buildings increased by 79 per cent year-on-year.

Residential construction, though, remains in the doldrums, summed up Juho Keskinen, an economist at the Mortgage Society of Finland (Hypo).

“The dismal numbers in new construction are becoming bleaker and bleaker, and bankruptcies in the construction sector will increase by an estimated 200 and by more than 1,000 person-years from last year,” he noted in a press release.
Keskinen pointed out that confidence in the construction sector has fallen to its lowest point since the financial crisis and the number of building permits to its lowest point since the 1990s. The market expectation that interest rates will start to decline has, on the other hand, enabled publicly listed construction companies to recoup some of their share value and real estate sales have shown signs of recovery.

Yet, he does not expect to see the market shift significantly in 2024.

“Next year will nevertheless be historically bad at construction sites, which will be reflected most vividly in the number of newly built houses in 2025,” he said.

The Finnish construction industry witnessed its largest bankruptcy of the year this week, according to Helsingin Sanomat. The District Court of Eastern Uusimaa on Monday declared bankrupt most of Sajucon Asset Management, a Vantaa-based group that specialised in what it described as timeless and practical low-rise buildings.
The group reported an operating profit of 1.3 million euros on revenue of 115 million euros in 2022, the profit signalling a drop of over 13 million euros and revenue an increase of 14 million euros from the previous year.

Sajucon Rakennus, which accounted for 7.3 million euros of total group revenue in 2022, will be the part of the group to stay in business.

“At the time of filing the bankruptcy declaration, two projects remained under construction. The two projects […] had a total of seven dwellings, four of which are set to be completed in December 2023,” the company said on its website.

“The financial situation of the companies deteriorated rapidly during the autumn, and profitability and solvency did not improve effectively enough despite significant adaptation measures. In the prevalent circumstances, the companies slipped into insolvency, which proved irremediable. Declaring bankruptcy was the only option to prevent the accumulation of more debt.”