AJ100: survey analysis + data
Bruce Tether provides analysis on the 2014 AJ100 data
At the beginning of the year, the 106 practices included in 2014’s AJ100 collectively employed 5,036 ARB-registered architects in the UK - that’s 211 more than the total employed by last year’s 105 members. Even the six bottom-ranked practices have managed to increase their head counts by one, with the minimum number or architects required to gain entry into the AJ100 rising to 20.
Following the introduction of a new rule last year - to include only ARB-registered architects in the UK - we can also now start to compare like with like. Collective employment of architects is up overall by more than 3 per cent. The 93 practices that were AJ100 members last year and again this year collectively employ 147 more ARB-registered UK-based architects. Fifty-nine practices have added ARB-registered architects (12 of these have added at least 10), while 27 are employing fewer architects in the UK and seven are unchanged.
The UK’s two largest employers of architects remain the same: Foster + Partners with 290 and BDP with 203. In third place is last year’s Fastest Growing Practice, Allford Hall Monaghan Morris, with 122 architects, climbing six places and adding another 32 ARB-registered architects to its ranks. Other practices that have boosted their numbers notably include Scottish firm Keppie, which has added 24 ARB-registered architects, and Allies and Morrison, with 18 more than last time.
Elsewhere, practices experienced a loss of ARB-registered architects. Following a restructure within its parent group, Capita Property and Infrastructure, Capita has contracted from 170 to 90 architects, despite joining forces with London- and Hull-based firm ESA. Among the other big-hitters BDP, Pascall+Watson and 3DReid all have at least 18 fewer UK-based ARB-registered architects than they did last year.
Overall architectural staff numbers are heading upwards: this year’s AJ100 practices employ 13,300 architectural staff in the UK (including architects), and 38,600 people altogether, 3,000 up on last year.
The number of architects UK practices employ overseas has stabilised at 4,000 (the same number as last year). Canada-based IBI Group employs nearly a quarter of these. Collective overseas employment is more than 150,000, with Jacobs accounting for over half of the total. Forty-eight practices have at least one person permanently employed overseas.
Approximately 1,400 of AJ100 UK-based architects are women, comprising 28 per cent of the ARB-registered workforce - an encouraging rise of 3 per cent, or almost 100, from last year. A further 700 women architects in the AJ100 are based overseas. Women architects outnumber men in the UK offices of three practices: NBBJ (60 per cent), Darling Associates (56 per cent) and Paul Davis + Partners (51 per cent). The totals for black and ethnic-minority architects are less than half of the figures for women architects in the UK and overseas.
After years of stagnation, is pay finally heading in the right direction? It depends how high up the tree you are. Most firms provide information on their pay at various levels from directors to year-out students, and this year the median pay for directors is up slightly from £75,000 to £77,000, an inflation-busting 2.5 per cent increase, while the median pay for associates is also up from £49,000 to £50,000 (up 2 per cent). Associates are the only group to have seen pay rises both this year and last. The median pay for architects remains unchanged at £36,000, while that for Part 3 students and year-out students is down fractionally to £26,400 and £19,500 respectively.
Also striking is the range of pay levels between practices. A few directors earn over £150,000, while others earn just £40,000. Meanwhile, associates can get anything between £31,000 and £75,000, and architects and students in the best-paying practices can get twice what their counterparts receive in the lowest-paying ones. Practices that pay the bosses more also tend to be more generous to the ranks. Among the 17 practices that report paying their directors at least £100,000 a year, associates typically earn £55,000, architects £38,500, Part 3 students £29,000 and year-out students £22,000 - all higher than the overall average.
Among the 18 practices that pay their directors less than £65,000, average pay for each of the lower ranks is below average. But the differential between the top and the bottom is also much lower - directors typically get just 1.7 times what an architect gets, compared with roughly three times among the highest-paying practices. You might argue that this is like comparing apples and pears and, indeed, all of the highest-paying practices are headquartered in central London. Most of the low-paying practices are located in the regions but, surprisingly, some of the lowest-paying practices are in London, too.
Of the 106 practices in the AJ100, 104 provided their fee income, and the aggregate architectural fee income to UK offices for projects undertaken in the UK and overseas totalled £930 million, £20 million higher than last year. The top 20 practices account for almost half this income and a little more than three-quarters of it was from UK-based projects; fees from overseas projects amounted to £220 million.
Ninety AJ100 members provided fee income information both this year and last. Of these, 55 reported increased fees (including Aedas, up by £9.6 million and Allford Hall Monaghan Morris, up by £8.5 million), while four reported no change and 31 noted a decline. Not counting Atkins, which has changed the way its fees are reported, these practices collectively earned £52.3 million more this year than last, an increase of roughly 7 per cent. This is a much more healthy increase than the £1.8 million reported last time.
