Estonian construction companies say they'll be forced to dial back

Construction. Source: Siim Lõvi /ERR

Construction and roadbuilding companies in general believe they will have to dial back their activities and lay off workers in the years to come, looking at public works plans.

The government will invest most heavily in national defense and supporting sustainable economic growth next year, the Ministry of Finance's explanatory memo for the 2024 draft budget reads. Planned investments total €816 million for an increase of 7 percent.

The most money will go toward real estate, mostly infrastructure to host allies, roadbuilding and maintenance and Rail Baltica. But the total sum is considerably smaller than it was for 2023.

Other defense-related and IT investments will also be considerable next year.

Investments handled by the Ministry of Defense and Ministry of Climate are the most voluminous.

Minister of Finance Mart Võrklaev (Reform) admitted that construction investments will be modest in 2024, with €400 going toward the electrification of the railroad, new sections of four-lane highways and money local governments can spend on light traffic roads. "The construction sector will have €300 million for insulating and renovating mostly apartment buildings," the minister explained.

Construction companies find the planned investments insufficient.

"Road maintenance investments are set to fall considerably. From more than €200 million in 2023 to just over €160 million now for a reduction of 20 percent that will place businesses in a very difficult position," said Sven Pertens, CEO of roadbuilder TREV-2.

Pertens added that the €250 million the sector was after would have simply helped maintain the current level. "But the asphalt sector is poised to take another hit, and while their volumes are already just half of what they were in 2021, they will now fall further."

TREV-2 has cut its staff from 400 to around 270 and will likely be forced to dial back more in the coming years.

Pertens suggested that while increased Rail Baltica construction activity will compensate to some extent, its effect is not enough to offset the slump elsewhere.

Minister of Regional Affairs Madis Kallas (SDE) said that local government investments that have totaled €400-500 million in previous years, of which €80-100 million has come from the state budget, will likely fall too.

The general economic situation is reflected in the wider construction sector where mostly old projects are being wrapped up.

"Home sales are down as consumer confidence is low. Business real estate owners are similarly cautious as the economy is ailing, the rental business is slow and the public sector has severely dialed back investments, which is not good. We have heard talk of contracyclical investment and a long perspective in construction, while we are seeing neither today," said Ivo Volkov, CEO of builders Merko Eesti.


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Marcus Turovski

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: