UK Market Update with guest blogger Nicholas De Klerk4th April 2019 / Market Updates
It would be fair to say that unless you have been hiding under a rock, you will have heard about Brexit and the looming changes the UK leaving the EU will bring.
Our affiliate Oliver from JaK Consultancy had a chat with Nicholas De Klerk – Associate from Aukett Swanke, a well established UK company, to gain further insight into the impact Brexit is and will have on the industry.
A wonderful overview of current sentiment we found highly interesting and thought you would too:
Ask anyone in the UK about the state of the construction industry at the moment and you’re likely to hear a stock response – mixed. In the next sentence they’ll put this down to the dreaded B-word, Brexit. There is no doubt that the UK Government’s protracted negotiations with itself are causing a drag on the economy in the short term, principally down to uncertainty as to what the trading arrangements in the UK’s post-exit transition period will be. There is also no clarity on what our future trading relationship with one of our most important trading partners will be, as this can only be negotiated once our exit terms have been established. To say that we are in this situation nearly three years after the referendum took place almost beggars belief, but here we are. That said, the market fundamentals still seem sound and at the time of writing the UK economy remains the world’s 5th largest.
There was what was termed a ‘Brexit bounce’ immediately after the 2016 referendum, largely down to investors taking advantage of the currency devaluation that followed, but that has cooled. Any attempt to take a broad measure of the economy and more specifically of the construction industry will only tell part of the story. New London Architecture’s 2019 edition of its annual Tall Building Survey will tell you that 541 tall buildings are still planned for the capital, and that while starts on site and new planning applications are down, planning approvals are up. This tells you a number of things: that London is still an attractive destination for investor capital, but also that, fundamentals notwithstanding, it is starting to attract some nervousness. This is borne out in industry anecdotes; some clients are pausing live projects – sometimes because they see some advantage to be gained, but often because uncertainty really doesn’t do very much to engender a sense of confidence.
This is also a very narrow lens through which to view the architecture and construction industries. It should be self-evident to state that London is not the whole country and towers are not all architecture. The vast majority of architectural practices in the UK are small and work on domestic-scaled projects, and the bigger commercial practices that do work on large projects, also tend to work in multiple regions and sectors and can, as such, largely mitigate the risk of excessive exposure to any particular sector. So the answer you get when you ask about the state of the industry depends very much on who you ask.
Brexit is also having a very specific impact on employment in architecture. The aftermath of the financial crisis saw an influx of talented European architects into the UK industry, all with automatic reciprocal recognition of their qualifications, which has benefited the industry enormously. The referendum in 2016 saw some of those architects consider their options. Some have returned to their countries of origin, while others have re-evaluated their individual situations and the profession has seen a great deal of movement between practices as a consequence. It has also led to a significant decrease in the number of qualified architects heading to the UK (particularly from within the EU) to seek employment, making it more challenging to fill vacancies that have arisen as a result.
This should increase the demand for talented graduates from within the UK university system, which has been affected by its own pressures. The tripling of university fees in 2012 has made prospective students think long and hard about a course which is long and expensive and does not offer particularly high salaries to new graduates. Universities, including Loughborough and the London School of Architecture, however, are listening and developing courses which are more responsive to these real concerns.
Another factor is, of course, technology. The industry has been moving towards using Revit and BIM fitfully over the last few years and this is finally, at least in the bigger commercial practices, being adopted in a more widespread manner. The change to Revit and BIM offers many advantages to developers, contractors and indeed practices, but requires a significant investment in technology and training. It also means that those practitioners who have managed to build up good Revit skills and experience have become something of a commodity themselves, adding yet another staffing headache to practices.
In a buoyant market these issues would normally more or less resolve themselves, but in one with the looming structural issues that the handling of Brexit has created, the outlook is more, well … mixed.
An excellent insight from Nicholas whom we thank for being so generous with his time and valuable on the ground knowledge and experience, and highlight that for the purpose of this article, these are Nick’s personal views; not at all intended to be representative of the company views for whom he works in anyway.
Nicholas de Klerk
Associate, Aukett Swanke