Is it the case that London-based practices are doing particularly well, while the rest of the country lags behind, reflecting the unbalanced nature of the economic recovery? This very much depends on the practice. Dividing the 90 practices which provided fee income data into three equal groups - those that increased their architectural fees to their UK offices by at least £800,000; those that saw relatively little growth or a contraction in fees (-£100,000 to +£799,999); and those that saw a contraction in fees of at least £200,000 - we find that London-based practices dominate the first group. Twenty of these 30 practices are London-based.
However, London-based practices also dominate the third group, with the same 2:1 ratio. By contrast, regional practices are likely to be in the middle group - with 17 headquartered outside London, compared with 13 from the capital. A similar picture emerges if the data is cut up by relative, not absolute growth, so having a London base does not necessarily equate to a rise in fees.
Opening and closing offices
Ten practices report having opened UK offices, compared with seven that have closed them. New offices are scattered across the country, although four were opened in London and two in Glasgow. Eight practices also anticipate opening at least one new UK office in 2014, with three of these being in London.
Nine practices have also reported opening a new overseas office in the last year (against five closing overseas bases). The closest of these is in Lodz, Poland, where John Robertson Architects now has an office, followed by St Petersburg, Russia, where HKR Architects has taken up residence. The most distant is Broadway Malyan’s office in Santiago, Chile, followed by Scott Brownrigg’s in Singapore. Other new office locations include Chengdu and Shanghai in China, Doha in Qatar, Johannesburg in South Africa and Trinidad in the Caribbean. Nine practices also anticipate opening new overseas offices in 2014, in locations including Istanbul, Moscow, Hong Kong and Singapore.
Future profit margins in the UK and overseas
When asked how firms expect their profit margins for UK-based projects to fare in 2014, most practices are optimistic - seven expect a substantial increase in margins, while 51 forecast a slight increase; meanwhile 34 expect no change, with only two expecting their margins to be significantly down and 10 anticipating a slight decline.
Optimism is greater among the larger practices. Among the top 25, all of which employ over 60 ARB-registered architects in the UK, none expect their margins to fall: 70 per cent anticipate improvements, while 30 per cent expect no change.
Among the smaller practices, 47 are based in London and 34 outside the capital. Interestingly, there is not much difference in optimism between the two groups. Indeed, while a larger share of the London-based practices are expecting a substantial growth in margins, London is also home to the two gloomiest practices. Most regional practices are expecting a slight improvement in margins, but a third are expecting no change.
We can also divide the practices up according to their relative fees. The AJ100 survey asks members about their fee rates across a large number of different project types, and rates vary substantially.
Not all practices provide their fee rates, but 20 of those that do claim to charge rates that are typically at least one percentage point above the median for each category. Meanwhile, 30 report fee rates that are generally below average, and 18 report rates that are moderately above average.
We might expect that the highest-charging practices would be the most cautious about future margins, but this is not always the case. While this top group does include a minority that think margins will fall, the majority expect margins to grow. The low-charging firms tend to be fairly optimistic too, with a majority anticipating improved margins on UK projects, while a third expect no change: three firms, however, expect their margins to contract further. Among the middle group, which tend to charge slightly higher than average fees, half expect no change, 12 per cent forecast a contraction, but 38 per cent expect improved margins.
Among the 72 practices with overseas income responding on how they expect their overseas margins to develop, 43 anticipate them to remain unchanged, while six firms expect them to be slightly lower, against 23 forecasting increased margins. Only one expects substantially higher margins.
Also notable is that, while the majority of these firms - 48 out of 72 - anticipated the same change (or lack of) to their overseas margins as their UK ones, 20 practices expected their UK margins to develop more favourably than their overseas margins, with only four taking the opposite view. This suggests that, contrary to the past few years, more hopes are now pinned on the domestic market than overseas.
Future employment of architects
Asked how they expect their employment of architects to develop in 2014, 94 practices said that they forecast increasing their employment of UK-based architects by the end of the year, with seven predicting no change and only five expecting to reduce their number of architects.
PRP and Capita - ESA are the most bullish, both expecting to increase their architect headcount by 100. If the plans of all the practices are realised, there will be 825 extra UK-based architects among the AJ100 practices by the end of the year, a remarkable 16 per cent increase on their current workforce.
Meanwhile, 47 expect to increase their employment of architects overseas during 2014, with only three anticipating to employ fewer. Again, if all of these plans are realised, there will be 393 more architects employed abroad by the AJ100 practices, roughly a 10 per cent increase over the year. IBI Group alone is anticipating employing nearly 100 more architects abroad by the end of the year. Optimism is returning, with most practices predicting both growth in head counts and wider margins.
Bruce Tether is professor of innovation management and strategy at the Manchester Business School at the University of Manchester. Bruce’s research interests concern innovation and competition in design-based businesses