Low oil price adds 91,000 jobs to UK labour market

16 March 2015 Consultancy.uk

Oil prices of around $50 per barrel could boost UK GDP by 1% and employment with 91,000 by 2020, research by PwC shows. In its research, the consulting firm also looked into two additional scenarios, with oil prices of around $73 and $108, scenarios that show less profitable results for the economy. The firm also warns in its report that the low inflation rate, which resulted from the low oil prices, is expected to rise again, something businesses and households should prepare for.

In the latest edition of its ‘UK Economic Outlook’ report*, which researches the UK economy and its recovery, professional services firm PwC specifically looked at impact of lower oil prices on the UK economy. This resulted in the conclusion that although sectors directly involved in oil and gas production will experience negative effects of the sharp decline in oil prices, the impact will generally be beneficial for the UK economy.

PwC - London

In the report, PwC lays down three scenarios:  a scenario in which the oil price per barrel will settle at around $50 by 2020, one in which the price will rise to around $73, and one where the price will rise back to its mid-2014 level of around $108. For each scenario, the firm estimated the increase in total UK employment for 2016 and 2020.

This analysis highlights that lower oil prices are expected to boost the UK employment, with the highest rise expected in the scenario with oil prices of $50 per barrel. This will, according to the report, lead to an increase of 1% of the UK GDP, and boost in employment of 91,000 by 2020. According to the consulting firm, this will be the result of lower cost of production which will lead to an increase in overall economic activity, which in its turn will boost both investment and employment.

Increase UK employment: 2016 and 2020

“Lower oil prices should have a positive impact for most sectors of the economy, households and the government, but the scale of these benefits remain highly uncertain depending on how oil prices evolve from here,” explains John Hawksworth, Chief Economist at PwC. “So businesses would be well advised to look at alternative scenarios.” Looking at the other two scenarios, it becomes clear that in these cases the impact will be smaller: with increases in GDP of 0.2% and 0.5% and of employment of 3,000 and 37,000.

Recovery UK economy
The UK economy has experienced a growth of 2.6% in 2014, which is the fastest rate since 2007 and strongest growth rate in the G7. PwC believes that, as a result of the recent fall in oil prices, the recovery will continue and forecasts the economy to grow with 2.5% in this year and with 2.3% in 2016. Looking at inflation, which was pushed close to zero as a result of the falling oil price, the firm expect it to rebound to 1.8% by late 2016.

UK economic growth prospect

Commenting on the expected rise in inflation, Hawksworth concludes: “Inflation is likely to remain close to zero on average in 2015 due to lower global energy and food prices, but could return to target by the end of 2016. As a result, we expect the MPC (Marginal Propensity to Consume) to keep interest rates on hold in the short term but then to increase them gradually from later this year or early 2016, returning to around 3.5-4% by 2020. Businesses and households should start preparing for this upward trend now.”

* The UK Economic Outlook report is produced every four months by PwC’s macroeconomics team. 

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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.”