UK growth to remain slow thanks to low wages and debt

12 December 2017

The next three years are likely to see a period of relatively low growth, according to a new study. In the short term, declining wages and rising consumer debt are likely to impact the banking industry, while asset management will continue to benefit from strong equity performances at home and around the world.

The UK economy is projected to see relatively weak growth this year and the next, following a relatively sluggish start to the year punctuated by uncertainties. Growth of 1.5% this year will be followed by around 1.3% next year, before returning to 2016 levels by 2019, at 1.8%.

One of the major drivers for the sluggish growth is a squeeze on household spending, which is  partly a reflection of negative real-wage growth. Household disposable income is projected to fall by 0.2% this year as government austerity measures continue to cut away at the UK’s  safety net and low-wage growth key factors. The current debt-fuelled spending is also likely to be hit by the Bank of England’s recent rise in interest rates, with Threadneedle Street having sent various warnings regarding the unsustainable nature of current lending levels.Headline resultThe report notes some bright spots as exporters in particular are sitting in a ‘sweet spot’ with a relatively low pound and a competitive employment environment. However, their unwillingness to invest the resultant profit due to Brexit uncertainties, and the prospect of the pound returning to strength, imposes a few challenges.

While the economy as a whole has entered a period of relative uncertainty and relatively low growth, the banking sector continues to see total asset growth go up from £7 trillion in 2016 to a projected £7.25 trillion this year.

The banking sector remains, in part, dependent on consumer sentiment in their willingness to take on additional debt. A relatively weakening job market, real wage decline, rising personal debt levels and regulatory interventions are being considered to stave off a repeat of the 2007 credit crunch, which may mean that consumers reduce or slow their exposure, thereby impacting the banks' revenue growth.
Borrowing costs have hit records lows
Total income for banks considered is likely to stay relatively stable at around £137 billion this year and the next, before rising to £143 billion by 2020. Banks continue to be affected by low interest rates, pressuring margins and a range of other issues.

Omar Ali, EY UK Financial Services Managing Partner, commented, “Even modelling for a Brexit transitional deal, the outlook for 2018 remains tough for financial services as the impact of higher inflation is felt by households up and down the country. Business lending, mortgage lending and general insurance look set to be the hardest hit. Despite warnings from the Bank of England and some high-street lenders, the only type of lending that is expected to grow in 2018 is consumer credit. A return to mortgage and business lending growth is forecast for the latter stages of the decade, but this does depend on the right deal being struck with Europe.”

Insurance and assets

The life insurance segment is set to see premium growth increase slightly, favoured by equity prices. The relatively stable equity environment,  recovering rates, as well as a fall in the pound mean that industry profit will stabilise at around £6.5 billion, rising slowly to around £7.4 billion by 2020.

The wealth & asset management sector is projected to see modest growth of around £90 billion in assets under management (AuM) between 2016 and 2017, largely due to gains in the equity market, while bonds add around £11 billion to the total. The rise was slightly more modest than the jump between 2015 and 2016, when AuM increased by more than 16%.
AUMs reached almost 60 percent of GDP in 2016 and are forecast to climb further
The future for the market looks relatively robust, even if growth is projected to slow. By 2020, AuM in the UK is projected to hit just shy of £1.3 trillion, with interest in bonds rising slightly as US Federal reserve set interest rates increase, while equities are set to be a relatively stable asset class. Given the relative economic uncertainties, the report suggests that some degree of diversification is likely over the coming period.

Ali concluded, “There’s been a lot of speculation about what will happen in the longer-term regarding Brexit and a transitional deal. That’s only right - given the importance of financial services to overall economic prosperity in the UK, it’s vital that the industry’s needs are front of mind during the Brexit negotiations. However, we can’t afford to lose sight of the short-term. Both mortgage, and business lending to a lesser degree, are expected to drop back next year. This will naturally impact the real economy. Falling real disposable incomes and policy headwinds will make 2018 a tough year for general insurers and there’s also a risk of consumer credit growing out of pace with affordability as people try to compensate for the impact of inflation.”


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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.”