Roland Berger: banks must reduce savings interest rates

18 November 2013

Banks are paying too much for savings interest rates. Against the backdrop of low interest rates and relatively high inflation this statement certainly does not reflect the public sentiment, yet according to strategic consulting firm Roland Berger Strategy Consultants, banks should indeed consider to downwards adjust their interest policy.

As a result of the financial crisis, saving has become increasingly important to consumers. Traditionally, the average EU household saves about 11% of its disposable income. Yet the crisis has changed financial behaviour drastically, and households have, on a large-scale, exchanged risky products, such as shares or bonds for safe deposits. As a result, the volume of deposits has grown by at least 30% since 2003, by 40% in the Netherlands and by even more than 100% in Sweden. Roland Berger estimates that European households momentarily own €8.5 trillion in deposits, one-third of their financial resources.


The problem with deposits for households is the low return it provides. In some countries the low nominal return, combined with the rate of inflation, even provides negative real returns. A comparison: 


The dominant thinking in the market is that banks are purposely providing (too) low interest rates. However, from a banks perspective this can be questioned. Up to 2009, using savings to finance investments was considerably cheaper than using funds at the interbank lending rate. However, nowadays the opposite is true. From 2009 onwards, the interbank rate has, on average, been lower than the interest rate offered to customers, implying that banks, from a financial viewpoint, have been ‘overpaying’ households. The extent to which this is done varies from country to country. 


Banks have one key reason why they overpay: they don’t want to lose customers. Banks are also prepared to pay more because of “their stability and better position under the new Basel 3-standards applicable to the sector. These requirements oblige banks to, inter alia, for the money they lend out, possess sufficient savings”, says Mark de Jonge, partner at Roland Berger in the Netherlands. 

Deposit strategy
The advice from the consultants is clear: “If interest rates remain low for an extended period – and most analysts predict no major change before 2015 – banks will find themselves under pressure to stop overpaying on deposits.” This will have to be done in a careful manner, says Roland Berger. A deposit strategy should be developed, that looks at the savings behaviour of customers and the deposit-elasticity. It is also advised, to accompany such discounts with mitigating initiatives, such as innovative ways to reward client loyalty, the introduction of new loyalty schemes and customized services, such as tailored pricing.


Project management industry adds £156 billion of value to UK economy

15 April 2019

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.


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.”