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Set sail to survive the Covid storm

Words:
Adrian Malleson

As we emerge from coronavirus lockdown, turning attention to overseas markets might be the best bet for UK architects – for the moment at least

If targeting international work look for countries with growth forecasts that have been less hard hit by the pandemic, like the Czech Republic.
If targeting international work look for countries with growth forecasts that have been less hard hit by the pandemic, like the Czech Republic. Credit: iStock

Moving through the coronavirus crisis, it is clear that the UK will be among the worst-hit countries, both in terms of fatalities and in the damage to the economy. The construction sector will significantly contract and architects’ workloads will diminish. Survival will dominate practice thinking; just getting through the next two years will be enough of a target for many.

At the same time, UK architecture has an enviable global reputation. This can be shown in design quality, but can also be shown by money. The RIBA Business Benchmarking survey gives a figure of around 17% of total chartered practice revenue coming from overseas work. Further, UK architecture makes a much needed positive contribution to the UK balance of payments; for every £1 of architectural services we import, we export £12.

Tough at home

With that as background, let’s look a little closer at the challenges there will be in the UK. We have been among the least adept countries at limiting the effects of Covid-19. At the time of writing, UK total mortality is exceeded only by the USA (though India and Brazil look set suffer greatly), and, among major countries, UK deaths per million population is exceeded only by Belgium. It’s suggested that had the government imposed a lockdown earlier, deaths may have been half as many.

The severity of the pandemic in the UK is severely damaging the economy. Latest figures from the Office of National Statistics put the first estimate of GDP in the month of April as a reduction of 20.4%; two decades of growth gone in a month. The construction sector contracted by 40.1%. Of any major county, the OECD (in June) projected the UK to have the most significant GDP reduction in 2020, with a forecast contraction of 11.5%.

Meanwhile, Brexit. Even before we leave the EU, the cost of Brexit has been real; the Brexit decision has weakened the UK economy, making it less ready to weather the Covid -19 storm. The Bank of England estimates that, since the referendum, the anticipation of Brexit has reduced UK investment by 11%. The latest (September 2019) Brexit forecast from the Bank put the cost of a no-deal, disorderly Brexit at 5.5% of UK GDP. The current gloomy projections of UK GDP in 2020 assume an orderly Brexit, with a working trade deal with the EU; if that doesn’t happen, the economy will fare even worse.

With this as our economic context, it’s no surprise that the RIBA Future Trends survey shows expectations of architects’ future workload are extremely weak (though improving) and current workloads down a third on a year ago. Almost three-quarters expect profits to fall, with 8% thinking that their practice will cease being financially viable.

There’s some comfort in knowing this economic darkness is likely to be temporary; while the OECD has the UK as the worst performer in 2020, it also put it as the best performer in 2021, with a projected annual GDP growth of 9%.

Time to look elsewhere?

The UK economy is at risk, the construction sector is at risk, and practices are at risk. 2020 is going to risky.

One way to mitigate business risk is to diversify. This might be through diversification of work sectors, clients or regions, for example. Another possibility; look overseas. One stand-out success area for UK architects has been overseas working. Is this a way to diversify, and if so, where might the going be better this year?

International work has, to now, been steadily growing. The international revenue generated by chartered practices increased by almost a quarter (22%) in 2019; to total of £625 million. The ‘big four’ regions of the EU, the Middle East, Asia and North America account for almost 90% of this.

Of this overseas work, 80% of its value is generated by the larger practices, those with more than 100 employees. But then, so is 47% of all work. The world is not exclusive to large practices; those with fewer than 100 employees have between them generated £141 million of international income in 2019. For example, that’s 12% of total revenue for practices with 50 to 99 staff and 9% for practices with 10 to 19. Some of this work is niche – architecture in the Antarctic for example – and being done by outward-looking smaller practices.

To date, the UK’s position as an open trading national, with London as perhaps the premier international city, has given us a marked advantage. Business is done by people. The multinational makeup of so many UK practices has meant that home-grown architects have been able to learn from overseas expertise. It has also often meant that those who, having worked in the UK then returned to their home country, do so with a strong UK professional network, with a predisposition to UK architecture, to doing business with us.

Working practices have changed through the crisis. With the rise of home working, virtual meetings have become the norm; international working may depend less on taking to sky to be there.

Where next?

If not the UK, then where? There is of course, no one answer, but many things to consider. First, look to existing contacts for local expertise, knowledge and word of opportuniutes. There’s often more to be gained from a chat than a week of deskwork.

But don’t skip the desk work! There is a lot of free information, about, for example, economic performance, ease of doing business, levels of corruption, and about how well countries are performing against the UN Sustainable Development Goals. Getting an overall picture of a country helps you learn whether it’s a place you’d be comfortable working, and if it’s worth making the investment of looking for work, of creating and submitting bids. Think too of a country’s standards and regulatory environment; does your practice have the expertise to design and specify within it?

It’s also worth having an eye on the construction industry, to spot areas and sectors of potential growth. This data can be more difficult to obtain. Amid the Covid-19 crisis, any projections, forecasts or scenarios are highly uncertain.

Before the pandemic hit, notable hotspots of construction growth were India, with a projected annual growth rate of over 7% for the coming years, and Brazil, with a projected growth rate of over 3%. But both countries have been hit hard by Covid-19, and for both, the pandemic is unfolding.

Construction markets spurred by significant government capital investment, made in response to the Covid-19 in the built environment, are likely to recover well. China remains the best example of that for now, with growth in the construction sector projected to be only temporarily diminished by coronavirus. That said, the challenges of working in China remain, notably the regulatory restrictions placed on overseas companies, along with the different standards environment.

Eastern Europe has been less affected by the pandemic, with Hungary, the Czech Republic, Poland and the Baltic states having significantly fewer infections per million than the in the west. Projections for construction growth in the regions are fair, if not spectacular. Pre-Covid-19 growth above 2% per annum was expected in Eastern Europe.

Where does that leave us?

There’s no sure-fire gold rush, no one place where international working is sure to pay off. It’s a risk. But through 2020, the UK will be facing new and enormous economic challenges, and architects are not exempt. But the UK, as a leader in international architecture, is globally strong; that strength can help see practices through the crisis. Overseas working is, in part, about building a network overseas, and the UK’s position as a global architectural hub can help. But the research still needs to be done on potential markets and how they fit with practice culture and expertise. We may be seeing a shift. With the rise of virtual working, physical distance matters less than ever before, at least for now. It’s an opportunity that may be worth grasping.

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