Uncertainty increasingly hitting workers and businesses in time of change

25 July 2017 Consultancy.uk

Policy uncertainty has risen to levels above that of the depth of the financial crisis as the US and the UK and Europe find themselves in somewhat unexpected situations. This uncertainty is felt most acutely by employees further down the corporate food-chain in the US, who remain in weak uncertain positions with low wages, with a similar outlook for that group in the Brexit-era UK.

To better understand key current trends faced by CEOs across the globe, PwC have released their ‘Global EconomyWatch’ report. The latest edition finds increased uncertainty among top level decision makers, with challenges stemming from a range of domains, from cybersecurity to economic conditions. Employment and Brexit – particularly following the hung parliament – create additional areas of uncertainty in Europe. However, while the high-pressure lifestyle of top executives is the most visible sign of panic in international markets, the effects of uncertainty are felt most acutely by workers furthest down business pecking orders.

The latest report into uncertainty levels* shows a steady rise in uncertainty between 2016 and 2017. The spike is significantly above levels seen even during the financial crisis and the wider effects of the crisis across Europe. Uncertainties stem from a range of factors, from Trump’s ascendency to Brexit and changes in US monitory policy.

Uncertainty levels hit all time high

The high level of uncertainty has multiple knock on effects that affect businesses, with consumers becoming less confident whereby they tend to save more; businesses cut back on investment, production and compensation; and financial markets tend to increase the cost of money.

In the US

The research notes that the US labour market has continued its tightening trend, hitting unemployment of around 4.3%. While unemployment is down, the research notes that many remain underemployed relative to earlier periods – the supposedly positive figures do not distinguish between gainful employment and those working fewer hours than they would wish, or even those whom have left the labour market due to the untenable conditions such employment practices place them in.

US unemployment levels and low wage growth

The research further finds that new jobs are of poor quality, usually employing low-skills, for low-pay – a sector likely to come under increasing threat from automation anyway – or are out of sync with the skillset of those employed. People are often also in unsecure jobs, finding themselves in ‘gig economy’ jobs, or other forms of temporary labour. Furthermore, bargaining power for workers has decreased, resulting in a trend of continued poor wage growth.

Wage growth, the research finds, remains well below that of pre-crisis levels, even while employment figures are comparable. Technology is increasingly implicated in diminishing the role of labour and strengthen the power of capital – with potentially disastrous, and certainly uncertain, long-term consequences.

In the UK

The UK too continues to find itself in deepening uncertainty. Theresa May’s failed bid to secure a larger mandate in a snap election which saw her government lose its Parliamentary majority, the resolve of Europe regarding the likely difficulty of getting ‘a good deal’ from a government subsequently in chaos, and increased questions about the Brexit referendum itself, mean that businesses, the public and governments across the region are increasingly mired in policy-related uncertainty.

Forecast of UK GDP growth

One of the effects of this kind of uncertainty is that there is a correlation with increased variation in economic forecasts. The most recent aggregation and standard deviation of UK GDP projections from major sources is now at almost 0.4%, well above referendum and general election results – where there were also periods of uncertainty.

The study notes that uncertainty will likely begin to trickle down into the wider economy as consumers hold back on spending – which is of particular concern in the UK due to the low pound and rising inflation. For businesses, big ticket investments become increasingly risks, while cash hording also tends to increase. For investors, finally, increased uncertainty tends to indicate increased risks, which correspondingly sees money moved from risky investment classes to safer ones. The firm’s research also notes that gold has begun to tick up in recent months, suggesting an oncoming period of economic crisis, while the Emerging Market Index has continued a slow long-term downward trend – even while recent business trends have remained optimistic.

Reversal of flows from riskier to safer

Barret Kupelian, a Senior Economist at PwC, said, “Businesses that have invested resources in such areas are likely to be better prepared for a future that remains highly uncertain. According to our CEO Pulse Survey, 30% of business leaders expect at least one crisis to hit their business within the next year.”

* The index is developed from three metrics, the first “quantifies newspaper coverage of policy-related economic uncertainty. The second reflects the number of federal tax code provisions set to expire in future years. The third uses disagreement among economic forecasters as a proxy for uncertainty.”

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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.”