www.gatewaybaltic.com

Market overviews

The Nordic countries’

construction industry

by GatewayBaltic

We are the leading company in the

Baltic states providing Market and

Export Intelligence services

We add value with our local knowledge and expertise in

markets combined with a professional and personal approach

Markets:

Baltic states: Latvia, Lithuania, Estonia

Nordics: Sweden, Norway, Finland, Denmark

EU: Germany, Austria, France, UK, Spain and other EU

Eastern Europe: Poland, Czech Republic and other CEE

CIS: Russia and Belarus

We have served over250 clients in their international

market developemnt

Partners:

In short

We are a Gateway for businesses entering the Baltic states and an opening for Baltic companies

to international markets

Export Intelligence

Export Intelligence services for companies interested to enter international markets with partner screening and attraction, sales channel creation and export management.

Market Intelligence

Market Intelligence solutions for companies interested in up-to-date market information on clients, competitors, suppliers and markets.

Our way

Analyze Act

Finnish market expert

Scandinavian market expert

UK and Northern Ireland Market

expert

French market expert

Portuguese market expert

Dutch market expert

German and Austrian market

expert

Russian and Belarusian market

expert

Eastern Europe market expert

Ukrainian market expert

Spanish market expert

Baltic team

Market competences GatewayBaltic has

developed a network of

local market consultants

supporting our clients

with market

intelligence, market

entry and market

expansion services

Clients

Client: VOKE III

Defining the partners

-Housing developers

- Construction companies

- Loghouse and panel house builders

Partner search

Overall 22 companies were selected in Norwegian and 26 in Swedish market.

After communication, 8 companies from each country have expressed willingness to meet with the representatives.

Result

Trade missions to Norway and Sweden were organized to meet 16 potential cooperation partners and discuss the possible collaboration in the near future.

As a result of the project Voke III has done the first delivery to Norwegian market.

Feedback from client: ” We really appreciate our cooperation and in our opinion Your company is in much higher league than other consultant services. The business meeting in Norway was very useful; companies are willing to cooperate with us in the future.”

Norway, Sweden|

Kitchen, bathroom furniture

Task: To attract potential partners in Norwegian market

Client: Belmast

Defining the partners

- Construction companies

- Mashine building manufacturers in energy sector

- Similar producers

Partner search

Identified 20 potential partners in Norway.

After communication with potential partners, five express interest to meet with Belmast to discuss potential cooperation possibilities.

Result

Organised two day trade mission to Norway to meet 5 companies with assistance of representative from GatewayBaltic.

After the business visit to Norway, Belmast received first order from Norwegian partner for custom made steel constructions.

Norway| Metalworking

Task: To identify and communicate with potential partners in

Norwegian market to develop export for fabricated steel structures

Client: Windex

Sweden | PVC windows and doors

Task: To assist company in finding partners in the

Swedish market

Defining the partners

- Wholesalers of PVC windows

- Construction companies

- Manufacturers of PVC windows

Partner search

Overall 24 companies have been identified and included in the potential partner list. 20 companies have been successfully contacted.

5 companies have expressed willingness to meet with Windex representatives.

7 companies were interested to consider a meeting in the future.

Result

Paulius Berezuckis, Business developer, Windex Within a short period of time and reasonable cost Gatewaybaltic managed to select potential target customers as well as arrange business meeting with them. GatewayBaltic most definitely highly professional team, providing its services right on schedule and according to our expectations! Great job!

Client: Tenapors

Defining the partners:

- Wholesalers of building materials

- Construction companies

PARTNER Identification

20 enterprises working in construction sector were identified as potential cooperation partners.

After communication, 6 companies showed interest regarding potential cooperation possibilities with Tenapors.

RESULT

Business trip to Sweden were organized to meet four of the potential partners and have a discussion about possible cooperation opportunities in the near future.

With one of the largest construction companies in Norway, Tenapors has started cooperation.

Norway| Sandwich type panels /construction materials

and heat insulation materials

Task: Identify potential partners in Norwegian market to find

new cooperation opportunities

Client: Eco House Industries

Defining the partners

- Real estate companies

- Building companies

- House manufacturers

Partner search

We selected 31 potential companies in Sweden.

After the communication, 9 companies expressed interest but 6 from them were willing to meet with EHI to talk about possible plans in the future.

Result

Organised three day trade mission in January 2010 to Sweden to meet 7 companies and discuss the further cooperation opportunities for sales of wooden frame houses to Sweden.

