- Energy/Power sector to offer the most attractive investment opportunities in 2012
- Industry expects growth this year, yet economic uncertainty and government deficit/debt in some regions are still major concerns
- Perceived lack of government policies and leadership seen as biggest barriers to public-private partnership investment in infrastructure
KPMG’s sixth annual Global Construction Survey finds that 41% of the top global engineering and construction leaders expect the energy/power industry to offer the biggest opportunities for revenue growth in the next 12 months and as a result, this could change the direction and even the landscape of the construction industry.
Richard Threlfall, UK head of KPMG’s infrastructure, building & construction practice, said: “This year could see the construction industry in the UK and around the globe start to change direction significantly as the energy sector grows as a source of income for the industry. As a result, the demand for firms and individuals with energy sector-specific engineering and construction skills will rise as power projects proliferate.”
The survey shows that economic uncertainty is still seen as the greatest systemic threat to the construction industry but optimism remains widespread amongst the global engineering and construction leaders as almost half (49%) expect to increase their backlog orders in the next 12 months. In the Americas and Europe, Middle East and Africa (EMEA) regions the second greatest concern over business conditions is the ongoing issue of government deficits – over half (52%) of construction executives in the Americas fear this may constrain any economic recovery; over a third (34%) are worried about this in the EMEA region.
Richard said: “While the continuing economic instability deepens in many parts of the globe, the construction industry is not in retreat. 2011 was a solid year for engineering and construction companies as they saw backlog orders increase compared to 2010. The outlook for the construction sector is largely sanguine in the short-term and in the coming decades the demand for power and infrastructure projects around the world is only going to grow, which means the construction industry should be adapting to respond to the opportunity.”
The survey finds that 40% of equity investors in the infrastructure sector from EMEA see energy/power followed by transport projects (30%) as the most attractive investment opportunity in the next 12 months. However, an overwhelming 80% cite that they are very concerned about governments’ ability to drive infrastructure spending and see lack of leadership as a barrier to investment. Moreover, two-thirds of engineering and construction leaders believe that the private sector is not showing enough initiative.
Richard said: “Amidst a global ‘energy crunch’ significant investments are needed in energy infrastructure to provide energy security at current levels and to allow for a low-carbon transition of our energy systems.* Given the push for infrastructure, there will be intense competition for resources and skills, so the UK needs to work hard to attract the best private sector talent and investment.
“With austerity policies in many countries constraining the scope for public sector spending, it is vital to create an environment that encourages private sector investment. As governments around the world seek to create 21st century infrastructure, they need to create an environment that encourages private sector investment. This means addressing regulatory and legislative barriers and showing long-term commitment.”
- Engineering and construction leaders expect office (29%); industrial (27%); retail (23%) to have a negative impact on the construction indutsry
- 21% of global engineering and construction leaders have not made significant cost reductions; in EMEA 29%. 61% said that organisational culture is the biggest barrier to greater cost efficiency
- 50% of global engineering and construction leaders say that IT transformation is too costly and takes too long
- 71% say they have formally reviewed their IT systems within the previous 12 months
- 59% of respondents say procurement and supply chain offers the greatest opportunity to improve efficiency
- One-fifth of global respondents saw supply-chain management as a key business risk but over half of UK respondents identified this as one of the greatest risks facing their firms
- A quarter of EMEA engineering and construction leaders are concerned about the skills shortages in their region; in ASPAC the figures rises to 45%
- EMEA respondents say the two most central risk factors when doing business with emerging (high growth) markets are access to skilled resources (41%) and political risks (38%).
- Ends -
Notes to editors:
Richard Threlfall, UK head of infrastructure, building & construction at KPMG, is available for interview.
* Organisation for Economic Co-operation and Development (OECD) countries need to retire significant amounts of ageing infrastructure and non-OECD countries have to provide for new energy demand. According to the International Energy Agency (IEA), US$33 trillion will need to be invested in energy-supply infrastructure between now and 2035. Non-OECD countries account for 64% of the total investment needs, with China alone representing 16% of the investment needed.
About the Survey
All survey responses for KPMG’s 2012 Global Construction Survey: The Great Global Infrastructure Opportunity were gathered through face-to-face interviews in 2011 with 161 senior leaders – many of them Chief Executive Officers – from leading engineering and construction companies in 27 countries around the world. Fifty-two percent of respondents were from EMEA, 31 percent from the Americas and 17 percent from the Asia-Pacific region. Respondent companies’ turnover ranged from less than US$250 million to more than US$5 billion, with a mix of operations from global through regional to purely domestic. The interviews were carried out by senior representatives from KPMG member firms specializing in the engineering and construction industry, with the questions reflecting current and ongoing concerns expressed by clients of KPMG member firms.
For further information, contact:
Arti Mohan, Corporate Communications
Tel: 020 7694 8735
Mobile: 07768 858 085
KPMG Press Office: 020 7694 8773