Output boost of 1.6% needed to rekindle Nordic growth

15 December 2015 Consultancy.uk

For the Nordic countries to flourish once again, like they have done for many decades, they will need to boost their productivity growth by 1.6% per annum until 2030, research by BCG shows. According to the consulting firm, the region must increase its workforce by an additional 1.7 million people and stimulate its most productive industries, with a focus on digitalisation, to achieve the desired growth.

The Boston Consulting Group (BCG) recently released a follow-up on its 2014 ‘Nordic Agenda’ report, which aimed at providing the Nordic region with advice on how to rekindle growth. In the 2015 edition of the agenda, titled ‘Bringing Growth Back To Focus’, the consulting firm re-examines Nordic growth and identifies the major challenges the Nordics (Denmark, Finland, Norway and Sweden) are facing, while highlighting key areas of focus for bringing back Nordic growth.

Competiveness rankings

BCG’s analysis shows that the region, just like last year, is increasingly facing challenges concerning its competitiveness and innovation. Whereas Finland, Sweden and Denmark were all three found in the first quartile of the global competitiveness index in 2006/2007, Finland and Sweden have dropped to the second quartile, to #6 and #7 respectively, and Denmark fell even further to the third quartile. The region’s innovation rankings also declined considerably. Sweden, the most innovative Nordic country, in 2009/2010 found on #1, slipped to #3, while Norway, the least innovative country of the four dropped from #6 to #13.

Labour productivity

For many years, the majority of the Nordic countries’ growth came from productivity improvement, which grew with an average of 2.3% between 1980 and 2007. However, since the financial crisis, this growth in productivity has decreased to 0.1% per annum between 2007 and 2014. The research shows that since 1980, the size of the labour market only grew by 0.4% per annum, adding a total of 1.6 million workers.

Size of labour force

The Nordic countries need to focus on these two key developments, and address the workforce gap caused by the aging population and stimulate the most productive industries to regain their competiveness. According to the researchers, continued prosperity and wellbeing will require an annual productivity growth of 1.6% until 2030, up from the 0.1% experienced between 2007 and 2015. In addition, to cope with the foreseen workforce gap by 2030, the labour force will need to be increased by 1.7 million new workers, of which only 0.5 million will come from population growth.

GDP growth

The analysis also stresses the need to stimulate the region’s most productive sectors and drive productivity improvement through innovation and radical digitisation. Currently, the Nordic countries’ service sectors are growing in size, but not in productivity, while the more productive manufacturing sectors are actually decreasing in size. In addition, the highly productive digital and financial business sectors remain comparably small.

Different industries

The firm identifies four actions to be taken by the Nordics to drive growth:

  • Catalysing demand for domestic services; this is the largest contributor to the Nordic GDP after the public sector.
  • Driving growth in the vibrant digital sector; the Nordics are well-positioned to capture a large proportion of the share of growth in the digital industry. Investing in digital can also spark growth in other industries.
  • Investing to bring manufacturing back to the Nordics; in recent years many manufacturers moved abroad. The Nordics need to invest in manufacturing and boost productivity by using industry 4.0.
  • Revitalising the public sector to become more productive; the Nordics have much larger share of their labour force working in the public sector. In Norway the share is 33% compared to the 19% OECD average.

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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.”