UK business optimism rises but stagnant wages could limit growth

05 October 2017

Business optimism is running relatively high, finds a new report poll-of-polls of UK business reports; production sectors are particularly optimistic on the back of a low pound. Unemployment, meanwhile, has hit the lowest levels since 1975 at 4.4%, but real wages are projected to decline by 0.5% for the year – suggesting that this optimism may be short-lived, as decreased spending power impacts on consumer markets.

BDO’s latest poll-of-polls, titled 'BDO's Monthly Trend Indices', is a regular collation of all the UK’s main business surveys. The study, which looks at four key business trends: output, optimism, inflation and employment, studies the most recent figures available, and gives a general indication of business sentiment for the period.

BDO Output index

The output index has remained almost unchanged since July, coming in at 95.1. Having recovered from a brief dip in output in June, this still represents near stagnancy for the index (positive growth >95). Following a previous protracted period of decline – which began at the end of 2015 when the rating stood at almost 105 points – there are still causes for concern despite increased stability. While a 0.2 point increase in services occurred, representing the majority of output, manufacturing, which accounts for around a fifth of total UK output, fell by 0.7 points to 97.9 in the period. The sector has been hit by a continuing period of uncertainty thanks to Brexit negotiations, which could impact the ease of imports and exports, as well as access to skilled labour for manufacturers.

GDP growth, meanwhile, stood at around 0.3% for the Q2 period, led by services which increased by 0.5% between Q1 and Q2. Production, however, saw declines of 0.3%. Researchers noted that, looking ahead, economic growth from spending is also likely to take a hit as consumers tighten their belts in the face of wages which are stagnating in real terms – which would also have a knock-on impact on manufacturing, and various other aspects of the supply chain.BDO Optimism index

Conflictingly though, BDO’s research shows that the manufacturing sector is actually optimistic despite an uncertain outlook. Investors in manufacturing have benefitted in the short-term from a relatively low pound, with 14% of firms reporting a rise in output in the past three months. The high level of confidence may reflect continued expectation of competitiveness going into Q3, as the pound remains relatively low. However, while negotiations between Brussels and the UK are on-going, the low pound is still supplemented by ready access to the EU in terms of tariff-free trade and free movement for employees. Were these factors to seem increasingly likely to change for manufacturers post-Brexit, this might impact on the confidence of manufacturers in BDO’s future surveys.

Despite declines in output, broader business optimism, reflecting order book development, has remained relatively positive following a large boost in at the end of 2016. Optimism has continued to run at around a rating of 103, as seen in the previous surveys, and has now trended up by 0.2 points to 103.2. Despite service optimism remaining somewhat subdued at 99.5, manufacturing optimism actually hit the highest levels seen in the report since the firm began to track optimism, up 1.2 points to 122.6.

BDO Inflation index

The research notes that the inflation index has remained relatively stable at 104, an 0.8 point decrease on July – with headline inflation then running at 2.6%. The index remains above the long-term trend, reflecting the increased cost of goods and utilities, clothes, gas & electricity, and food & non-alcoholic beverages, although the price of fuel continued to decline.

The increase in inflation has bitten into real wage growth, which is found to have fallen by 0.5% in the year so far. Given the already squeezed finances of much of the UK’s working population, this has seen a decrease in retail spending for non-essential purchases, while budget stores like Aldi and Lidl have seen continued boosts to their sales figures.BDO Employment indexThe employment index is continuing to see increases as unemployment levels fall further to 4.4% of the UK’s working age population actively looking for work. The figure is the lowest since 1975, although the increase in employment has yet to translate into higher wages, even while demand for workers saw a near-record 768,000 vacancies advertised for May to July.

According to the study the relatively low wage increase so far this year, 2.1%, is reflective of ‘weak productivity growth, driven in part by economic uncertainty’. However, it may also be substantially linked to the growing ‘gig economy’ of the UK, whereby employers fill roles with ‘self-employed’ or ‘freelance’ staff in order to circumvent long-term commitments to higher wages and improved conditions – cutting costs, but at the same time limiting the spending power of a large portion of the working population – which, in the long term, could severely limit the growth potential of an economy based on consumption.


More news on


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.”