• Home
• Construction
• News Article

Global engineering and construction companies adapting quickly to meet the critical demand for new infrastructure, according to KPMG survey

22 February 2012
Findings from a recent global construction industry survey indicate that the need for infrastructure is at an all-time high, a development so pivotal that it is pressuring the engineering and construction industry to step up as never before to meet the challenge, and putting their efficiency and risk management processes to the test.

KPMG 2012 Global Construction Survey, The Great Global Infrastructure Opportunity, surveyed 161 engineering and construction companies around the world with revenues ranging from US$ 250 million to more than US$5 billion.

"With increased scale comes complexity as global industry players navigate a tough political, commercial, regulatory and governance environment which will test their risk management ability to the maximum extent," said Geno Armstrong, KPMG's International Sector Leader, Engineering and Construction and a partner in the US firm.

Nearly 40 percent of respondents from Europe, Middle East and Africa (EMEA), believe that the energy sector will have the biggest impact on revenues. Second behind energy were roads/bridges at 27 percent followed by residential at 25 percent.

While 49 percent of respondents expect their backlogs will grow from 5 percent to over 15 percent in the next year, 71 percent of respondents cite economic uncertainty as their biggest ongoing concern followed by a skills shortage (31 percent) and thirdly, government deficits (30 percent). Sixty-two percent said that they expect margins on current bids to remain unchanged from their current backlog.

Bahrain-based KPMG partner and head of building, construction and real estate, middle east and south asia region, Wirtschaftspruefer Ernst Weber, said that, the shape of the industry is changing as the main players continue to focus on more diversified businesses, having the right expertise and a possible rise in acquisitions to buy that expertise.

"The future for the infrastructure industry in the region lies in optimizing costs, streamlining supply chains, improving IT systems and grows through mergers and acquisitions," said Mr Weber.

Cost cutting still remains a challenge for companies as well, with organizational culture seen to be culprit for implementing the cuts for 61 percent of respondents globally, and 78 percent in the Americas. And a surprising 17 percent of respondents globally said that cost reduction was not a priority at all.

With projects anticipated to become more complex, maintaining margins and mitigating risk are major concerns for most respondents. Globally, 45 percent of respondents say that quantifying risks is the chief concern; in the Americas, 52 percent of respondents say that identifying risk is the main focus and nearly 50 percent said they want to understand the link between strategy and risk.

What respondents say may be the primary barriers to public-private partnerships in infrastructure investment is a perceived lack of policies, leadership and investment by the public sector as well as a lack of initiative in the private sector.

Less than half (47 percent)of respondents believe government policies will have a positive impact on investment, which is roughly equal across all three regions, with Asia Pacific being the most positive (49 percent) followed by EMEA (47 percent) and the Americas (41 percent).

Moreover, respondents showed concern about the public sector's ability to drive infrastructure investment with 80 percent of respondents globally saying that lack of leadership will hamper 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," Mr. Armstrong said.

Commenting further on infrastructure investment, Mr Weber, said, "As governments around the region seek to create 21^st century infrastructure, they need to create an environment that encourages private sector investment. This means addressing regulatory and legislative barriers and showing the kind of long-term will that transcends immediate political popularity."

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.

KPMG in Bahrain will host a breakfast seminar on 28 March 2012 at the Intercontinental hotel to launch the global construction survey results.

About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

-Ends-

For further information please contact:
Ramesh Bhaskar
Manager markets
Mob: +973 36187909
Ph: +973 17224807
rbhaskar@kpmg.com

Richard Kohinga
KPMG Director, Head of Markets
Mob: +974 6695 5773
Ph: +974 4457 6425
Richardkohinga@kpmg.com

© Press Release 2012