Sweden| Manufacturer of timber frame houses

Task: To attract new cooperation partners to expand its operations

in Swedish market

Client: AmberWood

Defining the partners

- Importers of wood flooring

- Wholesalers of wood flooring

- Similar producers

- Flooring installation service companies

Partner search

Identified 20 potential partners in Sweden.

After communication with potential partners, two expressed interest to meet with Amber Wood to discuss potential cooperation possibilities.

Result

Organised one day trade mission in February 2010 to Sweden to meet 1 company. And organised one day visit of Swedish company in Latvia.

First order from Swedish partner was received in February 2010 .

Sweden| Woodworking

Task: Identify and communicate with potential partners in Swedish

market to develop export for fabricated solid wood flooring boards

Common characteristics Amongh top countries in means of GDP per capita and income in Europe

Developed markets, but with a strong focus on workers’ rights and socio-democratic principles, and high tax rates (up to 60% of income): the Nordic capitalism model

Infrastructure construction more stable than residential, but trends still vary in each country

Very strong trade unions that have a significant impact on the labour market and are closely following foreign workers’ inflow

Unions are organized into 3 levels: a pan-country union, sector unions, and profession-unions

Registration requirements for foreign workers in all 4 countries, and only Denmark does not have a construction workers ID cards system yet

No universal minimum wage: collective agreements with the relevant unions in the industry determine the minimum pay levels

The Laval case in 2007 established some protection for foreign subcontractors against unions’ industrial action (blockades), though Laval still went bankrupt

Foreign firms still typically work as subcontractors and their specialists as unskilled workers, as mostly just local professional qualifications are recognized

Main pan-EU legislation: Posted Workers Directive 96/71/EC

Posted workers must have a clear, temporary posting period and stay in the country for less than 183 days/year in order not to be regarded as local tax residents

The number of illegal construction workers in Norway, Sweden and Denmark is estimated at 20,000 or more per country

Social security laws, due to EU regulations, permit home country social insurance for posted workers, if they can display an E101 form by their home country’s social insurance authority

Retrieve such forms timely, so that contracts in the Nordics are not delayed; local work time, sick pay, holiday regulations and work safety requirements still must be observed

Sweden

Population of 9.1 million, average salary of 3,900 EUR/month

Construction turnover in 2010 reached 1,000 billion SEK, or 112.3 billion EUR, and forms 8% of GDP

About 500,000 or 11 % of total workforce is employed in construction

Investments into construction were at 29.9 billion EUR in 2010: one of the lowest levels in the EU: the market only dipped in 2009 and early 2010, but construction volumes will have to increase, especially around Stockholm and other big cities

Stockholm area expects population growth by up to ¼ from 2 million to 2.5 million by 2030: heavy need for scaling up new housing construction

Housing construction still makes up the most of new projects in means of total floor area

Undeclared construction still frequent, but also targeted by the authorities

Current illegal employment estimated at about 20,000 foreign construction workers

Inspections at sites carried out both by authorities and by own monitoring activities of the relevant unions

Key legal features: Sweden

Foreign workers from the EU do not need a work permit, but, if staying for longer than 3 months, must register with the Swedish Migration Board

If staying in Sweden for 183 or more days per year, foreign workers are considered tax residents and must pay Swedish income tax

If exceeding the 320,000 SEK/year sales threshold in Sweden, a company must register locally for VAT

Workers with a valid E101 form from their home social security authority do not have to pay local social security contributions, unless they qualify as tax residents

Collective agreements set the minimum pay rates in construction, which are not publicly available, but the average wage in construction is at about 150 SEK/hour; the average wage overall in Sweden in 2010 was 28,400 SEK/month

Building defects insurance is required for at least 10 years as of the date of the final inspection of the building (but not for works that do not require a building permit, though it is also expected to have 2-5 years warranty)

An ID06 card must be carried by all workers on construction sites

Norway

Population of 4.9 million, second wealthiest in the EEA after Luxembourg

Construction together with mining generates 15% of GDP and employs 193,000

Residential construction is booming currently: in some quarters of 2011, new projects were up by 40% compared to respective periods in 2010

Very high proportion (80%) of dwellings is owned by the inhabitants, and a relatively large number of households have their own holiday houses: clients may as well be private persons

Hydropower facilities, northern roads, many islands and challenging nordic climate all require infrastructure maintenance and further development

A non-EU, but an EEA country – the labour environment is generally similar to that in neighbouring Nordic countries

