AJ100 Analysis & data
This year’s AJ100 data proves just how resilient and resourceful UK architects have been. It’s remarkable that the gang is (almost) still all here, writes Bruce Tether
This year, the AJ100 practices collectively employed 5,639 architects in the UK. The largest, Foster + Partners employed 304, the four smallest 21 each, making the total 186 fewer architects employed by AJ100 firms last year, all of which employed at least 22 architects in the UK.
Among the 91 practices that appear on both this and last year’s lists, the total number of UK architects has declined by 190, or 3.5 per cent, a slightly larger decline than last year’s 2.3 per cent fall. Meanwhile, total UK employment among AJ100 practices has declined by 5.8 per cent, showing that while architects are suffering, non-architects are suffering more.
The year also saw the demise of some significant players, including Austin-Smith:Lord, which, with 79 UK architects, ranked 15th in last year’s list, seventh in 2010. On a brighter note, Zaha Hadid Architects has participated in the AJ100 for the first time, jumping straight in to ninth place with 110 UK architects on its payroll.
Others joining the list for the first time, or rejoining after several years’ absence, include Assael Architecture, 88=; Associated Architects, 70=; Buttress Fuller Alsop Williams, 96=; Clague, 92=; David Morley Architecture, 96=; and Haskoll, 92=. Congratulations to all of these.
The top two are familiar names: Foster + Partners and BDP. These two (and Atkins) have jostled for the top spot for years, and this time Foster + Partners comes out on top having increased its employment of UK architects by 24, while BDP cut back by 43 and drops to second.
In the 2009 AJ100, Atkins held the top spot with 381 UK architects, but this is now down to 228, hence its placing fourth behind Capita Symonds, which is now third with 246 UK architects but employing 20 more architects than in 2011.
Overall, the top 20 practices each employ at least 70 UK architects, up from 67 last year. Collectively, they employ 2,566, roughly 100 fewer than last year and nearly 900 fewer than the 3,433 recorded in the 2009 AJ100, which marked the peak before the recession really began to bite.
In relation to overseas architects, 56 of the AJ100 practices employed at least one architect overseas, and some, fundamentally multinational businesses, substantially more. Aedas employs 843 architects outside the UK, compared with 149 in the UK; Gensler, 670 overseas, 30 UK; Woods Bagot, 466 overseas, 56 UK; and Jacobs, 427 overseas, 60 UK.
Collectively, the AJ100 practices employed 4,787 architects outside the UK, which is almost 1,000 fewer than last year. However, this is largely due to highly international practices RTKL and SOM deciding not to participate this year: last year, these two practices collectively employed 737 overseas architects. Comparing like with like, the 91 practices on both this and last year’s list now employ 267 fewer architects overseas than they did last year, a decline of 5.3 per cent.
93 of the AJ100 practices submitted their architectural fee income for 2011, and for UK based projects undertaken within their UK offices this aggregated to £625 million. 78 of these practices also provided this information last year, and for these firms the aggregate UK based architectural fee income was £544 million, down 4.8 per cent from last year’s £572 million. Meanwhile, the aggregate income to UK architectural offices from overseas projects was £220 million, with a very large proportion of this due to just one firm: Foster + Partners with £122 million.
Last year, Foster’s did not provide a breakdown of its fees, so we can’t compare its performance. But among the 78 practices that did report overseas architectural fee income to their UK offices for the past two years, aggregated income rose by £770,000 from £86.4 million to £86.9 million. Among the 98 firms reporting their total architectural fee income (both UK and overseas work) to their UK offices, this aggregated to £943 million, while among the 80 firms that reported this information both this year and last, the totals were very similar: £676 million this year, £680 million last year – a decline of £4 million.
Dividing fee income by the number of architects provides an indication of performance adjusted for firm size. The median architectural fee income to UK offices was £135,000 per architect, which is marginally down on last year’s figure of £137,000. However, this figure also varied enormously, from over £500,000 per architect at the RPS Group, to just £61,000 per architect at R H Partnership Architects. Of course, fees per architect can be increased if practices employ more students and architectural assistants, rather than qualified architects.
An alternative benchmark of performance is total income per employee. Before the recession, analysts suggested that design firms should achieve at least £80,000 of income per employee as a rule of thumb. This year, the mean among the 93 firms providing this information was just shy of this, at £79,300.
The median was slightly lower at £74,000, and almost identical to the median achieved last year. Just a third of practices providing this information achieved an income per head of more than £80,000. Of these, 19 were in the top 50 AJ100 practices, while 13 ranked between 51 and 100. This shows that the larger practices tended to earn more per head. Again, this can be demonstrated by comparing the median income per employee. In practices ranked one to 50 it was £78,000, whereas those ranked 51 to 100 achieved a median of £72,000 per head, a difference of 8 per cent.
Given the lack of vibrancy in the architectural market, it’s not surprising that salaries have remained flat. 71 firms provided information on salaries this year, and the medians were as follows: directors or partners, £75,000; associates: £47,000; architects £36,000, Part 3 students £27,000, and year out students £20,000. These figures are not only nearly identical to those in the AJ100 2011, but also to those reported in 2010, meaning that incomes have been treading water for two years. Indeed, once inflation and rising taxes are factored in, real incomes are falling.
