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
Architects | May 23, 2023
DEI initiatives at KAI Enterprises, with Michael Kennedy, Jr. and Gyasi Haynes
Michael Kennedy, Jr. and Gyasi Haynes of KAI Enterprises, St. Louis, describe their firm's effort to create a culture of diversity, equity, and inclusion—and how their own experiences as black men in the design and construction industry shaped that initiative.
Multifamily Housing | May 23, 2023
One out of three office buildings in largest U.S. cities are suitable for residential conversion
Roughly one in three office buildings in the largest U.S. cities are well suited to be converted to multifamily residential properties, according to a study by global real estate firm Avison Young. Some 6,206 buildings across 10 U.S. cities present viable opportunities for conversion to residential use.
Architects | May 23, 2023
Ware Malcomb hires Francisco Perez-Azua as Director, Interior Architecture & Design, in its Miami office
Ware Malcomb hires Francisco Perez-Azua as Director, Interior Architecture & Design, in its Miami office.
K-12 Schools | May 22, 2023
The revival of single-building K-12 schools
Schools that combine grades PK through 12 are suddenly not so uncommon. Education sector experts explain why.
Architects | May 19, 2023
Snøhetta architects make a bid to unionize the firm's New York studio
Employees at the New York office of architecture firm Snøhetta have filed a petition with the National Labor Relations Board (NLRB) to unionize the studio. Snøhetta employees’ action marks the third time architects at a private-sector architecture studio in the U.S. took that step.
Healthcare Facilities | May 19, 2023
A new behavioral health facility in California targets net zero energy
Shortly before Mental Health Awareness Month in May, development and construction firm Skanska announced the topping out of California’s first behavioral health facility—and the largest in the nation—to target net zero energy. Located in Redwood City, San Mateo County, Calif., the 77,610-sf Cordilleras Health System Replacement Project is slated for completion in late 2024.
Government Buildings | May 18, 2023
GSA launches first biennial construction award program
Today, the U.S. General Services Administration (GSA) announced the new biennial GSA Construction Award program, which is seeking submissions this summer. The program was created to honor outstanding achievements in construction, with a focus on quality and craftsmanship, collaboration and team dynamics, sustainability, innovation, and technology. The first Construction Awards ceremony will take place in 2024.
K-12 Schools | May 17, 2023
Designing K-12 schools for students and safety
While bullying, mental health, and other acts of violence are all too common in schools today, designers have shown that smart and subtle preventive steps can make a big difference. Clark Nexsen’s Becky Brady shares how prevention and taking action at the design level can create safe and engaging learning environments.
Affordable Housing | May 17, 2023
Affordable housing advocates push for community-owned homes over investment properties
Panelists participating in a recent webinar hosted by the Urban Institute discussed various actions that could help alleviate the nation’s affordable housing crisis. Among the possible remedies: inclusionary zoning policies, various reforms to increase local affordable housing stock, and fees on new development to offset the impact on public infrastructure.
University Buildings | May 17, 2023
New UC Irvine health sciences building supports aim to become national model for integrative health
The new College of Health Sciences Building and Nursing & Health Sciences Hall at the University of California Irvine supports the institution’s goal of becoming a national model for integrative health. The new 211,660-sf facility houses nursing, medical doctorate, pharmacy, philosophy, and public health programs in a single building.
