US economic optimism spurring global confidence in its slipstream

18 April 2017 Consultancy.uk

Business optimism is globally on a high, according to a research by Grant Thornton, up from 38% in Q4 last year to 49% in the first quarter of 2017. 

The findings, from the firm’s most recent quarterly global survey of 2,400 businesses in 36 economies (‘The International Business Report’), suggest that the new pro-business Trump administration is acting as a catalyst, releasing pent-up confidence after a long period of supportive monetary policy and cheap oil. In the US, business confidence among mid-market decision-makers surged from 54% in Q4 of 2016 to a 14-year high at 80%. Given the mid-market serves as the engine room for broader economic growth, the researchers point out that the US economy is facing a rosy outlook. 

Francesca Lagerberg, a partner at Grant Thornton, says that despite the strong performance, it is still too early for US businesses to enjoy a positive impact on bottom lines. In fact, US business expectations for profitability have fallen from 55% to 52%. “Businesses await follow through on promises relating to spending, de-regulation and tax cuts, while stock markets continue to react to daily policy developments”, she remarks.

Business optimism

US neighbouring countries feel upbeat, too, as optimism in Canada rose from 33% to 59% and in Mexico from 8% to 32%. Countries across the European Union have seen a collective increase in optimism from 34% to 39% in the last quarter, despite the decision of the UK to leave the EU (‘Brexit’), while both Japan and Singapore have seen +20% improvements. The result for the UK echoes another recently released study, by Deloitte, which found that CFOs across the UK have become more upbeat about the future prospects of the UK business environment. 

“As the world’s largest economy, US business confidence sends a shot of endorphins throughout the global market. It’s encouraging, therefore, to see that close neighbours and countries with strong trade links are also riding a new wave of hope”, comments Lagerberg.

The US as a catalyst

The research shows signs that many businesses globally are aiming to tap into the growing US market. One of the biggest providers of capital goods, German export expectations, have climbed from 22% to 35%, as a 9% rise in the number of US firms expecting to invest in plant and machinery – at its strongest since Q1 2014 at 41% – signals a desire to re-tool for the future.

Globally, export expectations are up from 16% to 18% over the past three months, with prospects improving particularly across the developed Asia-Pacific (+4% to 12%), the G7 (+3% to 17%) and the EU (+2% to 24%). Nigeria (+26% to 40%), Germany (+13% to 35%), the Netherlands (+12% to 30%) and Ireland (+10% to 28%) have seen the most improvement. The data also reveals global rises in expectations of investment in plant and machinery to 34% (+1%) and new buildings to 22% (+3%).

Unemployment rates in select countries

Lagerberg: “Growth in US investment expectations are clearly opening up opportunities for trade.”

Talent: a growing bottleneck

The report by the accounting and consulting firm further highlights challenges in the mid-market marketplace. Concern over a lack of skilled staff is cited as one of the major bottlenecks feared, with scarcity of talent at a two and a half year high of 33% and global hiring expectations up 3% to 32%. This is a particular problem in tight labour markets and in demand sectors, such as digital, engineering and data science, say the authors. In the UK for instance, unemployment has reached its lowest level in decades, putting pressure on talent strapped businesses seeking to capitalise on growth opportunities.

In light of this, businesses are advised to assess their export strategies over the coming years and consider how to take advantage of investment opportunities, taking into account the changing talent landscape, which is largely being affected by technology-led innovation

According to a study by PwC, on the long run the main driver of global growth is shifting from developed to developing markets.

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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.”