Bricad Associates

FIDIC-EFCA Survey

FIDIC-EFCA Consulting

Engineering Industry Survey

Total demand (market - non-market; private - public)

Europe 28

Peter Boswell

Bricad Associates, Switzerland

Dublin, 9 May 2019

survey.peterboswell.net

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Europe 28 demand

Total demand

From National Accounts

- Demand: percent of

investment requiring services

benchmark against

- Use from Eurostat Supply-

Use Tables

Advantages

- forecast use to 2019

- not business accounts

- construction + industrial

activities

- EU28 - Croatia + Norway

= 94% GDP of Europe 44

- Russia

300

bEUR

35

15

M

AR

KE

T

N

ON

-MA

RK

ET

PUBLIC PRIVATE

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EU28 context

Underlying investment

Investment (GFCF)

- fell rapidly during financial crisis

- recovered in 2010 & 2013

Investment ratio (GFCF/GDP)

- fell rapidly during the crisis

- has now maybe stabilised

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Normalised investment ratio - Europe 28

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Investment requiring services - Europe 28

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Total demand - Europe 28

Forecast (not benchmarked) 2010-19: growth 3 p.a.

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Demand - Europe 28

Forecast (not benchmarked)

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Growth path 2010 – 2019 - Europe 28

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Demand profile - Europe 28

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Expectations - Europe 28

3% growth in demand in 2019.

Demand decrease in 2019 for

only one country.

Optimistic official investment

expectations driven by above

average investment growth (4%)

in 2017-18 compared with 3%

for 2010-18.

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Demand: Market - Non-market / Public - Private

Non-market – Market demand (in progress)

2010-19 demand growth driven by market or

public investment?

Public – Private demand (in progress)

Opacity remains.

Public corporations entering

the market when public

demand reaches a

5% threshold

is a key issue.

Threshold?

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Demand changes

Demand changes

The survey model’s required reconciliation of:

- use

- demand

reveals changes in use & demand.

An advantage of the survey’s benchmarking approach.

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Use of consulting engineering (CE) services

Direct use (CE services consumed directly by activities)

USE TABLE

Activity Exports Total

Product

M71 N81

M71 52 364 34

N81 12 153 7

Output

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Use of consulting engineering (CE) services

Direct use (CE services consumed directly by activities)

Product

CPA

Activity

NACE Rev. 2

Use of CE services

Factor % Product

M71.12 Architecture &

engineering

M71 Architecture &

engineering, testing

Engineering: 100% of M71.12 share

of M71 turnover.

72

M72.19 R&D M72 R&D R&D:100% of business share of total

R&D expenditure in relevant sectors

times M72.19 share of M72 turnover.

5.4

B09.90 Test drilling B Mining Test drilling: 20% of share of B09.90

test drilling turnover.

1.4

M74.10

+

M74.9

Specialised

design +

Professional

activities

M74 -

M75

Other professional Design & Consulting: 4% and 8% of

share of M74.10 + M74.90 in

M74+M75 turnover.

4.5

N81.30 Landscape

services

N80 -

M82

Security, service,

landscape

Landscaping: 4% of M81.3 share of

M80-82 turnover.

0.3

Turnover from Eurostat SBS database.

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Use of consulting engineering (CE) services

Direct use (CE services consumed directly by activities)

M74-75 Design

& Consulting

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Market change - M74.10 - impact of new/digital design

European Design Report 2.0 (2018)

Two groups

M74.10 Specialised

Design reclassification

- will some M74.10

services move to

M71.12 (engineering)?

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Market change - M74.90 - impact of consulting services

SYNTEC-Ingénierie, France, 2014 survey

M74.90 Consulting Services

- France, % turnover: 7% total

- Survey, % demand: France: 1% total

Europe 28: 2% total

New CE demand

- Reclassify some M74.90 as M71.12 (engineering)

- 74.90.13: Environmental consulting

- 74.90.19: Services provided by consultants other than

quantity surveyors, etc (“excludes 71.12 –

engineering”).

- Reconcile use & demand

- increase survey’s use factor (currently 8%);

- identify the investment generating the M74.90 demand.

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Demand generated by indirect investment

Indirect investment

Embodied (“indirect”) investment revealed through use tables.

Identified in 2018 by the Banque de France & OECD;

ICT products (for several categories)

- investment in computer hardware underestimated by 35%!

- reconciliation - survey model: GFCF requiring CE services

increased by 6%.

CE services (for M71.12, the main CE demand)

- reconciliation - survey model: GFCF requiring CE services

increased by 0.5%.

Threshold

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Demand generated by direct investment

Direct investment

Survey Model using national accounts

- Investment - adjust GFCF classes for assets not included in

national accounts:

- indirect investment

- own-account design

- renovation and maintenance

- Requirement - estimate percentage of each GFCF requiring

CE services.

- Fees - assume that the industrial required investment (Plant

+ IPP) generates 20% more demand for CE services than

the construction asset required investment (Construction +

Indirect). i.e., CE fees are 20% higher for industrial work.

Threshold

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Reconciliations

Demand adjustments

New:

- 74.10 (digital design) services generated by construction

investment (Construction GFCF)

- 74.90 (new consulting) services generated by industrial

investment (Plant & IPP GFCF)

Currently, probably relatively small changes in demand on

adjusting the survey model (confirmation pending).

But changes maybe much more significant in the future.

Threshold

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Investment generated demand - Survey Model

Threshold

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Summary

Summary

Solid core market demand

Driven by construction investment:

- stable engineering services demand.

But change underway

Driven by industrial investment in design & consulting

- effect of full-service providers & digitalisation:

- business impact being felt;

- national accounts & other sectors reacting.

- EFCA:

- push for an engineering perspective and

classification;

- or risk uberisation.