Blog author: Richard Saxon CBE, JCT Chairman
Construction used to be the most local of industries. Buildings were made from the nearby materials by local craftsmen and master masons. There were no ‘professionals’. As modern materials came in so they were sourced from further afield and professionals emerged to decide how to use them. Whilst bulky materials are expensive to ship, the UK has largely gone over to importing building products, with a major negative balance of payments for manufactured components. For a wide variety of reasons, UK suppliers are now mainly re-sellers of foreign products. European firms are world leaders. As to main contractors, you will have noticed how many of the top thirty are now foreign-owned firms or direct ventures by overseas contractors. Again, European firms dominate. There are some who think that all the top UK contractors will be overseas-owned by 2020, given the large differences in scale between UK-owned firms and the global giants.
It’s somewhat different in professional services. Foreign ownership has absorbed many of the UK’s engineering and surveying firms, and some architects. But we have some global players based in UK. What is unusual is that UK-based professional services, wherever owned, are in demand world-wide and London in particular has become a global hub for built-environment professional services. This embraces design and project management services, but also legal and property services, a multi-billion market.
Global construction is rising steadily, with a total spend of USD 15.5 trillion expected by 2030, an 85% rise in the next 15 years(1). Most of the growth will occur in urbanising economies, but the USA, Canada and the UK are also strong contributors. The UK will be the world’s sixth largest construction market by 2030, based on strong infrastructure and housing growth, driven by a rising population and economy. This will draw in more foreign direct investment but also give a strong home market for UK professional services. The urbanising world’s need for master-planning and design services will continue to pull in UK professionals.
The position of London is extraordinary. Using architects as a yardstick, 40 of the world’s top 100 practices are based in London, a far greater concentration than in any other world city. 15% of UK architectural firms work internationally, compared to only 3% across the EU. 22% of fees earned by UK chartered practices are from export, with 86% of these earned in London offices. Those offices earn over half of all fees earned in the UK, whilst employing just under half of the professional staff.
Why has this concentration occurred? The Company of Chartered Architects, a Livery Company of the City of London, has done a study of this phenomenon(2) and is lobbying for recognition and support of our Global Hub. They point to the value, perceived internationally, of the UK’s established professional institutions, their education standards and quality assurance. British professionals are seen as creative, innovative, ethical, expert, technically competent and giving quality of service. UK universities provide excellence in education and research for these professions, and attract many overseas students who then form links between countries in their practice at home or in the UK. The open and stable business environment of the UK, with its effective networks of supporting services and specialists, appeals to worldwide investors. Our non-prescriptive regulations and technical standards are an advantage too. Our professionals have become familiar to worldwide clients by virtue of their travels, but also through the support they give inward investors to the UK. Last but not least, our leadership is recognised in the change from analogue working to digital: the UK leads on the use of BIM and GIS (Geographical Information Systems) and in computer aided design. We may not be good at languages but the world increasingly speaks our language.
There are threats to this positive situation: immigration concerns limit the flow of talent into UK universities and offices; we need priority visas to keep up the UK’s advantages. Government promotion of UK professional services is less than that from rival countries; we need support to avoid being shut out of markets where non-UK technical standards are taken as the norm. Support with financial arrangements is also less than ideal. Finally, infrastructure: the UK’s air services to opportunity cities are limited by runway capacity; broadband is behind world standards; housing availability in the capital is a major drawback to firms based there. How can we advise the world on the built environment if we can’t look after ourselves?
The City of London used to say, before Murray, that it was like Wimbledon Tennis, it put on a great show but its local players were not contenders. UK construction shows a mixed picture: leaders at consultancy but followers in products and contracting. At least the work is being done from here, by everyone, in the new, global style.
(1) Global Construction 2030, by Global Construction Perspectives and Oxford Economics.
(2) The Company of Architects’ Global Hub campaign.
Note: Blog posts are the views of the author(s) and do not necessarily represent the views of JCT.