The infrastructure sector is an important driver of economic growth and is analysed every year by KPMG in the Emerging Trends in Infrastructure report. The 2023 edition has recently been issued. It comes at a time of considerable uncertainty, as geopolitical tensions pose questions about globalization, as supply chains are facing disruption, as inflation emerges as a problem for the first time in decades in much of the developed world, and as the global community is faced with the growing challenges of climate change. The KPMG survey has identified ten key trends in the infrastructure sector, as businesses and governments grapple with these issues.
1. Tilting towards territorialism and shifting allegiances
Globalisation is being eroded by several factors, including geopolitical tensions and supply chain problems. Nevertheless, infrastructure projects continue to be needed and governments often want to see them happen. Yet infrastructure players- developers, investors and operators in particular- face numerous uncertainties, such as rising costs. There is a risk that in spite of the need for infrastructure projects the pace could slow down. Infrastructure players will need to be aware of the challenges and agile in dealing with them.
2. Backed into the sustainability corner
Sustainability is now a prerequisite for infrastructure projects. In fact, the sector has a key role to play in the effort to combat climate change. Successful projects will address the key issues of security, affordability and sustainability. We can expect to see a significant shift in investment towards research into cleaner fuels, carbon abatement and energy efficiency, along with innovations in new green technologies like green hydrogen.
3. The age of mass customization emerges
Infrastructure is becoming much more customized and focused on the individual than has been the case in the past and technology is playing a key role. For example, new technologies have revolutionized the way we travel and access healthcare and education. The challenge for existing infrastructure players is to remain relevant by adapting to these trends.
4. Inflation, pricing and supply elevates the risk
Inflation has created uncertainty and increased risk for infrastructure players. In the past, price risk had often been considered as being an effect of poor cost management. But today, the link between risk and discipline has been unhinged. Moreover, there is also concern about supply chain bankruptcy. Nevertheless, inflation has been faced in the past, such as in the 1980s in the US when multiple cost scenarios had to be planned for, and more recently in countries like Turkey and Venezuela. So players will need to understand the new realities and negotiate ways to continue to do business.