Uncertainty before and after the EU referendum led to a falling-off in confidence in 2016. Bruce Tether crunches the numbers. Additional reporting by Richard Waite and Ruth Slavid
After two years of strong growth, the increase in work among AJ100 firms has slowed, due to uncertainty over Brexit and a periodic swing in the development cycle. Fosters remains the largest employer of UK architects
This year’s AJ100 survey shows a marked slowdown in growth compared with last year, in part due to a falling-off in confidence following the vote for Brexit but also to a natural swing in the development cycle. Whereas last year AJ100 practices employed 6,811 architects – up from 4,825 in 2013 following three years of growth – this year’s survey results show a far more modest growth in number of architects employed. At 6,853, AJ100 practices employ just 42 more qualified architects in the UK than a year ago.
Paul Chappell of recruitment agency 9B says: ‘Some firms have been hit hard by the referendum. Following the referendum result, the majority of firms from small to large put recruitment on hold until the outlook became clearer. Before Christmas, however, confidence grew rapidly and a backlog of opportunities suddenly arose. These, though, were predominantly within firms working in the large-scale residential and private rented sectors. But some of the larger practices working in other sectors made redundancies, and so overall the picture appears quite flat.’
Gerard Daws, founder of design management firm PlanA Consultants, says: ‘From our experience, the larger practices have consolidated over the past year. Practices have aimed to take a more conservative approach due to Brexit and the natural economic cycle. Those working in commercial and residential particularly know that the upward curve cannot last forever. However, projects are still being won and recruitment is still ramping up. Anecdotally, those architects released recently during well-publicised redundancies have picked up work again quickly enough.’
The comparatively stagnant figures hide some rapid changes of fortune among AJ100 firms. The largest increases in the numbers of UK architects employed have been at tp bennett (+29), Hawkins\Brown (+28), and Stockwool (+24). Overall, 65 practices added to their tally of registered architects, 28 employed fewer architects, and seven reported an unchanged head count.
In contrast, one of the biggest shocks is the 50-place drop of Capita ESA, from seventh to 57th position. The architectural arm of the consulting giant closed its office in Hull and shrank its workforce in some of its other studios.
The top three practices by number of registered architects employed in the UK remain the same: Foster + Partners in top place for the sixth year running, followed by BDP and Zaha Hadid Architects. Allford Hall Monaghan Morris has swapped places with Sheppard Robson at fourth and fifth respectively; Allies and Morrison remains sixth. Atkins, Purcell, Squire & Partners and tp bennett round out the top 10.
The top six practices all employ at least 150 registered architects in the UK, while another 11 employ at least 100. At the other end, the four 100th-ranked practices each employ 26 registered architects in the UK, down one from last year’s survey.
The AJ100 practices also employ nearly 12,000 architectural staff in the UK (including architects), which is almost identical to last year’s total. Collectively, the AJ100 practices employ more than 30,000 people in the UK, including freelancers and those on short-term contracts, but almost half of these are employed by Atkins and Jacobs. Fosters, with 1,195 employees, remains the largest ‘pure’ architecture practice.
The use of short-term contractors and freelancers continues to grow; 77 of the AJ100 practices report employing at least one person on these terms, adding up to 3,559 positions (up 221, or 6.6 per cent, from last year). However, Jacobs alone accounts for nearly two thirds of these positions. While 29 practices report not employing any short-term contractors or freelancers, in half of those that do, these staff constitute no more than 5 per cent of the workforce.
Twelve practices report having opened one or more UK offices, the same number as last year, with three of these in both London and Birmingham. Seven practices, however, report having closed a UK office.
While confidence levels have fallen, most AJ100 practices are nevertheless expecting to grow
Levels of optimism have fallen in the year since the previous AJ100 was published.
Whereas in last year’s AJ100 survey nearly three quarters of practices were either ‘optimistic’ or ‘very optimistic’ about the year ahead, in this year’s survey that proportion has fallen to under two thirds (64 per cent), with only one practice declaring itself ‘very optimistic’. Thirty per cent are now ‘neutral’, a share that has slightly increased since last year (from 26 per cent), while only 6 per cent are ‘pessimistic’, and none are ‘very pessimistic’.
Yet, asked about recruitment or contraction plans for 2017, all but 10 of the AJ100 practices say they expect their businesses to grow in the UK.
And, according to Adrian Dobson, who collates his own data on market fortunes as executive director members at the RIBA, confidence is now rising after a major dip last year. ‘Following the EU referendum, the RIBA Future Trends Workload Index – our key future workload forecast – plummeted into negative territory,’ he says. ‘Practices were clearly very nervous about the impact on the profession. However, confidence levels staged a remarkable recovery, and by January 2017 the index was back at pre-referendum levels.
‘The home extension market appears to remain buoyant, and there is growing activity in infrastructure-related work and private rented sector housing, whereas areas such as retail appear to remain more subdued.
‘The overall picture we have from our practices remains generally to the upside, but tinged with awareness that the medium-term picture is somewhat foggy to say the least.’
