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AJ100 Analysis: Financial

One simple measure of the way that architectural work has shrunk in the past year is to look at the total fees that practices reported for 2009, compared to those reported for 2008.

A total of 70 practices in the top 100 declared their total architectural fees for those years, and they have seen them fall from £1.7 billion to £1.3 billion, a reduction of nearly 24 per cent.

This is, of course, an average, and different practices have had very different experiences. There are a number whose fees have grown. They include Swanke Hayden Connell Architects (up 140 per cent), Aedas (up 43 per cent), Grimshaw (up 40 per cent), Austin-Smith:Lord (up 28 per cent), SOM (up 19 per cent), ADP (up 12 per cent), Hawkins\Brown (up 9 per cent) and Penoyre & Prasad (up 8 per cent).

The really dramatic rises come from practices that have worked hard at their international spread, and have used a combination of skill and luck to find themselves in places where there is still work and profit to be made. Neither Hawkins\ Brown nor Penoyre & Prasad report any overseas income at all, so their success must be put down to good management, keeping customers happy, possessing skill at winning work, and charging fees at a decent level.

It is interesting that Hawkins\Brown, although it admits, like many practices, to reducing its fees, has high earnings per architect, at £207,000 in UK fees per person. This will of course be inflated by the fact that all its work from its UK architects translates into UK fees, but is still an impressive figure. Penoyre & Prasad has been earning a far more modest £126,000 per architect. Hawkins\Brown reports profits of 11 per cent; Penoyre & Prasad has not supplied these figures. Last year it reported that it expected its overseas income to fall by 100 per cent - a prediction that has been fulfilled but with no ill effects.

There are many more practices that have seen their fees fall than have enjoyed a rise and, with such widespread results, it is hard to detect patterns. Chapman Taylor, the practice with the second largest fall, has a heavy dependence on retail, in which it is seen as a specialist. This area has been very heavily hit in the downturn and, given the worldwide nature of the crisis, even its broad geographical spread has done little to protect it.

Broadway Malyan, the largest practice to suffer badly, has a surprisingly diverse portfolio, but again its strengths are in the retail and commercial sectors. Both practices have been fairly hard hit in terms of staff numbers, with Broadway Malyan dropping 18 from a total of 41 and Chapman Taylor losing 13 from a total of 79. Interestingly, it expects to bounce back, projecting that it will employ 77 architects again by the end of this year.

‘Dramatic rises come from practices that used skill and luck to find places where there is still work’

For some of the practices at the lower end of the AJ100, where total workloads are relatively smaller, the dramatic drops may just be down to one or two jobs disappearing or going on hold. But there are some anomalies. Gensler has taken a serious hit, despite the fact that other US giant international practices have done well - and Gensler has been touted as the biggest practice in the world. But with such large, complex businesses, what seem like huge differences may in fact be down to accounting anomalies. Jestico + Whiles is another oddity, with total architectural fees down by nearly a third, and yet the practice reporting extremely good UK profits at 38 per cent. Scott Wilson, which has seen its fee income crumble, is primarily an engineer, and may be concentrating on that sector, as Jacobs may also be doing.

In a booming market, any practice that is seeing a fall in fees is either very unlucky or doing something wrong. But in the current situation, the explanation may be much simpler: the economy, stupid.

How are architects responding to these difficult times? Their answers indicate how hard they have had to look at their own businesses. There were 109 responses to the question (the number of practices that responded to the AJ100 survey, not just those that made the list). Redundancies and reallocation of staff received the highest level of responses, reflecting the fact that redundancies seem to be a nearly universal experience, although some practices that have made cuts and subsequently won work report that they are now recruiting.

Only 13 per cent use subcontractors and freelancers, but as the situation picks up a little, this is likely to increase. Many practices are wary of taking on full-time staff and then having to let them go again. Taking on subcontractors seems to be a more comfortable solution.

Generally, salaries show a slight downward trend, with only the associate position holding steady, but note that all figures are still above those for 2006. Considering that less than two years ago, practices were bemoaning the ridiculously high salaries that Part 3 students were looking for in what was then a seller’s market, it is surprising that the salary drops have not been greater.

It is interesting to look at the variation as well. Ten practices had average directors’/partners’ salaries of more than £100,000 and five pay their associates £60,000 or more. At the bottom of the scale, there are two practices paying Part 3 students less than £20,000 a year, and six paying year-out students less than £15,000 a year.

‘Salaries show a downward trend but it is surprising that the drops have not been greater’

Money is not everything. We asked practices if they have bonus schemes, and of those who responded the answer was generally positive. Similarly, there are a large number of practices with student bursaries. Again, this is generous considering the current state of the economy. Practices may have learnt their lesson from the last boom, when there was a chronic shortage of staff. If you want to be prepared to benefit from the opportunities that present themselves, then your staff will be the greatest strength you have. Tough as it is now, paying decently, offering bonuses and helping train the next generation of architects are all good investments.

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