Explore how economic challenges shape the construction and architecture sectors, and discover the key insights shared during RIBA's recent Economics Panel. Gain valuable insights into the state of British architects and what lies ahead for the industry.
In this article, we delve into topics such as resilience, sustainability, and the opportunities in overseas markets.
Revenue growth in the architecture market
First, let us have a look at the revenue growth in the Architect's market. As we can see from the graph below, architects play a vital role in the UK economy: RIBA chartered practices contribute not only to the development of a better-built environment and improved communities but do also directly add over £3 billion to the nation's economic landscape.
This graph is provided by RIBA (external link)
There was a robust growth trend from 2015 to 2019. However, this growth trajectory experienced a stall in 2020, followed by a notable decline in 2021. Fortunately, 2022 has shown signs of stabilisation, indicating a potential rebound in the coming years.
Growing sense of confidence in the construction industry
Major events such as Brexit, the pandemic and the war in Ukraine, have impacted the economy in the previous years. Construction activity has recently been hindered by a weak economic outlook, higher interest rates, and political instability.
However, there is a growing sense of confidence as interest rates are expected to soften in the second half of 2024, potentially spurring private sector recovery. Public sector investment, on the other hand, might face delays due to the upcoming general election.
Stabilised prices in construction materials provide more certainty
According to RIBA, the construction sector has seen a stabilisation in prices of materials post-pandemic, offering a sense of certainty for the industry moving forward. Architects surveyed by RIBA noted client hesitancy due to concerns over costs and affordability, but with prices now steadying, there's optimism for improved client confidence in the near future.
Resilience in the architecture market despite recent economic challenges
Despite facing significant challenges such as project cost inflation and rising interest rates in 2021 and 2022, the architecture industry in the UK has demonstrated remarkable resilience. Navigating the pandemic with agility, architects have attributed their ability to weather the storm to the diverse range of projects they undertake.
The graph below highlights that smaller practices heavily rely on revenue from private housing projects, making them more vulnerable to the fluctuations in the private housing market.
Extended lead times since 2019
Extended lead times have become a concern. For instance, the planning phase was taking 34% longer in 2022 compared to 2019.
Growing revenue in projects overseas
Interestingly, 2023 saw a notable increase in overseas revenue for British architecture firms, especially in Europe, suggesting that Brexit has not severed ties with this market. The importance of trading services, including architecture, is growing post-Brexit, making it a sector to watch in the future.
The RIBA Economics Panel contained a few more interesting findings on this topic, we recommend checking it out if you’re interested to knwo more (external link).
Architects’ Attitudes Towards the Future
Insights from the latest RIBA survey among chartered practices revealed key data on the Future Trends Workload Index. This index calculates the difference between the percentage of practices anticipating workload growth versus contraction in the upcoming three months. A positive value signifies overall growth expectations among architects, while a negative value indicates a potential downturn.
Anticipated increase in workload volume in the upcoming months
Overall, RIBA's surveys typically reflect architects' optimism towards the future. However, the past 9-10 months have presented the longest period of pessimism in recent memory. Recent trends, though, have shown a more positive outlook, with many architects now expecting an increase in workload volume.
RIBA Future Trends Workload Index
Meanwhile, the survey indicates that smaller practices maintain a cautious outlook, largely influenced by their heavy reliance on revenue from projects within the private housing sector, which is known for its volatility. Should this market experience an upturn, it has the potential to boost staffing levels and enhance the overall outlook for smaller practices.
Workload Index - Small vs Medium and Large Practices
Reasons for Optimism among Architects
There are several reasons for optimism in the architecture market. Supply issues are improving, project cost inflation is stabilising, and demand for better housing and social infrastructure remains strong. The climate emergency continues to drive the need for sustainable building and refurbishing practices, which presents ongoing opportunities for architects.
As previously mentioned, the overseas market remains healthy and growing, providing additional avenues for revenue. The commercial market shows a steady outlook, while the public sector continues to underperform, with uncertainty due to the general election likely to prolong this trend.
Insights from the Panel
A panel of experienced architects were invited to the webinar, to share how their business is going and what issues they expect to affect the architecture market going forward. Here are some of the key issues the panel highlighted:
Uncertain economic landscape
The economic landscape has presented challenges for many practices over the past nine months, with uncertainties and escalating operational expenses. Delays in bureaucratic processes, specifically with planning applications, have further compounded these difficulties. With the upcoming general election on the horison, the developments in the second half of the year are eagerly anticipated.
Market adaptibility
For small practices, their agility is a strength in an unstable current landscape, as it is easier to adjust the work and competence to move to new, promising sectors.
Strategic Focus: Practices are advised to focus on their core strengths and leverage their experience.Sustainability
The rise in demand for sustainability retrofits, especially in energy-efficient structures, presents lucrative prospects for firms specialising in sustainable design.
New avenues for growth
Exploring untapped potential in unconventional sectors such as transport industry storage locations, infrastructure development, and rural data storage facilities provide new avenues for growth.
Supporting Diversity
Adapting practices to align with the current landscape while upholding diversity is crucial. Supporting early-career professionals is essential to ensure a sustainable future for the architecture industry.
Conclusion
In conclusion, the current trends and future outlook in the UK architecture market showcase a mix of challenges and opportunities. Despite economic uncertainties, architects have shown resilience and adaptability, with a growing sense of confidence in the industry. The stabilisation of construction material prices, the potential rebound in revenue growth, and the increasing focus on sustainability all point towards a positive trajectory for British architects.
As the sector continues to evolve, exploring overseas markets, embracing diversity, and capitalising on new growth avenues will be key for architects to thrive in the ever-changing landscape. To delve deeper into the insights shared by industry experts and stay informed about the latest developments in the architecture market, we encourage you to explore the valuable resources provided by RIBA and engage with the ongoing conversations shaping the future of architecture in the UK.
