The RIBA/NBS economic panel met at Portland Place to discuss the state of the UK economy, the construction industry, and the prospects for architects
Brexit inevitably loomed large at the latest meeting of the RIBA/NBS economic panel. Since the previous meeting there has been little certain information about how it might ultimately affect the construction and architectural markets. It now seems more likely that it will be a hard Brexit, but given the rapidly changing political background it is difficult to tell where we will be in March 2019.
Most projections for the economy suggest that leaving the EU will have a negative effect on the UK. Indeed, the harder the Brexit, the worse the projections tend to be.
The construction industry is particularly sensitive because of its high reliance on EU workers. As many as 45% come from overseas, and 27% from the EU. Among UK workers in construction there is now a generational spike of people aged 50 to 65. A labour shortage in the years post-Brexit looks a real possibility.
Architecture is in a slightly different position. Figures from the Architects Registration Board (ARB) indicate that the total number of architects in the UK has increased since the referendum. While the value of the pound has dropped relative to the euro, the differential between UK salaries and those in many EU countries means that the UK is still an attractive place for many to come and practise. The European pool of architects is large – work done by the Architects' Council of Europe suggests that there are about 600,000.
So does that mean the UK can continue to rely on EU architects contributing to UK architecture? Or, to put it another way, will those who might come to the UK continue to see it as an attractive and welcoming country, the kind of place to enjoy practising architecture?
There is no easy answer. While there is some anecdotal evidence from practices that it is getting more difficult to attract architects to the UK, the number of EU architects remains steady. The panel is not hearing of lots people leaving the UK, but it’s the ones deciding not to come that will have the real effect, albeit an effect that’s hard to measure – an accumulation of lost opportunities.
Longer term, while the portcullis will not come down overnight, any legal impediments to the UK being a global centre for architects and architecture remains a real concern.
Worst case scenario – and bright spots
Let’s say the worst case is realised, that we need to rely solely on the insufficient pool of UK construction workers and architects. What would this future look like.
On the one hand, it may present a desperate challenge. We need a built environment in a constant state of improvement and renewal, one that is able to meet the changing needs of our society and the challenge of supporting sustainable living. To do this we need skilled people.
On the other hand, the construction industry is going through a phase of rapid innovation through digitisation and new technology. Is it possible that a reduction in the availability of skilled labour and professionals will result in an acceleration of new technology, a spur to increased productivity in the industry?
Through BIM we’ve already seen savings delivered on capital expenditure because it allows more thorough testing of design before construction, resulting in more certain outcomes.
Soon we might expect BIM and connected built assets to facilitate improvement in the lifetime performance of buildings. Architects will iteratively improve design as real world performance is analysed, assessed and used to influence future projects.
There is also a clear vision for off-site production. In principle, doing as much of the construction work as possible offsite offers a range of benefits, including quicker delivery, higher quality, reduced cost and better working conditions. It involves looking to past projects and innovating based on what can be learnt from them. This takes effort and investment.
We are already seeing some contractors implementing this in housing, schools, healthcare, offices, retail and leisure. But it’s not without difficulty. Creating the plant and supply chain needed to make a success of offsite construction requires high investment upfront. This investment requires a steady, predictable demand, to match the now steady supply. However, one thing we know about the construction sector is that it is unpredictable and cyclical. Anything that can be done to smooth demand would help here, and an obvious candidate is government investment, for example in public housing.
The panel pointed out that in the days of ‘pre-fab’, a crude approach to off-site construction ended badly for the new built environment and the communities placed within it. Do people want to live in off-site manufactured houses? A better approach might be to think not about the standardisation and off-site construction of buildings, but instead of the off-site construction of constituent systems and components.
Construction may look like a disruption-proof industry but this cannot last forever. We may be moving towards an industry where data and information about the performance and attributes of products and buildings becomes as significant as the physical things themselves.
Office for National Statistics (ONS) data for construction output remains weak. On the face of it, a downturn for the construction industry lies ahead. The latest data from the ONS estimates that construction output fell by 0.9% for Quarter 3, following a contraction of 0.5% in Q2. This is the first time the ONS has reported two consecutive quarters of contraction since 2012.
The panel was keen to point out, however, that the broad brush of overall construction output can mask significant differences between sectors and regions. By quickly identifying these differences and niches of opportunity, architects can ready themselves for future opportunity.
The commercial sector may be one of the most challenging sectors, after a strong 2016. The demand for office space is softening, with growth better in other European cities. Retail is shifting online, resulting in fewer shop developments (though more warehouses).
Longer term this may mean a change in what our city and town centres provide. We are seeing restaurants, hotels, entertainment and independent retailers springing up in place of traditional shops. Town and city centres are increasingly providing an ‘experience’, not just places to buy goods. This change will be supported by the rapid growth of global tourism.
Infrastructure is likely to be a growth area too. This offers opportunities for architects, in station design for example. More importantly though, improvements in infrastructure can indicate where future opportunities will arise. The simple removal of tolls from the Severn Bridge may open up South Wales to the growth in the London/South West corridor. Crossrail and Thameslink are likely to spur an uptake in nearby property values by increasing the accessibility of central London. While there is continued investment in infrastructure in London and the South East the panel drew attention to the importance of HS3, the Northern Powerhouse Rail, to spurring much needed growth in the North.
The demand for housing looks set to bring steady if unspectacular growth in coming years. Help to Buy will stimulate housebuilders to increase supply, but data suggests it is also inflating prices. Help to Buy, available only for new build, may also be distorting the market, skewing to activity to new build outside where it is most needed, the capital.
The role of Registered Social Landlords (RSL) will be increasingly positive for architects, as the trend is for them to operate at scale. The panel suggests they will be raising significant investment, employing architects and delivering ambitious regeneration schemes. Refurbishment of social housing to ensure safety will be an inevitable priority. Along with the warm noises central government is making about council housing (and the ever increasing housing benefit bill) this means we might yet witness the moment when social housing returns as a very significant sector for architects. But it would be good to see the money.
Social housing might return as a very significant sector for architects – but it would be good to see the money
Overall the panel stressed that the coming years will be a challenge. Brexit will make things tougher than they might have been. Contractors may already be feeling it, with reduced, even negative margins on some projects. That said, it is important to resist the temptation of seeing everything (good or bad, depending on your leaning) as a result of Brexit. We’ve always had a highly cyclical sector.
Difficult times, however, are often times of great innovation. Through BIM, the UK is already leading on this, a lead we can maintain as we move to BIM level 3 and the transformation of the construction industry.
The panel drew attention to software advances available to architects, and how, through Software as a Service, capital costs are falling rapidly. Through technology, UK architecture can, as it has done, stay ahead of the global competition, doing things differently, and better, before everyone else.
The attendees were
- Sarah Davidson, head of research and development at Gleeds
- Sue Foxley, research director at ThinkBarn
- Simon Rawlinson, head of strategic research and insight, Arcadis
- Noble Francis, economics director, Construction Products Association
- Vince Nacey, partner, Mirza Nacey
- Adrian Dobson RIBA, executive director of members
- Lucy Carmichael RIBA, director of practice
- Adrian Malleson, head of research, NBS