9/12/10 – KPMG Survey Says Global Construction Industry 'Mildly Bullish' for 2011
9 December 2010
KPMG International says that despite the slow pace of economic recovery to date, many leading engineering and construction companies worldwide offer a somewhat bullish outlook for 2011.
The company says, “Findings from the KPMG 2010 Global Construction Survey, Adapting to an Uncertain Environment, indicate that close to half of respondents in the KPMG survey forecast rising backlogs in 2011 from pent-up demand; expansion into new services, such as power; or moving into additional geographies, such as the Middle East, Asia, Australia, Africa and India. Asia Pacific demonstrated the most promising outlook in backlogs in 2011 with 21 percent of respondents confident of a significant increase.”
Risk apparently is a key issue for companies and KPMG says that the lingering economic downturn and associated constraints have generated a movement among companies to create stronger, more resilient business models that can weather change and manage risk. Seventy-seven percent of respondents to the KPMG survey said they have in place sophisticated systems to effectively manage risk.
"The willingness of contractors to move into new markets, and possibly to evolve their value proposition, could be the difference between thriving and merely surviving," said Geno Armstrong, international sector leader of KPMG’s Engineering and Construction practice. "With margins unlikely to rise for traditional business, such a repositioning could be vital. North American firms can learn a tremendous amount from the experiences and successes of their counterparts in other markets, particularly the ways in which projects are being financed."
According to the KPMG survey, margins have been cut over the last year, as most respondents said they had to reduce prices. However, the impact has been lessened due to cost-cutting measures. Looking ahead, more than 30 percent said they are bidding on new projects with lower margins, but that factor is offset by the sentiment that backlogs are predicted to rise.
"The global E&C industry’s optimism and notable progress on making major improvements to become leaner and focused provides a strong foundation for the years to come," said Armstrong. "The future is far from certain, but continuing to invest in risk management, expanding into new areas and building a skilled staff are critical steps that can help weather any change."