UK businesses remain uncertain as economy hit by market fundamentals

03 April 2018 Consultancy.uk

UK business face various uncertainties, partly related to the outcome of Brexit talks. New analysis from Grant Thornton shows that businesses face various barriers to growth, although many also see those barriers as offering opportunities for acceleration.

The Grant Thornton study, titled ‘Planning for growth: Don’t let uncertainty hold your business back’ is based on a survey of 1,000 business owners, CEOs, CFOs, and CSOs, at businesses with a turnover of between £10 million and £1 billion.

The number of businesses in the UK has risen steeply since 2012, with more than 2.7 million enterprises in 2017, up from 2.2 million. Exports continue to see relatively favourable conditions, with low exchange rates and a rise in exports in the coming 12 months.

Labour productivity

However, while exporters are projected to see strong results, concerns around the wider UK economy continue to mount in the short-term, with GDP growth rates remaining lower than that of mainland allies such as Germany and France. Overall, GDP saw an 0.4% increase in Q4 2017, while in Germany and France 0.6% was recorded. GDP growth for the coming year is estimated at 1.5%, well below the 2.7% estimated for the US and 2.2% for the Euro area.

Productivity

Productivity remains an issue, with the UK seeing relatively low growth rates over the past five years. Following a slight dip into the negatives in Q2 2016, following the referendum results, productivity climbed to around 1% growth by the following quarter. However, the latest quarter again saw a relatively low result, at 0.4% growth, at a time when France and Germany have seen strong increases to 1.5% growth. Business confidence in the UK also remains at relatively low levels, at a net 12% positive, down from 26% in 2016, while the global average has seen a sharp uptick, from a net 38% to a net 58% last year.

Number of years since investment decision

The research found that companies are in a period of acute, going on to chronic, insecurity – which has increasingly led, according to the survey, to a risk-averse leadership (41% of respondents). The study shows that the most recent investment aimed at growth was by and large between 3-5 years ago in terms of people, operating profit and top-line growth. Those in the 1-3 year segment account for around a quarter in the three segments, while in the past 12 months, figures for this segment have been particularly low – 9% for people investment, 5% for operating profit and 7% for top-line growth. 

Barriers

Technology is cited by 38% of respondents as the biggest hurdle facing their firm, while 34% cited brand, marketing and sales as the top going concern. Partnerships took third place, on 31% of respondents, while systems and processes stood at 31% of respondents. Talent and innovation, meanwhile was cited by 31% of respondents. Interestingly, inclusion and equality and Brexit strategy were not in the top ten (21% and 22% respectively), while governance and local prosperity come in last on 13% and 14% respectively.

Barriers to growth (%)

In terms of the companies’ confidence in overcoming barriers, around half said that they expect to overcome technological issues, while 43% said that they are suited to deal with brand, marketing and sales issues. Most companies say that they will be able to deal with the increasingly contentious issue of inclusion and equal pay.

Technology is cited as the biggest accelerator by 37% of respondents, equal with those who that say partnerships could act as an accelerator. Brand, marketing and sales come in at 33% of respondents, while 32% say systems and processes could accelerate their business.

In terms of the area in which companies say that they can implement an accelerator, technology and talent and innovation are cited by 55%, while healthcare and wellbeing are noted by almost 70% of respondents as an area in which they have the ability to act. Vision, culture and purpose are also areas in which respondents note their ability to intervene, at 70%, while inclusion and equality was cited by 74% of respondents as an area in which they are well suited.

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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.”