Global capital project and infrastructure (CP&I) spending is set to grow to more than $9 trillion annually by 2025, up from $4 trillion in 2012.
A new report by PwC, Capital project and infrastructure spending: Outlook to 2025, analyses capital project and infrastructure spending across 49 of the world's largest economies. These account for 90% of global economic output, covering the extraction, utilities, manufacturing, transport and social infrastructure sectors.
The research found that, following a rebound from the international financial crisis, the global CP&I market should grow by as much as 6-7% annually between 2014-2025, with the UK growing 3.8% per annum over this period.
Overall, close to $78 trillion is expected to be spent globally between now and 2025 on capital projects and infrastructure, with $1.5 trillion forecast for the UK.
The UK's overall spending will keep pace with other major European economies, with total spending reaching £106bn in 2025. Power and transport will account for almost half of spending, versus around a third today. With the fiscal squeeze forecast to ease from 2020, annual investment growth of 4.5% is possible, making up for slower growth (2.4%) during the austerity years of 2014-19. Demographic shifts will also influence spending, with 20% of the UK population being over 65 by 2025.
A substantial rebound in transportation spending, including rail and air upgrades, will lead to annual spend doubling in these sectors. Spending on power generation infrastructure will nearly triple from over £6bn per annum in 2014 to more than £17bn per annum in 2025.
Richard Abadie, PwC's global leader, capital projects and infrastructure practice, said: “It is telling that social infrastructure spending accounts for about a third of total spending currently despite the perception of cutbacks in this area. Nevertheless, we expect transport and power to be the growth sectors up to 2025, with transport doubling and power generation nearly tripling. This spending will be critical to ensuring economic growth in the UK and global competitiveness.
“Private investment, whether from pension funds, insurance companies, sovereign wealth funds, for example, will be the dominant financing source for this spending as government has signaled previously.”
Sally Percy is editor of The Treasurer