Clare Goggin, a project manager and director at property consultancy Jackson Coles, says: ‘There was a state of turmoil after Brexit, but it has calmed down in the last six months. People are more quietly confident. We are getting a lot of enquiries. But schemes have changed. We are at the end of a development cycle. We will see smaller projects, and more regeneration.’
Pay levels continue their decade-long stagnation, yet architects are overwhelmingly satisfied with what they take home
This year’s AJ100 salary figures confirm what has been becoming evident for some time: that architects’ salaries are falling in real terms. Average pay in architecture has been remarkably stagnant for years. It is worth noting that had average pay increased in line with the consumer price index since 2007, then partners/directors would on average now be paid £105,000, associates £63,600, architects £47,500, Part 3 students £35,600 and year-out students £26,250. In fact, only 18, seven, four and three practices respectively report paying these amounts to their partner/directors, associates, architects and Part 3s, while just one practice pays that level to its year-out students.
The median pay for partners/directors is unchanged from 2015 at £85,000 – only £1,000 above what it was in 2007 prior to the financial crisis. Meanwhile median pay for associates is down marginally year-on-year to £51,500, while that for architects is up only slightly at £38,500. Median pay for Part 3 students is unchanged at £29,000, while that for year-out students has risen very slightly to £21,250.
In light of these declining real incomes, it is surprising that the survey of employees, undertaken alongside the survey of AJ100 practices, finds that 80 per cent are satisfied with their pay – a third of these respondents say they are ‘very satisfied’, while a further 46 per cent are ‘satisfied’. Only 2 per cent say they are ‘very dissatisfied’, while 9 per cent are ‘dissatisfied’ and 9 per cent are ‘indifferent’.
As before, there is striking variation in pay levels between practices. One practice claims to pay its partners/directors £188,000 on average, while another pays them only £50,000. There are 21 practices that pay their partners/directors at least £100,000 on average, and unsurprisingly most of these are based in London. Also unsurprisingly, median pay at all levels is around 20 per cent higher for practices based in London compared with those in the rest of the country, with the relative difference being greatest (30 per cent) for Part 3s.
There may, however, be changes on the way. Dave Madden of recruitment agency Mustard says: ‘We have seen a stabilisation in salaries over the last 12 months. But a number of clients think they are artificially high, particularly for Revit skills. Good skills get 10 to 15 per cent more. And a number of clients in recent months are paying people too much in the mid range. Architectural assistants/ Part 2s are getting 34 to 36k which even in the heyday before the crash wasn’t happening. Rates are particularly rising in Birmingham and Bristol.’
At £1.24 billion, fee income has fallen slightly though a handful of practices made big gains
This year’s fee income figures paint a markedly mixed picture. Aggregated architectural fee income to UK offices for projects being undertaken in the UK and overseas (excluding a few non-responders and late responders) was £1.24 billion in 2016, a total that is fractionally lower than in 2015. The top 21 practices by fee income account for half of this, and Foster + Partners alone makes up nearly 14 per cent of the total.
Overall, 53 of the 95 practices reported higher fees, and four no change, while 38 reported lower fees.
Ninety-five of the practices that appear in this year’s AJ100 reported their fees to their UK offices for both this and last year, and among these the aggregate fee income was up by a little under £9 million – or 0.6 per cent on last year’s total.
The practices that increased their UK fee income most were BDP (+£8 million), Zaha Hadid Architects (+£6.8 million), Hawkins\ Brown (+£6 million), Scott Brownrigg (+£5.4 million) and PRP (+£3.6 million).
David Henderson, studio director at Glenn Howells, says: ‘Clients want more and they want to pay less, and want more opportunity to do a shopping list. This means that we have to operate more like contractors. We will be retained for a certain scope and make sure there are change control procedures.’
The percentage of practices seeking work overseas has dropped in almost every region
Enthusiasm for overseas work appears to have cooled, according to this year’s data. Sixty-four of the AJ100 firms say they are actively seeking work abroad – a slightly lower total than in last year’s survey. In fact the percentage of practices chasing jobs has dropped in nearly every region of the world.
And although Qatar (35 per cent) and China and Hong Kong (38 per cent) remained popular destinations for AJ100 companies (the survey was completed before Qatar’s recent problems), interest has fallen markedly in both regions from peaks of 40 per cent in 2014 (Qatar) and 47 per cent in 2015 (China and Hong Kong).
Meanwhile, eight practices reported closing at least one overseas office.
For those still keen on international projects, the ‘old’ European Union and the United Arab Emirates remain the most common working and hunting grounds. More than half of the AJ100 practices are either working or seeking work in the old EU (a high share in light of Brexit uncertainties and issues around negotiating access to the EU’s single market), while 45 per cent are either working or seeking work in the UAE.
North America (33 per cent) and the ‘new’ EU (32 per cent) are also important markets. Perhaps surprisingly, five practices claim to be working or seeking work in Iraq.
A further 11 practices reported opening at least one office overseas, with a number of practices targeting Australia (Leonard Design, Populous, Purcell and Weston Williamson+Partners) and even more heading to Dubai (Aukett Swanke, Darnton B3, Foster + Partners, Grimshaw, and Zaha Hadid Architects).
