Global spending on military and defense grows to 1.8 trillion

06 June 2016 Consultancy.uk

Global spending on military and defense has increased for the first time since 2011. Spending amounted to a total of about $1.8 trillion, more than 50% higher than at the beginning of the 21st century. When it comes to the big guns, the US and China reign supreme, while Saudi Arabia holds the spot for biggest spender in relation to income.

Growing tension and unrest within the global geopolitical landscape, from the South China Sea to the Middle East, have, in 2015, ensured that for the first time in five years, there was an increase in global military spending – reveals an analysis based on data from the Stockholm International Peace Research Institute (SIPRI). Between 2011 and 2014, global military expenditure fell from $1.78 trillion to less than $1.75 trillion, while last year total expenditure increased by 1% to $1.76 trillion. In the 13 years prior to 2011, global spending for military purposes increased by more than $700 billion – from $1.07 trillion in 1998 to $1.78 trillion in 2011. From 1988 onwards a steady reduction in military spending followed, from $1.6 trillion to the trough in 1998.
Global spending on defense and weaponsNot all countries are increasing their defense spending however. Sam Perlo-Freeman, head of SIPRI’s military expenditure project, explains: “Military spending in 2015 presents contrasting trends. On the one hand, spending trends reflect the escalating conflict and tension in many parts of the world; on the other hand, they show a clear break from the oil-fuelled surge in military spending of the past decade. This volatile economic and political situation creates an uncertain picture for the years to come.” 

An analysis of military spending by region show that different parts of the world show mixed trends when it comes to military spending. In Asia and Oceania military expenditure on the whole was up compared to 2006; the region saw an increase of 64% on military expenditure, and since the end of 2014 spending increased by 5.4%. The bulk of the region’s total $436 billion military bill is by East Asian players, which accounted for $302 billion. 

Defense budgets per region

In Europe, spending has increased by 1.7% since 2014 and 5.4% since 2006. The continent, however, presents a relatively mixed bag, with Western and Central Europe mainly reducing their expenditure and Eastern European countries bolstering their respective budgets. For the coming years, the UK, France and Germany have indicated in their budgets that there may be an increase in spending, partly due to the unrest in the Middle East, tensions in Ukraine and the rising threat of terrorism. In Eastern European countries, increases of up to 90% have been seen since 2006, primarily due to turmoil close to their boarders, and in some cases, within them. The data available from the Middle East, is, according to the researchers, insufficient for an accurate assessment.

The African region also reveals a mixed picture. In North Africa, budgets have been substantially ratcheted up in recent years – an increase of 148% compared to 2006. In 2015 expenditure levels in the region appear to have stabilised, with only a slight increase of 2.1% noted. In the southern parts of Africa spending on respective militaries contracted significantly in 2015, expenditure decreased 11% to $19.1 billion. With a total of $37 billion, Africa is by far the smallest region for military spending.

North and South America together constitute the region with the highest spending on their militaries. North America, in 2015, spent more than $611 billion on its military, around 2.4% less than in 2014. South American countries collectively, expanded expenditure by 27% since 2006, but also showed a contraction in 2015, with a decrease of 4%.

Top 15 countries with the largest defense budgets

Top 15 countries
The level of military spending in North America is high, mainly due to the US. The country spent a total of $596 billion on its military in 2015; making it by far the largest military force in the world, accounting for 36% of global expenditure. China takes second place, with an estimated expenditure of $215 billion, more than double its 2006 budget. Saudi Arabia accounted for $87.2 billion in military spending, and is in third place, followed by Russia with $66.4 billion. Both countries increased their military spending by more than 90% since 2006. The top five is closed by the UK, which reduced its spending by 7.2% in recent years, to $55.5 billion.

Of all European countries in the top 15, Germany is the only one that spends more compared to 2006 on its military; its total spend stands at $39.4 billion, up 2.8% on 2006, with the country accounting for 2.4% of the total worldwide. The United Arab Emirates (UAE) takes the title of the fastest growing military spender in the top 15 over the past decade, with a growth of 136%. Together, the top 15 accounted for $1.35 trillion in spending – 77% of the global total.

Top 15 countries with the largest defense budgets (w.r.t. GDP)

The extent to which a country is focused on military spending is, however, best illustrated by studying the military’s share of the country’s total GDP. The analysis finds that mainly the countries in the Middle East are growing their armies’ ranks, with Saudi Arabia at the top (13.7%), followed by the UAE (5.7%). China takes the shared third place with Israel – both countries invest around 5.4% of their GDP on their militaries. Despite its declining military spending, the US still is in the top five, with 3.3% of GDP is spent on matters related to combat, peacekeeping missions and weapons.

A recent analysis by Consultancy.uk showed that over the past six years total military spending by NATO members has dropped by $200 billion, a shift which slashed one fifth of NATO’s total budget.

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”