McKinsey: Europeans most confident about economy

15 September 2015 Consultancy.uk

Globally, confidence in the economic conditions for the coming six months are the most positive from a European perspective and the most negative from a North American one, research by McKinsey & Company shows. Regionally, respondents in emerging markets are considerably more downbeat about conditions in the coming six months than their developed region counterpart. Geopolitical situations remain the dominant risk for the coming 12 months, followed by economic volatility.

A recently released McKinsey & Company report, titled ‘Economic conditions snapshot 2015’, explores the intuitions of 1,452 executives on the state of the global and local economies over the short- and mid-term. The report cuts across the full range of regions, industries, company sizes, functional specialties and tenures.

Future expectations
This years’ survey shows that last year’s projections about the current economic conditions in which executives find themselves are not congruent with how things turned out. Last year, executives were expecting positive mid-2015 economic conditions in general. At the end of last year, 40% of executives from emerging markets expected conditions to improve, which fell to 24% in March this year, with June this year only finding 27% of executives expecting improved conditions. Developed markets on the other hand have seen slight improvement in expected conditions, up from 41% at the end of last year to 45% as of June this year.

Market conditions across emerging and developed markets

Global projections
At the global level, particularly European CEOs are upbeat about the economic conditions. Almost half (46%) believe conditions will improve moderately in the coming six months, 4% that they will be substantially better and only 9% that they will be substantially worse. While Europe is expecting high economic times globally, both Latin America and North America are expecting conditions to be more adverse. Only 27% of North American executives expect improvement and 28% expect deterioration in conditions. Latin America, while slightly more positive among executives - with 37% expecting improvement, also holds a considerable number of downbeat executives, at 28%.

Economic conditions across regions

Regional confidence
Looking at confidence in regional economic conditions, considerable variations are found. Particularly Latin America is expecting poor results, with 59% of respondents continuing to expect economic conditions to decline for them. The Asia-Pacific region has seen the biggest drop in executives expecting a better outcome from 64% in March to 45% in June. North America also saw a sharp drop in expectations, down from 56% in March to 45% in June. India, while seeing a drop in confidence, remains one of the strongest regions. 80% of executives is still confident of good outcomes for the region, even if it is down from 93% in March.

Expected economic condition in local economies

Geopolitical situations
The survey also asked respondents to name some of the wider context and situations that are likely to create negative risks to economic growth in the short-term (next 12 months). The biggest issue remains geopolitical instability, both at the national and international level. Nationally, the risk increased 24% last year to 26% this year, while at the global level the risk jumped from 60% last year to 74% this year.

Economic volatility also increased significantly on last year; from 15% to 25% at the local level and from 22% to 34% internationally. Exchange rate volatility also saw a considerable increase, now at 22% on both the national as the international level. In addition, a sovereign debt default, with Greece the likely entity, increased significantly internationally since last year up from 9% last year to 39% this year. Although by all accounts this risk has now abated.

Geopolitical conditions

Mid-term projections
The consulting firm developed four scenarios with general predictions about the coming decade. The first is the ‘pockets of growth’ that represents uneven, volatile, but high levels of global growth. A ‘global downshift’ describes a situation in which growth is lower but more resilient. A scenario of ‘global synchronicity’ represents a period of globally distributed growth and broad increases in productivity. A fourth scenario, ‘rolling regional crises’, describes volatile and weak global growth.

For the most part, respondents indicate that ‘pockets of growth’ or ‘global downshift’ would be the most likely outcome of the global economy in the coming decade. Although particularly emerging market executives are upbeat about a ‘global synchronicity’ to form, being twice as likely as developed-market executives to rank as the most likely outcome for the decade ahead.

More news on

×

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.”