UK Government amidst decade of financial recalibration

26 October 2015 Consultancy.uk

The bailing out of private sector banks and institutions globally, and the resultant financial crisis, has hit the UK’s public finances hard. In the UK, government debt levels jumped three-fold following the crisis, research by Deloitte and Reform shows. The increasing debt levels have seen the UK Government enter into austerity to reduce borrowing and debt levels. This is expected to see state spending reduced from the norm of European neighbours to that close to the US.

The yearly run ‘The State of the State’ report delves into the current state of public finances and considers their improvement against ten indicators. The report is prepared by Deloitte and Reform, and is based on publically available information about state finances as well as an Ipsos MORI run series of interviews involving more than 40 local public sector leaders.

Public sector finances

Public sector debt
The UK Government represents 46.8 million electors that support a population of 64.6 million people. The public sector itself employs 5.4 million people in 5,500 organisations across England, Northern Ireland, Scotland and Wales; amounting to 17% of UK employment.

The financial crisis has had a largely negative effect on the UK’s books. Since the crisis, the Government’s debts have risen almost threefold to £1.5 trillion in 2015. As it stands, the UK Government is raising £673 billion through various income channels, while spending £742 billion, resulting in a deficit of £69 billion. This deficit is funded by borrowing. The cumulative effect of that borrowing over time means that the Government’s debts have risen almost threefold since the global financial crisis in 2008 to £1.5 trillion in 2015.

Public spending in the G7

 

Austerity
As a response, the Government – since the crisis – has decided to initiate a range of public finance austerity measures to reduce spending, whilst only marginally implementing measures to increase income. The aim of the policies is to eliminate the deficit by 2020, and in the long term, reduce outstanding government debts back to pre-crisis levels.

The UK’s deficit reduction programme is relatively austere. According to the current policy initiatives, the UK will be reducing its public spending by 19.5% as a share of their GDP over this decade, compared to 9.6% as average across G7 countries. Across the world, the changes instituted by current government policy has seen UK Government spending, when measured as a percentage of GDP, drop from 16th place of the 37 most advanced economies in 2010 to 21st today. It is projected to drop a further five places to 26th by 2020, leaving the ranks of European states to come closer to the US.

Public sector spending across UK

Public sector spend and employment
The level of public spending per head of population differs across the various countries of the United Kingdom. Public sector spending stands at £8,678 in England, followed by Wales at £9,924 and Scotland at £10,275. Northern Ireland has the highest level of spending per head of population at £10,961. The highest level of public employment is also seen in Northern Ireland, at 26%, followed by Wales at 21.4% and Scotland at 20.5%. England has the lowest level of public sector employment at 16.1%.

Spending cuts per head and headcount cuts

Cutting spending and headcount
Since the crisis, public sector spending and headcount have seen different levels of cuts across various regions in the UK. The largest drop in spending occurred in London at -11%, followed by East England which saw a drop of -6%. Wales, Scotland and Northern Ireland each saw a drop of -4% in public spending per head in real terms. In terms of employment reduction within the public sector, the largest drops since 2010 occurred in the South West and North East at -12% and -14% respectively, followed by Wales and North England, at -9% each. Scotland saw a drop of -7% while Northern Ireland has seen a -4% reduction.

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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.”