Decline of pound sees Chinese investment in UK flourish

29 November 2018 Consultancy.uk

The UK offers a range of investment opportunities that correspond to China’s strategic priorities; favourable conditions and a weak pound have seen Chinese investment in London swell in recent months. Chinese companies, however, are faced with an intricate tax regime and stringent rules around employment and data protection to invest in the country – something which UK management consultancies hope to advise on. 

Booming personal wealth in China has led to a surge in foreign investment across the world, with Chinese nationals keen to put their money to work wherever opportunity presents itself. While for a long time the developing world has been a key destination for this, Chinese investment has also been flowing into developed countries, including the UK. The falling value of the pound amid Brexit uncertainty has made the UK another hotspot for Chinese investment. In the first half of 2017 alone, this saw £5 billion in Chinese capital sunk into the London real estate scene.

More generally, investment in the UK from China doubled in 2017, totalling $20.8 billion in a year when overall Chinese outbound investment declined for the first time since records began in 2003. According to a new report from consultancy TMF Group and the China-Britain Business Council (CBBC), this trend is set to continue despite some short-term challenges posed by the UK’s exit from the European Union and a rethink by Beijing of its outbound investment priorities.

According to the study, as a mature, services-oriented economy, the UK offers a diverse range of opportunities that have so far yielded robust returns for Chinese investors; however, this is by no means a one-way street. The 30 fastest-growing Chinese companies with investments in the UK enjoy a combined turnover of more than £11 billion, but they also employ more than 5,000 across the country. In this regard it is important to note that while London remains a focal point, Chinese investment in the UK is also growing more diverse in terms of geography.

Decline of pound sees Chinese investment into the UK flourish

Residential property inquiries for Manchester, Liverpool, Birmingham and Edinburgh in particular are reported to have experienced three-digit increases in August 2018 over August 2017 by Chinese buyers. Further illustrating this, meanwhile, English football clubs like Reading, Birmingham City, Aston Villa, Southampton, Wolverhampton Wanderers, West Bromwich Albion now all have Chinese owners or Executives at the helm.

At the same time, deal-making activity by Chinese investors is expected to continue on an upward trajectory across Europe, where regulatory obstacles are lower than in the US. In the first half of the year, the UK attracted $1.6 billion in investment from China, outpacing France and Germany, and making it the most attractive European destination after Sweden. However, the researchers were also keen to explain that there is no guarantee that the UK will continue to benefit from this, with certain key uncertainties still hanging over the economy.

Felix Ndeloa, Director of Consultancy Solutions at TMF UK said, “Despite the broadly positive picture there are several forces that could impact future investment trends negatively. Chinese companies may overlook the regulatory and compliance complications of investing in the country. These include an intricate tax regime and stringent rules around employment and data protection. These issues argue for Chinese firms seeking the support of a knowledgeable local partner who can help ensure their operations are compliant and continuously up to date across taxation, accounting, employment and data policy – especially as factors like Brexit seem likely to rapidly shift the picture in some areas. Securing such a partnership will free investors to concentrate on the more strategically important tasks of cultivating their UK presence and building relationships with local enterprises and the community.”

Furthering that point, Weifeng Ma, Director, Financial & Professional Services and China Outbound at CBBC added, “Uncertainties surrounding Brexit could temporarily impact investment activity, but in the long run CBBC is confident that the UK’s investment environment will prove attractive to Chinese investors. As the UK creates new trade and investment relationships after leaving the European Union, China will become an even more important partner.”

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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.”