In the coming two decennia, the world needs to spend at least a staggering $57 trillion on infrastructure to keep up with the growth in population and GDP. In comparison, that is nearly 60% more than the $36 trillion spent over the past 18 years. This is reported by McKinsey in the report 'Infrastructure productivity: How to save $1 trillion a year'.
In the study, the consultants used three approaches to calculate the required investments in infrastructure. Based on external data, McKinsey concludes that $57 trillion is required. When GDP projections are used to forecast the demand for infrastructure, the amount is $10 trillion higher.
Investments in car park
The largest investment is required in building and repairing roads, followed by power grids, the water infrastructure and telecom networks.
Saving $1 trillion a year
According to the strategic advisory firm, the industry can realize a 60% efficiency improvement in the build and management of infrastructure projects. McKinsey bases its calculations on 400 case studies of best practices. Good news for the sector is that the identified improvements do not require groundbreaking new innovations yet can be achieved by applying existing best practices.
Based on a total required infrastructure investment of $48 trillion*, a global annual investment of $2.7 trillion is required. The saving of $1 trillion can be allocated to five areas. Improved management of the infrastructure portfolio can save $200 billion and improved delivery of projects can save an additional $400 billion. The remaining $300 billion in efficiency savings can come from better management of infrastructure projects, in particular in the areas of demand management and technical maintenance.
* excludes $9.5 trillion investment required in telecom infrastructure