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
| Nov 14, 2012
U.S. Green Building Council announces grant from Google to catalyze transformation of building materials industry and indoor health
Focus is on healthy building materials to promote indoor environmental quality and human health
| Nov 14, 2012
USGBC's Greenbuild International Conference and Expo kicks off in San Francisco
7,000 members of the green building industry convene for opening plenary headlined by "Morning Joe" co-hosts Mika Brzezinksi and Joe Scarborough
| Nov 13, 2012
Have colleges + universities gone too far with "Quality of Life" buildings?
We'd like your input - recent projects, photo/s, renderings, and expert insight - on an important article we're working on for our Jan 2013 issue
| Nov 13, 2012
Turner Construction’s green building Market Barometer reveals new findings on green building and certification
Respondents indicated a widespread commitment to sustainable practices
| Nov 13, 2012
Soladigm announces new glass product, changes company name to View, Inc.
Glass is installed and operating at W San Francisco adjacent to the 2012 Greenbuild show
| Nov 13, 2012
Sto Corp. announces appointment of new CMO
Bottema will be responsible for all corporate marketing, product management and sales activities.
| Nov 13, 2012
2012 LEED for Homes Award recipients announced
USGBC recognizes excellence in the green residential building community at its Greenbuild Conference & Expo in San Francisco
| Nov 12, 2012
PCI Skanska celebrates 40-year anniversary
Since its creation, PCI Skanska has provided EPC services to clients for more than 40 years.
| Nov 12, 2012
AISC launches 'Night School' online educational program
The program's weekly webinar sessions offer structural engineers a great opportunity to enhance their professional development online while accommodating their schedules.
| Nov 11, 2012
Under40 Leadership Summit draws 71 young leaders to Chicago
More than 70 young—that is, under age 40—architects, engineers, and construction professionals descended on Chicago in early October with one thought in mind: to learn how to “create with clarity.”