Grimshaw managing partner Mark Middleton says the dash to Dubai is easily explained, as the emirate ‘is the main economic centre for the Gulf Cooperation Council (GCC) countries. Most banks and financial institutions are there and that tends to have its own gravity that attracts consultants.
‘All of the other countries in the GCC are a short flight away, easy to get to so it’s a natural base. Added to that it’s also the best place to live in the region.’
It will be interesting to see how next year’s figures are affected by the progression of Brexit negotiations and whether the Department for International Trade’s huge export drive bears fruit (see AJ 22.03.17).
Trend towards gender equality continues, but ethnic diversity stagnates
Collectively, the AJ100 practices report employing 2,165 women architects on a permanent basis, more than 30 per cent of the total and a larger proportion than the 25 per cent the ARB register shows for all practices, with a further 1,055 based overseas. All practices report employing at least three women architects in their permanent UK workforce.
In only five practices do women architects equal or outnumber their male counterparts: Architype, Nicholas Hare, Comprehensive Design Architects, Darling Associates and Pozzoni. At the other end of the spectrum, there are six practices where women constitute fewer than one in eight of the architects.
Worryingly the number of black, Asian, and minority ethnic (BAME) architects employed by the UK’s largest 100 practices has dropped by 10 per cent (77 architects) over the last year. The figures also reveal that, shockingly, 12 practices employ no BAME architects at all.
In total, the AJ100 practices reported employing 695 BAME architects – just over 10 per cent of the total architects employed, although three practices were unable to provide this information.
Overall, the figures show that the larger the practice, the greater the share of BAME architects in its workforce.
More encouragingly, in six practices BAME architects constitute at least a quarter of the permanently employed architects. In two, at least one in three architects are BAME: PLP Architecture (39 per cent) and HOK (34 per cent).
The AJ100 practices also employ 399 BAME architects overseas, with HOK providing more than 100 of these positions.
Katy Ghahremani, director at Make and co-chair of the RIBA Architects for Change panel, says: ‘Architecture has a long way to go before it is truly a diverse profession. Yes, we are slowly improving in some areas … but this is still predominantly a white, middle-class industry, and we need to make much more effort to attract, train and retain students from different sectors of society. The Stephen Lawrence Charitable Trust has pioneered work in this area, as have panels such as MADE in the Midlands, but these need far greater support across the sector.’
Creativity remains the chief criterion for success, particularly among firms charging the highest fees
What are the secrets of success among AJ100 practices? Asked to divide 100 points across six criteria for practice success, client satisfaction came out top, with an average of 23 points (one higher than last year), followed closely by creativity (21 points – unchanged), and being a good place to work (18.5 – down half a point). The ability to win new business came fourth with 17 points (unchanged), while profit margin was fifth (13.5 – down half a point). Peer recognition is considered least important, with an average of 7 points (unchanged); 15 practices gave no weight to this at all, an increase of four practices compared with last year. Two, meanwhile, gave no weight to ‘profit margin’, and one gave no weight to being a good place to work.
We can compare these answers among different groups of practices, including those defined by their relative fees. Those that charge the highest fees place greater weight on creativity, while those charging the lowest fees give it the least weight. Profit margin tends to be relatively more important among those charging low fees (and those not disclosing fees), while the ability to win new business is relatively more important among those charging medium fees. There is little difference in the weight attached to peer recognition across all four categories, or for those reporting fees in the weight attached to ‘being a good place to work’.
It is also instructive to see who architects admire outside their practices. Just as last year, when asked which architect most inspires the work of their practice, the largest proportion (9 per cent) answered: Norman Foster, followed by Alvar Aalto (4 per cent). The only other living practitioners on the list are Allies and Morrison and Renzo Piano (both at 3 per cent) and Jan Gehl, at 2 per cent.
The Bartlett continues its run as the anointed best school of architecture, although it has dropped from 30 per cent last year to 21 per cent this year. The University of Bath is still in second place, with 14 per cent of votes. Well behind are the Mackintosh and the Welsh School of Architecture, with 4 per cent each.
Every single AJ100 firm now makes use of BIM
The high salaries that those with expertise in Revit can command are an indication of the growing importance of BIM (see Salaries).
Data from the survey shows a marked rise in the proportion of AJ100 practices extensively using BIM – 81 per cent, an increase of 7 percentage points from last year. Every one of the 106 firms surveyed now says it uses the technology. Ryder, which set up the BIM Academy with Northumbria University a few years ago, is advising the Sydney Opera House on the topic, and also using its expertise in work with Herzog & de Meuron.
But there is still some cynicism about the technology. David Henderson of Glenn Howells Architects says: ‘BIM still promises more than it delivers. You can’t be very flexible. You need to do other things as well.’
Meanwhile, practices are finding new ways to work with virtual reality, with Make Architects, for example, experimenting with its use as a tool for design and not just presentation.
In terms of sustainability, there are modest increases in all the markers with the exception of the numbers of directors of sustainability.
Bruce Tether is professor of innovation management and strategy at Alliance Manchester Business School