Modest return on assets to affect investors in coming five years

03 October 2016

New analysis of the global economic environment suggests that returns on key asset classes will be modest in the near term, following more than three decades of high performance. Investors may need to consider their strategy in line with the changes to the new environment, which appears set to stay in the mid-term.

The latest edition of Willis Towers Watson’s ‘Long-term statistics’ report tries to make sense of the current and coming performance of the global economy in line with historic trends. The study aims to provide investors with a snapshot of current conditions as a means to better inform their respective decision making.

 China ups corporate debt

Global concerns

The authors note that the current economic environment, with its global growth, interest rates and asset returns, may well remain relatively stable in the years to come. Uncertainties exist, however, particularly in China and the Eurozone, where there is said to be overcapacity – leading to possible headwinds around global wage growth, returns on capital and inflation.

For China, in particular, one of the biggest issues highlighted by the report is the growing burden of corporate/non-financial debt, which has increased to around 170% of GDP. While it is not immediately troubling, as cited by a recent McKinsey & Company report, the debt does create an impetus for the country to enter into reform mode. The transformation, and the quality of its execution, comes with risks, as well as lower growth rates of around 6%.

Globally, there are a number of uncertainties that compound current systematic risks inherent in the system, some are latent while others more directly visible – such as the slowdown in China, geopolitical risks and lower commodity prices for emerging markets. According to the firm’s analysis, it comes from a broad range of global events and rivalries, including global terrorist threat, fallout from the Syrian war, hostility between Shia Iran and Sunni Saudi Arabia, tensions in the South and East China Seas, European migration issues, Grexit and Brexit concerns, and the US presidential election, to name just a few.

Five year outlook for key asset classes

Lower returns

The current uncertain economic times, coupled with low interest rates and geopolitical tensions mean that the outlook from the firm’s analysis shows relatively weak performance, across key asset classes relative to previous decades, for the coming five years. Developed equities in particular, with an outlook of 3.2% per annum over the coming five years, are down on recent trends of around 8% per annum, while emerging market equities perform slightly worse at 2.9%. US investment grade fix income stands at between 1% returns, while US high yield returns around 2.6%. US and UK 10-year bonds provide relatively low returns at 1.8% and 1.6% respectively.

Low expected returns are persistent

The study suggests that the current asset market environment remains relatively uncertain and that moderate rates of return remain the most likely scenario. In some instances, the firm suggests that a ‘more radical reassessment of institutional or industry missions’ may be required to survive in the new normal. For pension plan investors this could mean reducing returns by shifting asset classes, as low wage growth allows the fund to still meet savers’ objectives even with reductions in its returns.

The firm adds, “The cautious outlook we have held for the past year or two is retained. Downside risks remain unusually elevated, not so much in number but in severity due to the inability of policy to mitigate their impact. We continue to encourage all investors to adopt a cautious approach to risk as a consequence.”

Related: Sentiment of investors globally is more bearish than bullish.

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

15 April 2019

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.


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.”