The StartBANK supplier assessment system is widely used by large contractors

Key legal features: Norway

Foreign workers from the EU do not need a work permit, but, if staying for longer than 3 months, must request a residence permit; after staying in Norway for 183 days/year or 270 days over any 36 month period, they are regarded as tax residents; even if residing in Norway for less than 6 months, workers should apply for a tax card

All contractors performing construction works in Norway worth 10,000 NOK or more must report these projects to the tax authority via the RF-1199 form (along with information on their employees sent to Norway)

If exceeding the 50,000 NOK/year sales threshold in Norway, a company must register locally for VAT or appoint a local representative who shares VAT liability

Workers with a valid E101 form from their home social security authority do not have to pay local social security contributions, unless they qualify as tax residents

By collective agreements, the lowest wage in construction, depending on 4 qualification classes, is 96 NOK/h (for assistants with no experience and under the age of 18, while skilled workers may have a minimum rate of 159 NOK/h)

New housing must have a warranty of at least 5 years (this requirement may be increased in 2012); contractor insurance is not mandatory in Norway

The green Byggekort must be carried by all workers on construction sites

Norwegian legislation has its specifics, relying on fair dealing between the parties in a transaction, rather than on the written contracts; B2B offers are formally binding until their expiry date

Finland

Population of 5.36 million, average salary about 2,900 EUR/month

State subsidized housing construction helped smooth out the drop in private residential projects in 2009, but now private projects have fully recovered

A relatively balanced construction projects portfolio by type: residential construction continues to have the largest floor area, but public, commercial and industrial, agricultural construction clients are also active

Estonian firms are bidding even as general contractors for social housing projects in Helsinki area, though none have been awarded contracts thus far

Workers may be posted for up to 6 months

Minimum wages by the Rakennusliitto union are based on the employee’s skill level, and range from 9.49 to 13.26 EUR/h

Statutory accident insurance is mandatory and if not taken, will be covered by the Federation of Accident Insurance Institutions, but expenses of up to 2,100 EUR will be collected from the employer

Rakentamisen Laatu (RALA) is the Construction Quality Association, with an online register of technically qualified companies in each specialist area

Rakennusliito is the construction industry union with 85,000 members

Key legal features: Finland

For foreign workers employed by non-Finnish companies, the Aliens Act 301/2004 and the Posted Workers Act (1146/1999) are the main regulations: the construction industry union Rakennusliitto has a guide in English to these regulations

Construction professionals are certified in line with the EN ISO 17024 standard

Workers (from the EU) need to register with the local police department if staying for more than 3 months; workers from the “new” EU countries must inform the Employment Office of their work in Finland within 14 days of commencing it, indicating their employment terms

Foreign workers are considered “posted” if working in Finland for up to 6 months; afterwards, they are regarded as tax residents

Foreign construction firms may need to register a local affiliate if construction projects in Finland last for more than 6 months; local VAT-registration is required if construction projects last for 9 months or longer

Foreign firms must report all construction contracts if exceeding 5,000 EUR turnover per quarter, and must provide information on all their employees active in Finland; all workers on construction sites must have a valid ID card

Statutory accident insurance is mandatory for permanent employees and for foreign companies in construction works, if the work scope is 12 man-days or greater, however, posted workers with a valid E101 form from their home social security authority do not have to have statutory accident insurance

Construction works and materials must have a warranty of at least 2 years (this requirement may be increased in 2012); contractor insurance is not mandatory in Finland

Denmark

Population of 5.6 million, average salary about 3,200 EUR/month, but tax burden of up to 57%

Construction generates about 11% of GDP and employs 143,800

Residential construction at about 1/3 of the total construction volume, but has decreased, which led to many construction firms competing for state and municipal construction tenders and dropped tender prices by up to 40%: quality concerns have been expressed

Farm buildings and public institutions’ offices are recently actively constructed as well – the offices because of a new 2010’ law that requires public buildings to have the highest energy efficiency level by 2015

Denmark has its own particularly strong expertise in green energy (CHP, wind farms), water processing (purification and wastewater processing) and engineering consulting: many Danish firms in these areas have activities or separate projects in the Baltics

In the 1960-1970s, experiences with many building defects in public housing have led to various quality control initiatives in construction, and mandatory building defects insurance for new housing

The Danish tax authorities and trade unions are known for thorough inspections at construction sites and generally, and unions have taken foreign subcontractors to court for labour law breaches

Sole labourers who operate as 1-man companies do not have to register for VAT in Denmark, hence many Polish workers are required to work under such an arrangement in Denmark

