Finnish bankruptcy filings increasing – Real estate bubble deflating?

The Finnish Techology and Economics -weekly Tekniikka&Talous has a news item on Finnish bankruptcy filings. It would be interesting to see the statistics in European context but I don’t have the time, nor do I know whether Eurostat has the level of statistical refinement that the data from Statistics Finland has. Below you can first read my translation of the original post:


According to data by Statistics Finland 1856 bankruptcies were filed during February-July, which is 106 (6,1%) more than in the same period last year.

The total personnel in companies that field for bankruptcy amounted to 9.188, which is 1.122 (13,9%) more than in the same period last year.

In terms of numbers, the most bankruptcy filings occurred in the sector ‘other services’, which consists of ICT-services, finance and insurance, real estate, ‘professional, scientific and technical work’, administrative and support services, training/education services, social and health services as well as arts and entertainment services. There where 507 bankruptcy filings in this sector, which is 9,5% more than in 2012 in the same period.

A decline of bankruptcy filings in construction

Bankruptcy filings increased in agriculture, forestry and fisheries, industries and mining, retail, transport and storage, hotel and restaurant sector and in the ‘other services’ sector, but on the other hand decreased in solely the construction sector. This sector saw 7,4% less bankruptcy filings that in 2012 in the same period.

As a methodological note, filing for bankrupcy does not mean per se that the bankruptcies will be executed – the process can also be left unexecuted.


As always with such a news item, it is hard to say whether this represents positive or negative developments, exceptions from the trend etc. So for your information I have compiled two graphs: the total amount of bankrupcy filings since 2003 (the data doesn’t go back further) and the same kind of graph by sector. The sectors are according to the Finnish Standard Industry Classification TOL 2008, which corresponds with the most recent NACE-classification. C is industry, F is construction, G is wholesale and retail as well as the sale and repair of motorvehicles, H is transport and storage and I is accommodation and restaurants.

Source: Statistics Finland

Source: Statistics Finland

The data does not yet include the data introduced in the news item, but bankruptcy filings have increased. The news item gives the main ‘growth’ sectors of bankruptcy filings. In the graph below, the category ‘other services could not be incorporated easily, so while that is said to be the greatest contributor to bankruptcy filings with more than one third of bankruptcy filings in the first half of the year, it is not shown here. However, it could be about half of the missing roughly 1000 bankruptcy filings per year if we compare the numbers in the sectoral vs. total bankruptcy filings. This could be scrutinized closer.

Source: Statistics Finland

Source: Statistics Finland

Although the news item emphasises the decline in bankruptcy filings in construction, this is misleading in my opinion because it is the single largest sector for bankruptcy filings (by number of filings). Nearly all the sectors in the graph show a spike in 2009, which arguably was when the initial effects of the eurocrisis were strongest.

Usually, the construction sector is quite a good indicator of how a country is doing, as it reflects new investments in real estate (both for private and business use). I have previously mentioned the possibility of a Finnish real estate bubble, and although it is hard to say, the big increase of bankrupcies in construction since 2003 may signal the end to any such bubble. In this context it is perhaps interesting that the second-biggest sector of bankruptcy filings is the wholesale-and-retail sector: companies in this sector are typically the inhabitants of new business parks, as are the companies in the ‘other sector’ category. I can’t say if this is too big a stretch (from bankruptcies to deflating bubbles) but I have a gut feeling it is related – just like in the Netherlands where bankruptcies in construction have increased drastically since 2009.

So what does this mean? To a large extent, more data should be presented, e.g. the number of personnel affected, the regional spread, etc. But increasing bankruptcies are always a bad sign. There is an institution of Finland which has exact statistics on real estate sales, in particular business real estate, but this is a paid service.

Therefore, it is a bit wait-and-see. Today, a Finnish bank predicts that next year the Finnish GDP will grow by 1,7%. There are a lot of assumptions behind that projections, such as growth in demand from Europe (AKA the ‘Eurocrisis is over’-argument) and the assumption of a (very) moderate wage increase through the collective agreement negotiations going on right now. I wouldn’t be surprised if this projection turns out to be too optimistic.

2 responses to “Finnish bankruptcy filings increasing – Real estate bubble deflating?

  1. Pingback: Aiming for wage moderation in Finland: some thoughts | Arjen polku

  2. Pingback: Finland: Construction bankruptcy filings and building permits | Arjen polku

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