The construction sector in Finland is once again experiencing growth, but the kind of buildings the country is constructing tells a more complex story regarding its economic recovery. There has been a sharp rise in new construction permits, this being mainly due to information-technology buildings such as data centres, while the pipeline for new housing continues to shrink. Meanwhile, the trend of youth unemployment in Finland has gone above 20%, leading to an odd discrepancy between the funds flowing into the industries of the future and the economic situation that young Finns are facing today.
According to the most recent construction figures released by Statistics Finland, the annual volume in cubic metres of new building permits rose by 16% compared with the previous year in July. However, the volume of permits for residential buildings fell by 12%, whereas non-residential construction increased by 22%. Statistics Finland points out that the rise was mainly due to buildings in the information and communications technology sector, a category which covers data centres and IT facilities. A total of 15,537 dwellings received permits during the annual period, which is 16% less than the same period the previous year.
It doesn’t mean that Finland has actually ceased to build houses in order to build servers; the two areas have different economic aspects, different investors and different locations. However, the contrast shows what kind of investment is currently powerful enough to influence Finnish construction, since capital is at this time flowing towards computing infrastructure while residential construction and the young labour market remain remarkably weak.
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Finland is gaining in importance as regards the physical infrastructure needed for artificial intelligence and cloud computing, because of its relatively cool climate, its access to electricity and its location within the European market, all of which have led to data-centre projects on a scale big enough to have an impact on the country’s construction statistics.
The situation is better understood by examining Finland’s electricity grid. In August Fingrid, the company responsible for the transmission system in Finland, stated that the proposed data centre projects which had signed grid connection agreements were planned to have a total final capacity of almost 5 gigawatts. Fingrid added that data centres and electric-boiler projects are among the main causes why Finnish electricity consumption is expected to rise sharply in the coming years. The company also warns that a connection agreement does not ensure that each project will actually be completed at the size proposed.
The investment is now large enough to affect economic forecasts. According to ETLA Economic Research, Finnish investment is expected to rise by 5.4% this year and by more than 9% next year, large investments in data centres being one of the main factors. ETLA forecasts Finnish GDP to increase by 1.7% in 2026 and by 1.9% in 2027.
However, there is a important qualification for investors. As regards Google’s intended investment, Sakari Lähdemäki of ETLA stated that “Google’s project is extremely large, but the proportion of imports involved is so significant that the impact on GDP will remain moderate.”
Even though a large data centre might need equipment worth billions of euros, if a great deal of that hardware is imported, the amount of money stated will not directly translate into Finnish wages, domestic production or income for households.
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It is especially important to consider that distinction when examining Finland’s young people. According to the most recent Labour Force Survey by Statistics Finland, the trend rate of unemployment among people aged 15 to 24 was 22.7% in August. The rate without seasonal adjustment was lower, at 16.9%, but it is the seasonally adjusted trend that shows how difficult the underlying labour market still is for younger workers.
To understand the figure we have to consider the context since it doesn’t imply that 22.7% of each Finnish person between the ages of 15 and 24 is unemployed. Unemployment rates calculate the number of unemployed people as a proportion of the labour force and therefore exclude many students and other individuals who are not actively taking part in the labour market. According to Statistics Finland, unemployed young people made up 8.2% of the total population aged 15 to 24 in August.
Yet the problem of unemployment in Finland is exceptionally serious for an advanced economy in Europe. In August the overall trend unemployment rate was 10.1 per cent, even though employment had risen by 34,000 compared with the previous year. According to the Bank of Finland’s September forecast, economic growth has not yet led to a substantial recovery in the labour market, mainly since demand for workers is still weak. The forecast indicates that unemployment will average about 10.4 per cent in 2026 before falling more noticeably the following year.
This results in a rather odd economic situation for a young Finn going through adulthood, since although the country draws in billions for artificial intelligence infrastructure businesses still do not provide enough positions for those who are trying to start their careers.
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The difference is even more apparent when housing is taken into account. The residential construction sector in Finland is not disappearing; on the contrary, Statistics Finland states that 20,031 new dwellings were completed during the year ending in July, which is 1 per cent more than had been the case in the corresponding period the previous year.
The issue is how things will develop afterwards. Building permits are forward-looking, so a 16 per cent decrease in the number of dwellings that obtain permits indicates that the pipeline supplying future housing construction is still considerably weaker than it had been a year before. This month the Finnish government’s construction outlook reached the same conclusion, noting that data centres and commercial buildings are raising construction levels while residential construction remains behind. It anticipates that the housing recovery will not start until 2027 as the existing oversupply slowly declines.
It is at this point that the headline assumes economic importance instead of having it only as a provocative element. Data centers and residential homes are not the same type of project; a government cannot easily convert a server facility into apartment buildings, and a company which is planning an AI campus is not necessarily the same kind of investor as one that would otherwise build housing. The data therefore do not show that data centers are causing Finland to construct fewer homes.
The thing they do show is the areas where investors currently see potential. Large quantities of private capital are sufficient to justify the building of new server halls, the establishment of new electricity connections and the development of industrial infrastructure, although the economic conditions for new residential construction are still so weak that developers are retreating.
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There is a very good argument in favour of Finland. The Bank of Finland currently forecasts GDP growing by 1.7% this year and by 1.6% in 2027. Growth is being driven by exports, non-residential investment has risen, and private consumption has started to recover from the low levels it reached in 2025. The central bank anticipates that employment conditions will eventually improve as economic growth works its way through the economy.
Data centers also lead to construction activities, generate local tax revenue, increase electricity demand, create technical jobs and offer opportunities to nearby businesses. Their value must not be judged just by the number of permanent workers who are left in a server building when the construction work is finished.
But Finland’s latest numbers raise a question that goes far beyond data centers. It is possible for economic growth to be real even if it does not appear to be widely distributed. A nation may draw in sophisticated AI infrastructure even though young workers have difficulty finding their first job. Construction investment may increase even if fewer future homes get permits. GDP may speed up even if unemployment stays at about 10%.
The fact that Finland is seeing a boom in its data centres shows that the country is successfully drawing in one of the major investment trends of the decade for investors. For younger Finns the more important question will be what takes place after the servers are switched on.
If the investments lead to the development of wider businesses, greater productivity, more jobs, and higher incomes, Finland could be laying the foundations for a powerful new economic cycle. However, if the country ends up with a huge amount of computing infrastructure but construction of housing and entry-level employment remain weak, the statistics might tell a quite different story.
Finland is being successful in building the infrastructure of the future. The question is whether the young Finns will have a sufficiently large role in the economy which is being developed around it.