After prolonged economic uncertainty, a majority of executives in the global engineering and construction sector have fresh confidence in the growth prospects for the industry, according to KPMG International's 2013 Global Construction Survey.
A general increase in backlogs and margins is giving cause for optimism across the industry, with further growth anticipated. Just over 50 percent of 165 C-level executives from the Americas; Europe, Middle East and Africa (EMEA); and Asia-Pacific (AsPac) regions said their companies experienced an increase in backlogs of at least 5 percent from 2012 to 2013. Moreover, though margins are not rising at the same rate as backlogs, 80 percent said their margins will either remain stable or increase more than 2 percent in the same period.
The Americas region had the highest confidence for growth with 90 percent forecasting margins as stable or increasing by more than 2 percent. By contrast, 28 percent of companies in the AsPac region see margins decreasing by fewer than 2 percent.
"Our 2013 survey shows the overall outlook in the industry is directionally positive," said Geno Armstrong, global leader of KPMG's Engineering and Construction practice. "A higher level of confidence in the Americas, demonstrated by large margin growth, is an indication of greater efficiency and cost management."
Looking at growth forecasts for 2013, optimism pervades with 64 percent expecting growth up to 25 percent. The highest growth is expected in Central and South America, and Africa. KPMG's Armstrong attributes the growth to "favorable trading conditions in the regions, as well as good prospects for mining, oil and natural gas." And, overall, companies with revenues greater than US$5 billion see the greatest potential for growth.
Drivers and Barriers to Growth
Government infrastructure plans (66 percent) were most frequently cited as the leading driver for growth, followed by global economic growth (42 percent) and population growth (38 percent).
In the Americas, privatization efforts via public-private partnerships (48 percent) and access to new energy sources such as natural gas or renewables (42 percent) ranked as the leading drivers for growth behind government infrastructure plans (58 percent).
Even with resurging optimism, many companies maintain a balanced view on what the likely obstacles to growth might be, with budget deficits and public funding shortages being the overwhelming factor, according to 72 percent of executives. Private-sector financing (43 percent) ranked second among respondents.
As companies ramp up for growth, a near consensus (93 percent) said that their risk management programs have improved project performance. Yet, more than three-quarters of respondents said the underlying causes of underperforming projects were project delays, poor estimating practices and failed risk management processes.
Expansion Plans -- New Geographies and Sectors
In anticipation of continued growth, 47 percent of respondents said their companies are making plans for international expansion into new regions. Africa (35 percent), U.S./Canada (28 percent), and the Middle East (22 percent) are the leading regional targets for expansion. Entering new sub-sectors of the industry is also in the works for 44 percent of respondents, with the power sector (54 percent), water-related activities (28 percent), and mining (27 percent) the leading areas for planned investment.
"The power sector is, without question, presently attracting the most interest," said Armstrong. "With the increase in economic activity and the hyper-focus on energy security, it stands to reason that many players will see opportunity in this area. Power, as well as water, mining, and other resources will increasingly become a critical priority of the business agenda in this industry."
About the KPMG Survey
The survey was conducted in early 2013 through face-to-face interviews with 165 senior leaders -- many of them Chief Executive Officers -- from leading engineering and construction companies in 29 countries worldwide. Respondent representation was spread across the Americas (20 percent), EMEA (52 percent), and AsPac (28 percent).
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.
Related Stories
| Mar 13, 2014
Do you really 'always turn right'?
The first visitor center we designed was the Ernest F. Coe Visitor Center for the Everglades National Park in 1993. I remember it well for a variety of reasons, not the least of which was the ongoing dialogue we had with our retail consultant. He insisted that the gift shop be located on the right as one exited the visitor center because people “always turn right.”
| Mar 13, 2014
Austria's tallest tower shimmers with striking 'folded façade' [slideshow]
The 58-story DC Tower 1 is the first of two high-rises designed by Dominique Perrault Architecture for Vienna's skyline.
| Mar 13, 2014
Simon Perkowitz to join KTGY Group
Perkowitz, the founder of Perkowitz + Ruth, will assist KTGY in responding to the demands and further development of its growing retail/commercial division.
| Mar 12, 2014
London grows up: 236 tall buildings to be added to skyline in coming decade, says think tank
The vast majority of high-rise projects in the works are residential towers, which could help tackle the city's housing crisis, according to a new report by New London Architecture.
| Mar 12, 2014
Final call for entries! BUILDINGChicago 2014 call for educational proposals
The Advisory Committee of the BUILDINGChicago/Greening the Heartland 2014 Conference is accepting proposals for presenters and topics through this Friday, March 14.
| Mar 12, 2014
14 new ideas for doors and door hardware
From a high-tech classroom lockdown system to an impact-resistant wide-stile door line, BD+C editors present a collection of door and door hardware innovations.
| Mar 12, 2014
AIA gives support to legislation to assist architecture students with debt
The National Design Services Act will give architecture students relief from student loan debt in return for community service.
| Mar 12, 2014
New CannonDesign database allows users to track facility assets
The new software identifies critical failures of components and systems, code and ADA-compliance issues, and systematically justifies prudent expenditures.
| Mar 11, 2014
7 (more) awe-inspiring interior designs [slideshow]
The seven winners of the 41st Interior Design Competition and the 22nd Will Ching Design Competition include projects on four different continents.
| Mar 11, 2014
Freelon Group to join Perkins+Will
The Freelon Group concentrates on museums, libraries, universities and other civic and institutional clients; Perkins+Will plans to incorporate this specialization into their design repertory.