There is, however, considerable variation in pay, especially among partners and directors, largely due to a few high paying practices. But only eight of the 71 AJ100 practices that provided this information reported paying their partners or directors more than £100,000 per year. If you are an architect or student who thinks these salaries excessive, you might note that firms that pay their seniors more also tend to also pay their juniors more.
The 33 firms that paid their directors and partners at least £80,000 a year (with a median salary of £100,000) on average paid their associates £5,000 a year more, both their architects and Part 3 students £3,000 more, and their year out students nearly £1,000 more, than the 42 practices that paid their directors and partners less than £80,000 (median salary, £67,000). Great pay equality tends to come at a price on all levels.
For the last few years the AJ100 survey has asked firms what actions they have taken in response to the on-going economic crisis. In the AJ100 2010 report (which reflects actions taken in 2009) the most widespread action was making redundancies. In 2011, that had dropped to second place behind reallocating staff to different areas of work within the practice.
This year, making redundancies has thankfully dropped to sixth place among the 11 actions asked about, although it remains distressingly widespread, with 62 per cent having made them in 2011. The most widely reported action was accepting lower margins on work, cited by 84 per cent of firms, up from 69 per cent in 2011, and 60 per cent in 2010. This was followed closely by the reallocation of staff to other project areas at 80 per cent, up from 73 per cent in 2011 and 71 per cent in 2010. More positively, nearly two thirds of firms say they have moved into areas of practice where they were not previously active.
Interestingly, almost the same number of practices report reduced profit margins on UK work as report that these are now higher, so there is no clear trend either way. The largest share is in the middle, reporting no change. Overseas, however, more firms report increased margins than reduced margins. With the UK market stagnant, it is unsurprising that nearly three quarters of firms say they are actively seeking work abroad.
The proportion of practices seeking work in most regions has also increased by a few percentage points, with non-EU eastern Europe countries growing by 9 percentage points from 39 to 48 per cent, and Singapore growing by 7 points from a quarter to a third. Most other regions are generally up by a few percentage points, while only north and central Africa, central Asia, Australia and New Zealand, and, perhaps most surprisingly, Saudi Arabia, have seen small falls in the proportion of firms seeking work there.
Asked what makes a good architectural practice, the most important factor among the AJ100 practices remains client satisfaction with 23 per cent of the total. Creativity follows at 19 per cent. But interestingly both of these are slightly down on two years ago: in the AJ100 2010 they were 25 per cent and 21 per cent, respectively. Now, slightly increased is the importance of ‘being a good place to work and having high staff morale’, which is up 18 per cent, from 17 per cent. Unsurprisingly in tough times, the ability to win new business has also risen, now at 17 per cent, from 15. Profit margin retains a 15 per cent weighting, while peer recognition is still least important, but has increased from 7 to 8 per cent.
Looking towards 2012, only one practice (a returnee to the AJ100 after a period away) reports being ‘very optimistic’ about the year ahead, while 22 were optimistic, and 52 neutral. Nine were pessimistic, thankfully none were very pessimistic. 16 did not express a view. Overall, this is a similar picture to last year, although there are fewer pessimists, or at least, fewer declared pessimists, as the proportion of ‘don’t knows’ has risen. Naturally, I hope the optimists are right.
This is the third year I have provided a commentary on the findings of the AJ100 survey. In the 2010 report, which reflected the market in 2009, there was certainly some contraction, but worse was expected. Rob Firth, now of HOK’s London office but at the time at Austin-Smith:Lord, was quoted as anticipating that 10 practices in the AJ100 would ‘go to the wall’. He probably did not expect his own firm to be among the major casualties. 2010 was a tough year, as was 2011, as this review outlines.
Yet, while the economic climate has hit many firms very hard, there are others that have been much less affected. It would be great to know what ‘magic ingredient’ separates these from the rest. But I am surprised by just how resilient the UK’s largest architectural practices have been. The AJ started listing the UK’s largest practices back in 1995, and each year since then roughly 80 to 90 firms that reach the ‘top 100’ list in one year, also appear in the following year’s list. Some towards the bottom in one year, drop out the next because other practices have slightly more UK architects than them. Others drop in an out for less obvious reasons: mainly, I suspect, their participation depends on whether or not they have had a good year.
But it’s impressive how few firms have disappeared because they have gone out of business. Like Firth, at the start of the recession I would have expected many practices to go to the wall. It is not easy shifting from a boom time to surviving a period of austerity. Clearly, this has come at a considerable price in terms of many architectural and other jobs being lost.
Among those who remain, pay has often been frozen and yet the business as a whole has survived. Your resilience is impressive. Although there are no real signs of an upturn in this year’s data, I dearly hope that next year I can report a brighter picture. Meanwhile, thank you for participating in the AJ100 and allowing me some valuable glimpses into your world. Congratulations on your resilience.
Bruce Tether is professor of Innovation Management and Strategy at Manchester Business School at the University of Manchester. Formerly of Imperial College Business School, Bruce’s research interests concern innovation and competition in design based businesses and industries, such as architecture. He studies how firms compete and how industries evolve over time.