Simon Rawlinson
How much is the world’s built environment worth? Which countries are investing the most into their built assets and how is that ‘wealth’ distributed per person? asks Simon Rawlinson.
These are just some of the questions posed in our first ever Global Built Asset Wealth Index published last month.
The findings provide some fresh insights and learnings for the construction industry, particularly in the UK as it seeks to maintain its global competitiveness.
At an initial glance, the UK picture looks somewhat bleak. It is placed behind a number of other leading European nations – Germany, France, Italy and Spain – by the value of its built assets and the spread per capita, indicating that it has underinvested in its property and infrastructure for a number of years.
“The UK does punch above its weight in generating GDP from its asset base, so the picture is by no means uniformly downbeat.”
The UK’s ranking at 14 in the Index highlights the impact of the many challenges and opportunities associated with asset investment in the new normal of low growth, financial de-leveraging and economic restructuring. Cuts in public and private investment that followed the 2008 crash are, in sectors such as power generation, constraining the UK’s ability to remedy decades of under-investment. Crucially, the UK has significant shortfalls in basic infrastructure – airports, roads and energy – all of which need massive investment.
However, the UK does punch above its weight in generating GDP from its asset base, so the picture is by no means uniformly downbeat.
One of the characteristics of the UK asset base has been the degree of long-term private sector participation in utilities and public service provision. Another has been the UK’s shift from a domestic manufacturing to a globalised service economy. Regulated investment in utilities has resulted in an efficient allocation of capital, whilst the UK’s enthusiastic adoption of the online world – from FX trading to internet shopping – is reducing the UK’s need for physical assets to generate wealth. The UK’s asset base is being used more intensively and more cost-effectively than in peer countries. In asset-rich, cash-poor nations like the UK, the effectiveness of built asset utilisation will be the key to future competitive advantage.
For UK construction firms seeking to prosper in a difficult environment, they must consider how they can help clients make the best use of their existing asset base to develop new sources of competitive advantage. With money a constraint, the ability to help limit operational and maintenance expenditure holds the key to driving this. The whole life cost of an asset, not just its construction, and the social and environmental, as well as the economic attributes of the asset must be considered in order to paint a realistic picture of infrastructure investment returns, and manage the investors’ expectations.
Simon Rawlinson is head of strategic research and insight at built asset consultancy EC Harris
EC Harris’s inaugural Global Built Asset Wealth Index is available to download from www.echarris.com.
