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The North bucks the trend amid sharp fall in confidence

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After previously lagging behind, the north of England is expecting the fastest growth in architectural work, though the national forecast is down from June’s all-time high, says Adrian Dobson

In June, the RIBA Future Trends Workload Index had reached an all-time high of +44, but July saw a significant note of caution returning to our forecast, with the Workload Index falling sharply to +22.

The fall seems largely to have been driven by some loss of confidence by our practices in the medium-term outlook for work in the private housing sector. This softening was particularly evident in London and the south of England, perhaps indicating that private housing sector activity in the South has reached a temporary peak. Private housing has been the main driver of increases in architects’ workloads in the last couple of years, so this is a development that we will be monitoring closely in the next few months. It is too early to say whether this is a definitive trend, and the crucial autumn period will give a better indication of the prevailing trajectory.

In terms of geographical analysis, all nations and regions in the UK returned positive balance figures, but it is the north of England with a balance figure of +48 that has the highest optimism levels about future workloads, and it appears to be the northern cities that are now seeing the most rapid growth in work in progress. This region had lagged behind in the earlier part of the recovery cycle.

Similarly when the data is analysed in terms of practice size, all size categories of practice are upbeat about work prospects. For small practices (1-10 staff) the balance figure is +17; medium-sized practices (11-50 staff) returned a balance figure of +55; and large practices (51-plus staff) a balance figure of +50.

Workload survey graph

Despite the fairly large drop in our headline index, it is important to remember that our forecast remains firmly in positive territory. In terms of the value of actual work in progress, our practices report that their overall workload is growing at an annual rate of 8 per cent and that staffing levels are 6 per cent higher than they were a year ago. Clearly we are still in a period of growth for architects.

In terms of sectors, the private housing sector workload forecast fell quite dramatically this month, down to +23 in July from +39 in June. The commercial sector workload forecast saw a more moderate fall, down to +13 in July from +19 in June. And the public-sector workload forecast declined slightly to -1 in July from +2 in June. Our practices still expect public-sector capital expenditure levels in the built environment to see little change in the medium term.

Firms are seeing solid growth, but there is pressure on fee levels

As with the workload figures, the RIBA Future Trends Staffing Index also declined this month, standing at +12 in July, down from +20 in June. The employment market for salaried architects remains very positive, with 98 per cent of our practices anticipating that their staffing levels will either increase or stay the same over the next few months. Small practices, with a balance figure this month of +6, and medium-sized practices, with a balance figure of +42, remain confident about increasing their staffing levels, but large practices, with a balance figure of +67, are still the most likely to be actively appointing new staff. There is plenty of anecdotal evidence of practices now having difficulties in recruiting experienced staff with specific skill sets, not just in London but across the UK.

Commentary received from our participating practices continues to suggest that most firms are seeing solid growth in workloads, but that there is still significant pressure on fee levels, with profit margins on projects typically remaining tight, and so constraining salary levels. Future Bank of England interest rate rises may yet dampen activity in the key private-housing and commercial sectors, but with low inflation looking set to continue, any medium-term rate increases are likely to be small and introduced very gradually.

Despite the cautionary note sounded by this month’s survey results, the overall economic environment for architects continues to be positive.

 

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