Key legal features: Denmark

Detailed Building Regulations of 2010 in English are available from the Danish Ministry of Economic and Business Affairs

www.posting.dk is a portal dedicated information on how workers should be posted to Denmark

The Danish Act on Posting is the key document with regard to the working environment requirements in Denmark

Workers (from the EU) need to register with Statsforvaltningen, the Regional State Administration, if staying in Denmark for more than 3 months; construction workers can stay in Denmark for up to 12 months without paying taxes locally (in other industries, just up to 6 months)

Foreign workers do not yet have to receive a special ID card, but must be entered into the RUT register as of May 2008 (otherwise a 700 EUR fine may be charged)

VAT registration not required only if working for a VAT-registered local company, which then must pay the VAT for the received service; otherwise, foreign companies providing services in Denmark must register for VAT

Foreign firms must register activities in Denmark as of the first day via the form 40112 to the Danish Commerce and Company Agency

The Laval case also somewhat changed the Danish legislation and limited the conditions under which Danish trade unions can take industrial action (typically construction site blockades) against foreign construction services subcontractors wokring in Denmark

Building defects insurance is compulsory in Denmark, and the standard building defects guarantee is 5 years

The main Nordic general contractors

A Swedish-origin international player with activities in Europea and

the Americas.

Has extended activities in the U.K. and Norway

lately, but saw residential projects drop in Sweden by a factor of

2 in 2011, though has 10,500 workers in

Sweden.

Skanska is known to have had Lithuanian subcontractors in the

U.K., though also a bad PR case with underpaid LT workers at one of its

sites.

One of the largest players in Sandinavia, annual sales at about 44 billion SEK and about 14,830 employees (2011). Focus on Sweden,

Norway and Finland.

Construction yields roughly 60%, while civil

engineering and industrial construction each roughly

20% of turnover. Stable growth in 2009-2011.

A number of large

shopping mall and office, leisure facilities contracts have been secured in the

Nordics in late 2011.

Swedish origin, core activities in the Nordics,

Germany and in the Baltics. Roads construction

activities are centered in Sweden and in the St. Petersburg area. An

upswing in housing sales and prices recorded in Q4

2011. About 17,46 0 employees and net

earnings of about 52.5 billion SEK.

Three priorities for 2012-

2015 are growth in Norway, establishment in civil

engineering in Finland, and expanding residential

developments in the main markets.

A Finnish-origin firm, initially in civil

engineering, but now also in residential

developments and inudstrial projects.

Focused on the Nordics, the Baltics, Russia, has

residential units projects in Lithuania (2010-2011). Revenue of 4.5billion EUR in 2011, employs nearly

26,000.

Forecasts more growth in residential projects in

Norway and Sweden in 2012 than in Finland and

Denmark, and steady growth in the Baltics and

Russia.

NASDAQ OMX Nordic stock exchanges and the companies’ annual reports are a good source of information, including their latest developments and project portfolios: these all are listed companies

Sweden: Skanska, NCC and PEAB Denmark: MT Hojgaard

Norway: Veidekke and AF Gruppen Finland: YIT and Lemminkainen

The main Nordic general contractors

A Norwegian international player, whose 2011’

revenues increased by 2 billion NOK to 17.7 billion, after a stagnation in 2010.

Norway, Denmark and

Stockholm, Gothenburg and Skone areas are the key focus: Norway generates 72% of turnover, Sweden

20%, Denmark 8% (in 2011). Industrial

construction is less than 1/5 of total group turnover.

Forecasts growth in 2012, 2013 in Sweden, Norway, then by 2015 a decline to slighlty above 2011’ level.

The group, named after a Finnish mythological figure,

focuses on the Baltic region. Net 2011’ sales

grew 24% to 2.3 billion EUR in 2011, and the company

employs 8,400.

International operations generated 1/3 (previously roughly 25%) of turnover.

The group aims to expand residential construction in

Russia (mainly St. Petersburg) and forecasts a busy year for construction in Helsinki metropolitan

area.

The overall Nordic construction market is still relatively fragmented, despite very strong large local players taking the bulk of the large projects

Note that, while 2011’ Q4 results are positive for these firms, margins are pressed due to current projects being finished with the crisis-years’ prices

The Nordic construction market shares in 2011

Source: NCC

With pleasure we will

discuss how we can add value to

your business!

Martins Tiknuss

Export and market Intelligence

Martins.tiknuss@gatewaybaltic.com

GatewayBaltic

Elizabetes 51, Riga, Latvia

Tel: +371 26677811

www.gatewaybaltic.com