Economies need to invest at least $49 trillion in infrastructure by 2030

02 January 2017 Consultancy.uk

The world will require around $49 trillion in new economic infrastructure investment by 2030, according to a new report. As it stands, a total gap of around $5.2 trillion exists in terms of planned investment – with particularly China behind on investment. Key future investment demands, including sustainability goals, are not yet factored into the total. 

The world’s built assets remains a key background through which modern lives are structured. The total value of the built assets in 32 countries in 2015 amounted to just over $218 trillion, according to a recent report. Many of these assets, particularly in developed countries, are becoming old, while in many developing countries, changing demographics demand considerable additions to their asset stocks. 

In a report by McKinsey & Company, the consultants look at, among others, the development of global infrastructure in line with demand (pinpoints the gaps), as well as its quality in relation to the income of the countries in which it is constructed. The report is based on an economic model built by the firm, complemented by data from three sources: the Organisation for Economic Co-operation and Development (OECD), the International Energy Agency (IEA), and Global Water Intelligence (GWI).

 infrastructure investment from developing world

Future investment

According to the analysis emerging economies have continued to see considerable sums invested in the development of their wider infrastructure. China, for instance, spent 26% of the $31.4 trillion invested between 2000 and 2015, while North America and Europe spent 22% and 16% respectively.

The coming fifteen years will continue to see the lion’s share of investment made in developing nations, India is set to double its investment to 6% of the total, around $3 trillion, while China will up its investments to 29% of the total, or around $14 trillion. North America will continue to invest around 22% of the total, while Western Europe drops down to 12%. 

Required future investment breakdown

Future needs

The total of $49 trillion breaks down to around $3.3 trillion in annual investments through to 2030, in line with the projects related to the demands envisaged by the organisations cited by the report. The report however, does not take into account demands made by additional global goals, such as those set at COP21 and the UN Sustainable Development Goals.

The largest portion of spending is projected to be $1 trillion per year for power, while water and telecom will each need to see around $0.5 trillion. In terms of the % of global GDP per year, around 3.8% will need to be invested per year to keep pace with global project growth.

Infrastructure investment in 2013

Historic trend

According to the research of historic spending trends, in 2013 the world invested around 3.5% of its total GDP into economic infrastructure projects. China was the largest spending, with a total of 8.6% of its GDP going to infrastructure, followed by India, at 4.9% of its total GDP.

Across various regions, the largest spending, as a % of regional GDP, occurred in developed Asia and Oceania, at 4.6%, followed by the Middle East, at 4.3%. North America and Western Europe both invested less than the global average, at 2.5% apiece.

Infrastructure investment gap by geography

Required investment

Relative to historic trends, there will be a global spending gap of around 0.4% of GDP, or a total of $5.2 trillion, by 2030. The gap in spending, given that the global average is made up of sovereign states, is more significant in some regions than other.

The two countries with the largest investments in infrastructure, China and Qatar, enjoy a spending surplus, implying that they are in a position to reduce their investments. India on the other hand, is projected to spend less on its infrastructure than is demanded from its growing and maturing population – the county faces an annual gap of 0.5% of GDP.

Other countries that are ahead on their level of spending, relative to the projected needs, include Australia, at -1.2%; Russia, at -0.1%; Japan, at -1.5%; Italy, at -0.1%; and France, also at -0.1%.

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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.”