United Kingdom
Should the construction industry broaden its horizons? - Richard Kelly
In an industry traditionally limited by national boundaries, construction companies are often ignoring the significant opportunities that exist for those willing to look beyond their own shores.
Much has been made of the G20 nations’ response to the global downturn. Many countries, including the United Kingdom and United States have sought to stimulate economic activity via expansion or acceleration of public sector programmes, including significant infrastructure development. Other countries have been more circumspect, preferring not to further inflate their own national debt. Nevertheless, a staggering £1.28 trillion has been announced by G20 governments and agencies as stimulus for the infrastructure and construction-related sectors of the respective G20 economies over the next three years.
Surely therefore opportunities exist for those construction companies willing to raise their sights from their own domestic markets.
BDO have attempted, via its first G20 Heatmap, to ascertain the scale of the opportunities available, and the relative attractiveness of these opportunities given the inherent difficulties associated in establishing international operations.
Based on this research we constructed an overall ‘heat map’ of construction opportunity from within the G20 nations and profiled each country in terms of:
- The health of its construction industry
- The nation's financial health
- The ease of doing business with that nation, and;
- The tax regime.
Based on this analysis, the United States came out as the most attractive market for those construction companies seeking to take advantage of the of the world’s response to recession. In particular, £150 billion of construction spending in the United States helped to secure the country’s top ranking in the survey. The massive programme of public works announced by President Obama’s administration outweighed some challenges of operating in the United States, most notably the high rates and notorious complexity of the tax system.
The assessment of European markets was mixed. The UK achieved second place, partly due to the 2012 Olympics and the UK Government stimulus package but also in acknowledgement of the relatively low barriers to entry in a market that is not overly dominated by local builders and already includes many significant non-UK participants.
In contrast, France was ranked eleventh as complex regulations and labour laws can provide a barrier to business with any newcomer to this market facing the challenge of the relative dominance of the big 4 French contractors.
Germany was placed thirteenth with its highly developed existing infrastructure limiting the scope for work on new projects in the next few years. Indeed, a number of commentators have predicted that the level of both public and private sector construction projects may stagnate in Germany over the next three years.
Elsewhere, there was a divergence amongst the developing “BRICs” nations, with China and India seen to offer more opportunities than Russia and Brazil. The Heatmap acknowledges that the engines of economic growth in China and India will drive massive infrastructure projects over the coming years. On the other hand, it is feared that the economic downturn may impact severely upon Russia. While the Brazilian economic prospects are generally considered strong, an extremely challenging regulatory environment weighed down its rating.
In summary
At a time when most industries are gravely affected by the global downturn, the G20 Heatmap overall represents an encouraging picture, highlighting some excellent construction opportunities across the globe and not always in the places people most expect to find them.
To find out more about the G20 Heatmap, visit www.bdo.co.uk/G20Heatmap or email Richard Kelly, Head of Construction, at Richard.Kelly@bdo.co.uk