Global trade on track for growth path, say Deloitte economists

02 February 2017 Consultancy.uk

The rise of protectionist politics, particularly in the US and UK, could mean a further slowdown in global trade. A new report argues however, that key structural and cyclic downwards trends of trade growth are about to come to an end, with, as a result, a global increase in trade activity and a boost in global economic growth.

Trade has been a key component of recent global economic development, and particularly a key driver for the success of Asian economies. Trade has however, made headlines recently as a key concern of the US electorate, and a key platform on which the now President of the US ran.

The rise of a more protectionist US, as well as the potential of additional barriers for trade between the UK and the EU, post Brexit, are said, by pundits, to potentially bring about a slowdown in global trade, and thereby, affect wider Asian economies.

In a new report from Deloitte, titled ‘Trade to trump protectionists and boost global growth’, the consultancy firm explores in how far Asian economies are likely to be affected by wider global political and economic trends going into 2017.

Regional share of global merchandise exports

According to Deloitte's analysis, trade has been one of the key drivers for economic growth across Asian countries. Cheaper labour and other structural costs, has seen manufacturing and services leave regions such and Europe and North America for far flung shores.

One of the most prominent benefits to Asia has been growth in merchandise exports, which has moved away from predominantly European and North American regions from the early seventies, as Asia begun to track towards generating almost the lions share by 2015. The movement of trade across the globe, the growth of which has far outpaced economic growth, by half again as fast over the past 50 years, has boosted the economic output of, among others, Asian countries.

The movement of trade has allowed economic growth in a number of Asian economies to significantly boost per capita incomes, although benefits are not apparent in all economies - with Bangladesh workers, in particular, continuing to face poor wage growth. It has also massively boosted the profits of multinational corporates, and wealth inequality among businesses (and people).

Global trade

The rapid acceleration of trade growth across the globe was the result of a range of factors, from the fall of the Iron Curtain, a manufacturing and export focus in China, to technological advances that allowed particularly IT services to shift to India.

While global trade has been steadily accelerating since the 1970s, the global financial crisis saw a sharp contraction, before a period of weaker trade growth. The slowdown in trade, the firm notes, particularly to levels below that of global economic growth as such, is of concern to Asian economies dependent on continued growth in trade for their own growth in GDP.Components of GDP, G7 economies

The reason for the sharp contraction in trade are, the firm notes, multifaceted. However, one part of the trend is the result of a considerable slowdown in key investments in advanced economies, which, the firm suggests, have resulted in a wider impacts to trade. Particularly as consumption, rather than investment, generate changes in the trade intensity.

Trade values too have been affected by macroeconomic conditions, particularly as US dollar has risen, which reduced the dollar price of internationally traded goods. A second condition affecting value is the movement of excess manufacturing capacity out of China to regional economies, which has resulted in deflationary pressures on manufactured goods prices.

Contribution to global economic growth, advanced and emerging economies

While global trade growth has remained relatively depressed relative to the period before the financial crisis, and in so far as political posturing and Brexit, among others, suggests that trade will be negatively affected in the long-term, Deloitte’s analysis argues that the future of both trade, and global economic growth, are not as dire as made out by pundits.

According to Deloitte’s analysis, the recent trend of low global economic growth is set to come to an end this year, as the contribution from emerging economies again ramps up and advanced economies begin to again make strategic investments. By 2021 global economic growth is set to hit 6% according to the firm.

The slowdown in trade, and the Trump related protectionism, is also unlikely – the firm suggests – to considerably dampen global trade growth. Cyclical effects related to the Chinese economic transformation slowing growth and lower infrastructure spending in the West, are likely to come to an end, while the slowdown in Chinese manufacturing will likely be picked up by other regional economies whose labour prices are more competitive. The growth of services across Asian economies, and their export – particularly in China and India – mean that in the long-term it is likely that trade volumes will again pick up steam.

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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.”