Growth in wood construction creates new jobs and improves the balance of payments

The processing of wood products and an increase in exports may create many thousands of new jobs in Finland, and the effect on Finland’s balance of payments may be €200-300 million. An interim report from the Ministry of Employment and the Economy's Strategic Programme for the Forest Sector (MSO) presents estimates of the social and employment impact of wood construction. ”The most significant impact on employment and the economy will occur through growth in the export of wood construction products,” says Sixten Sunabacka, Strategic Director of the MSO programme. The achievement of €500 million of export growth based on the MSO objectives as an addition to the export of wood construction products would lead to the creation of several thousand new jobs and to an increase in GDP of about €1 billion. Tax revenue would grow by more than €70 million and gross stumpage earnings by about €60 million.

The conclusions drawn in reports by the Pellervo Institute and the Government Institute for Economic Research (VATT) are similar. An increase in the use of wood in construction will increase employment in Finland as a result of the high domestic content of wood when substituting it for imported materials. When the net number of jobs increases in construction, it correspondingly decreases in the concrete, stone products and metal structures industries. The impact on employment stems from changes in the use of goods and services required in construction, and in the multiplicative effects of these changes elsewhere in the economy. Employment increases most in the sawmill industry, forest industry, warehousing and traffic-related activities.

”Wood as a raw material is home-produced and its regional economic effect is strongly positive. The net effect concerns increasing stump price revenue for forest-owners, harvesting-, transport- and forest management charges, an improvement in employment in the sawmill industry, new investments in the wood products industry, an increase in production and jobs in construction,” says Sixten Sunabacka.

According to the reports, the construction of wood-structured apartment blocks and retail and office buildings requires significant additional investments in new production capacity in the wood products industry, especially in prefabrication plants. Sunabacka says that the market particularly needs highly prefabricated elements for wooden apartment blocks for new and suburban repair construction, which includes HVAC technology and housing module production for the construction of additional storeys on apartment blocks. Important targets for development are also wooden floor panels, housing modules for wet areas and highly prefabricated balcony elements.

In Finland, the sawmill industry and the processing of wood products employs about 26,000 people, which is more than the pulp and paper industry. The sector’s export possibilities and employment increase when non-renewable natural resources are replaced with renewable wood. ”The situation in Finland’s pulp and paper industry has improved as a result of structural reorganisation, and we see great opportunities in the fact that new SMEs producing wood and biomass products are springing up alongside our global forest industry,” says Sunabacka.

The biggest impact on employment from export growth

According to the reports, the biggest impact on employment and the economy is created through growth in the export of wood construction products. The achievement of €500 million of export growth based on the MSO objectives as an addition to the export of wood construction products would lead to the creation of several thousand new jobs and to an increase in GDP of about €1 billion. Tax revenue would grow by more than €70 million and gross stumpage earnings by about €60 million.  

The studies estimated that an increase in wood construction as a noteworthy alternative in the construction market would also significantly affect production methods in house building.

 According to estimates, competition would increase and, with it, the steady improvement in productivity in construction would improve. New jobs in wood construction are created at wood prefabrication plants through increased industrial prefabrication, and the volume of labour required at construction sites correspondingly decreases, which is reflected as a positive development, for example, for building sites in the capital region, which are suffering from a shortage of labour.  

One key objective of the MSO programme is to increase the market share of wood in the repair of the façade walls of suburban apartment blocks to 90% by 2015. The renovation of the external walls of concrete apartment blocks built in the 1960s and 70s will significantly increase the volume of repair construction work in the coming years. Covering the repair needs of apartment block facades will require €300 million on annual investments in repair and renovation by 2030, which would enable the creation of a market for the wood product industry worth about €130 million. Such a large investment in repair and renovation work could create about 2,500 new jobs.

Broad political support for the promotion of wood construction

The Strategic Director of the MSO programme, Sixten Sunabacka, thinks that during the programme’s first year good results have been achieved, especially in the promotion of wood construction. ”In addition to the MSO programme, the parts of the government programme promoting wood construction have had a major impact on creating an overall positive atmosphere, which has positively affected the promotion of wood construction,” says Sunabacka. ”From a perspective of wood construction, the public speeches in favour of wood construction by many ministers show that the programme enjoys broad political support, which is of great significance to the achievement of the programme’s targets.

Sunabacka sees that interest in wood construction has increased greatly amongst developers and builders.” We have about 7,000 homes in wooden apartment blocks at different stages of the planning process, which shows that the construction industry and its major players are involved. Without the major forest industry companies becoming system suppliers for wood construction, we would not have been able to progress so rapidly.” 

The conditions for the growth of wood construction safeguarded in the EU

In accordance with the policies of the MSO Committee, the next steps in the programme are investment in, for example, international influence, policy activity aimed at maintaining competitiveness, the development of expertise and improving the image of the industry.

”We are trying to effect development at EU level, which will create the conditions for the future extensive exploitation of forests and raw materials by the wood construction industry. In this we are endeavouring to engage in extensive co-operation with all the different ministries and international organs of Parliament,” says Sunabacka. ”The idea is that, through their own international connections, all influential Finnish parties will be able to highlight the opportunities of domestic wood products and wood construction. We must be able to better utilise Finnish networks in this work.

The strengthening of wood construction expertise and image

According to Sixten Sunabacka, investments in wood construction expertise will continue. As a good example of this, he mentions the co-operation agreement for the diverse promotion of wood construction signed last spring by the Ministry of Employment and the Economy, Aalto University and the City of Espoo.

”From a point of view of the image of the sector, the greatest challenge concerns the use of wood,” says Sunabacka. ”Wood is already seen as an ecologically sustainable, safe and domestic material, the use of which is worth greatly increasing in construction. We must be able to tell the story of wood, which emphasises its good properties so that it is seen as part of the solution to climate change, not as part of the problem. Although we recognise the ecological competiveness of wood in itself, it is not necessarily known elsewhere.”

The Ministry of Employment and the Economy carried out an online survey of Finnish attitudes towards wood construction. According to this internet think tank, more than 80% of Finns support investment in wood construction. ”The promotion of wood construction has the support of the people,” says Sunabacka about the results.

New kinds of products and purposes from wood

A key function of the MSO programme is to initiate and implement processes of change that promote the competitiveness and renewal of the forest sector. ”Wood will have new kinds of purposes, not only in the wood product sector but also especially on the energy side,” says Sunabacka. On the horizon, we have projects in the production of high-quality transport fuels, bio-oil production, and we are preparing for the start of production of biochar pellets.”

According to Sunabacka, in the pipeline are also new products based on wood fibre, the production of which can take advantage of the side runs of products from the major forest corporations. ”This area has great prospects for development, but a problem is a lack of SMEs specialised in the further development of the sector. The products can be products from narrow user segments with highly specialised purposes, traditional wood products, and even products that exploit new technology. The wood products industry then again does have many SMEs that we are trying to help to internationalise,” explains Sunabacka.

Sunabacka says that one key objective of the MSO programme is to create a future picture of what we want from the Finish forest cluster. ”The use of certain types of paper will continue to decline, and now we must seek new competitiveness for the basic forest industry and new products for the production of energy, for production based on the use of fibres, for the wood products industry and for wood construction,” says Sunabacka.

Puuinfo article service/Markku Laukkanen

More information:
Strategic Director Sixten Sunabacka, Ministry of Employment and the Economy, tel. +358 (0)29 506 3562, sixten.sunabacka@tem.fi