Project Management’s Contribution to the UK

The Contribution of Project Management to the UK

Project management as a management discipline underpins much economic activity. In industries as diverse as pharmaceuticals, software and aerospace, projects drive business. And in the public sector, it is effective project management that translates politicians’ promises of new roads, schools and hospitals into gleaming new constructions that improve everyday life.

How important is project management to the UK economy?

So you’d imagine that it would be possible to place some sort of figure on the importance of project management to the UK economy. How much GDP does it drive? And as the economy evolves, how fast is project management’s prominence increasing?

Think again. The UK’s Office of National Statistics reveals the official Input-Output tables that record and analyse the makeup of economic activity within the UK and they go into no finer detail than at the level of individual industries.

So what exactly is the contribution of project management to a modern developed economy, like the UK’s?

A statistic – and a caution

Researchers employed by the Project Management Institute have an answer – of sorts. On the basis of data released by the Bureau of Economic Analysis, part of the US Department of Commerce, estimated that the US public and private sectors combined spend an amount equivalent to a quarter of America’s GDP.

How much do projects contibute to GDP?

On that basis, given the UK GDP of £1417bn in 2011, project-related expenditure of a quarter of GDP yields a figure of £354bn. This, of course, relies on the UK economy being structurally similar enough to the American economy for the American estimate of project management’s contribution to GDP to hold true. While there are undoubted differences between the two economies, they are unlikely to be significant enough to materially affect the extrapolated UK figure. A 10% deviation either way, for example, would indicate a range of (say) £319bn to £389bn

There is however, one slight problem to address when considering project management vis-à-vis GDP estimates. And it is here that a note of caution must be injected.

Take two hypothetical projects, identical in all respects except the calibre of their project management. One project comes in on budget, having used the planned resources. The other dramatically exceeds its budget, using far more resources than planned. Which has the greater contribution to GDP? The latter. Overtime payments, additional employees, replacements for materials wasted or otherwise found faulty – perversely, these additional expenditures contribute positively to GDP, not negatively.

As a result, while GDP-based estimates of the value of project management to the UK economy are useful starting points, a more rounded insight into the value of project management to the UK economy must come from more qualitative data.

Project management and innovation

Almost by definition, innovation relies on project management. Irrespective of whether the innovation concerns a new product, or a new process, or indeed a contribution to pure science, better project management, on the whole, will see a successful outcome reached more quickly, having consumed fewer resources.

And innovation is important to the UK economy as innovative businesses are more successful, and innovative industries grow faster, export more, are more competitive, more productive, and have a better long-term future.

Stating the benefits of innovation is one thing – defining innovation itself, or quantifying it, is another. As successive generations of statisticians have found, the measurement of innovation is almost as slippery a concept as the measurement of project management.

What value does project management add to your business?

It is suggested that overall, 7% of value added in manufacturing industry is project-based innovation. More, of course, taking into account the argument that some process-oriented improvement projects are overlooked. While some industries fall far below this level – such as textiles, where just 0.4% of value added takes the form of innovation – others massively exceed it: the pharmaceutical industry, for example, sees 44.2% of value added generated through innovation.

Project Management and Regional Economies

Project management also underpins the regional economies. It is the speed and efficiency with which innovations are spread and adapted that differentiate regional performance, concludes the report. GDP per head, for example, is 40% lower in the North East than in London. But under-performing regions have significant barriers in adapting and absorbing innovations, in particular lacking the highly skilled workers and productive firms that invest in R&D. High levels of innovation in a local economy have a multiplier effect in stimulating a more enterprising indigenous business base and a more enterprising society in the wider sense. In the UK overall, the report finds, there is a strong statistical correlation between the regional pattern of R&D (both public and private sector) and regional economic performance. Again, it is project management that underpins that R&D, and manages the process of turning ideas into actionable innovations.

Project management and project-intensive industries

Every business undertakes projects of some sort. But some undertake far more than others. Similarly, some industries are more project-intensive than others. Aerospace and defence, for example, are extremely project-intensive, working for years on long-term contracts or development projects that will eventually bring forth a new jet aircraft, missile system, ship or piece of electronic wizardry. Likewise, almost by definition, construction is another industry that exhibits a high degree of project activity.

Food, retailing and textiles, on the other hand, are less project-intensive. Even so, care must be taken. While corner shops may not be prone to launching new projects, the major supermarkets are: each year sees a number of new distribution depots, IT systems, retail outlets and the like.

How important is project management to our economy?

We are beginning to see research that proves how important project management is to the UK and global economies. All kinds and sizes of organisations in both the public and private sectors should sit up and take note of this because without well-trained and capable project managers the percentage of GDP spent through projects is inflated due to many exceeding their budget through poor management. Furthermore, considering the impact that successful project management has on fast-growing SMEs, it is hoped to see more project managers getting the recognition they deserve in helping to make these organisations even more innovative and successful.