Poor productivity sees UK growth hit lowest level since 2012

31 May 2018 Consultancy.uk

The UK’s economy saw its weakest growth figures since the country endured a double-dip recession in 2012. While the 0.1% GDP growth reported for the UK’s economy is at least still a positive one, and blamed by the Bank of England on bad weather which has since passed, many of the conditions cited for that last recession remain prevalent in the British economy.

In 2012, the Office for National Statistics confirmed the UK economy had returned to recession, after shrinking by 0.3% in the final quarter of 2011, and 0.2% in the first three months of 2012. A recession is defined as two consecutive quarters of contraction, and a sharp fall in construction output, and wage stagnation stifling consumer demand were two of the factors behind the surprise shrinkage which consigned Britain to its second recession since 2009.

The UK economy has maintained positive growth since, and employment in the nation is at a four decade high – however businesses have collectively failed to translate this into a substantial boom period, thanks largely to Britain’s poor productivity performance over the past decade. The issue deepened in 2017, as overall output per hour worked declined 0.2% in the year to the second quarter of 2017, compared with an OBR forecast for 1.5% growth as recently as the March Budget. Elsewhere the International Monetary Fund announced that due to "weaker-than-expected activity" in the first three months of the year, the global financial institution forecasts that the UK economy would grow by 1.7%, compared to a previously anticipated 2%.

Poor productivity sees UK growth lowest since 2012

The sluggish performance continued to prompt caution on the part of economic experts and one of the UK’s leading economic think tanks slashed its forecasts for 2018 following evidence that growth almost came to a halt in the first three months of the year. The National Institute for Economic and Social Research said it expected expansion of 1.4% in 2018 – down from the 1.9% it had been predicting three months ago – and anticipated that interest rates would not rise until August at the earliest.

Now, Britain’s slowdown has been confirmed, with new GDP figures showing the economy only expanded by 0.1% in the first three months of 2018. Some had hoped that last month’s preliminary growth figures might be upgraded, but ultimately the latest data from the ONS showed growth of just 1.2% in the last year – and the economy teetering on the brink of negative growth in coming months.

The Bank of England was quick to shift blame for the performance of the economy onto the so-called “Beast from the East”, a series of winter storms that saw the UK grind to a halt early in the year. This was something the ONS was keen to rule out, instead stating a crash in retail and construction driven by low levels of demand and weakened consumer power due to stagnant wages.

Wading into the debate, John Hawksworth, Chief Economist at PwC, said that growth may still pick up this year. He stated, “The ONS left their estimate of first quarter GDP growth unchanged at 0.1%, with construction and retailing being the main sources of weakness on the output side. They also continued to downplay the negative influence of adverse weather conditions on the figures, in contrast to the views of the Bank of England and indications from some business surveys that this was a more significant factor. On the expenditure side, subdued growth of consumer spending of just 0.2% was an important factor behind the slowdown, although retail sales bounced back strongly in April so we expect somewhat stronger growth in the second quarter."

While the Beast from the East was widely accepted as having contributed to a slow start in 2018, however, the construction sector in particular was found to have entered positive growth again by April. At the same time, the UK was by no means isolated in suffering at the hands of bad weather in the first quarter. In the meantime, wage stagnation has continued – something which is cited by multiple sources as having contributed to the demise of a number of high street and leisure brands this year. While growth in employment seemed to offset the effects of this up until this point, the growth in employment is likely to peak relatively soon, having already hit a 43 year high point.

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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.”