Contractors cautious on 2012 prospects

By Helen Wright30 January 2012

The global engineering and construction industry is cautious but hopeful on prospects in 2012, according to KPMG's annual Global Construction Survey.

Just under half (49%) of the 161 global engineering and construction company leaders surveyed forecast rising backlogs this year, with Asia Pacific companies the most confident, while 75% of those questioned believed margins on new bids would be equal to or more than their existing backlog.

The energy and power sector was identified as a key potential growth driver - 41% of those questioned expected it to offer the biggest opportunities for revenue growth in the next 12 months.

According to the International Energy Agency, the global energy sector requires US$ 38 trillion of investment in existing and new capacity by 2035 to meet the demands of population growth.

In the Americas the expectation that the energy and power sector would take more of a lead was even more pronounced, with 59% citing energy as the most promising sector, while respondents from the Asia Pacific and Europe, Middle East and Africa considered rail and mining to be areas of promise.

In China, where the latest Five-Year Plan has a strong domestic focus, there is an emphasis on resource-related infrastructure such as coal mining, high-speed rail, roads and waterways, according to the KPMG survey.

Dampened outlook

But the outlook was dampened by concerns over economic uncertainty and government austerity measures in some regions. An overwhelming 80% of those questioned reported being very concerned about governments' ability to drive infrastructure spending.

Richard Threlfall, UK head of KPMG's infrastructure, building and construction practice said, "While the continuing economic instability deepens in many parts of the globe, the construction industry is not in retreat. 2011 was a solid year for engineering and construction companies as they saw backlog orders increase compared to 2010.

"The outlook for the construction sector is largely sanguine in the short-term and in the coming decades the demand for power and infrastructure projects around the world is only going to grow, which means the construction industry should be adapting to respond to the opportunity."

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