As the world reacts to Donald Trump’s tariffs, learn more about how architects can make sure their businesses are as robust as possible
Make no mistake, architects are working through times of extreme uncertainty, now on a new level thanks to the import tariffs sanctioned by US President, Donald Trump. No one quite knows the impact of these tariffs yet – stock markets are fluctuating as much as the President’s strategy. Things really are changing on a day-by-day basis.
It’s always tricky to issue guidance when it comes to business resilience, especially when things are changing so abruptly and the whole world is processing these levels of unpredictability, not to mention the unprecedented nature of these latest developments.
However, architects of all shapes and sizes can take onboard the experiences of others who have successfully navigated choppy waters in the past, and think about how best to make their own business as resilient as possible.
How can architects begin to review their business situation?
When it comes to making sure an architecture business as resilient as it can be, there’s an obvious starting point.
“If you don’t know what’s going to happen, and there’s no particular circumstance to respond to or mitigate, rather than waiting for clarity a practice has to look right across the board at what it can do,” says Tim Bailey, founder of Xsite Architecture, who has guided his practice through previous upheavals. “The obvious things to start with are costs."
He continues: “A practice should look at anything it’s got as a fixed cost and where the costs are that you can adjust and be flexible about, particularly where they are base costs and overheads.”
For instance, just weeks ago Tim’s practice, which sits on the outskirts of Newcastle-upon-Tyne, was expecting to take on a five-year lease on a new property. Bailey has already decided to move to a perfectly good, but smaller office offered on 28-day terms. It’s cheaper and does not risk becoming a drag on monthly outgoings. If he needs to, he can exit.
Bailey describes himself as a keen advocate of permanent, stable and enjoyable employment, and on this he says he is not wavering. But he says encouraging employees to look at other interests and outlets they might want to explore to keep themselves busy might be an option in the future. This is something he says the practice has done several times in the past with benefits for both the practice and the employees. (Bailey gives an example where Xsite has reduced one employee’s workload to four days a week so they can study conservation on the fifth day.)
As a result, the practice has not had to make anyone redundant over the five years since lockdown, and the focus has always been: keep talent, encourage business and have a pragmatic attitude to workload in order to work up or down appropriately.
What responses can architects make?
Many practice principals have been here before, of course: the 2008 recession, Brexit, the Covid pandemic, all prompted urgent overhead cost reviews and employment concerns. It is about bridging the gap until normality returns, Bailey says. With the pandemic, for instance, there was a sense it would have a six-to-12-month impact, making it easier to plan ahead and ‘bridge the gap’.
The classic response to looming economic shock is to look within the business for areas of resilience. Resilient practices take a proactive approach to scenario planning, which makes them better prepared to respond to unexpected change or opportunity. More agile practices are able to act more quickly and decisively when faced with challenge.
“It’s looking for the component parts of the practice where you can sustain your competitive edge,” Bailey suggests. “That keeps revenues up, helping to keep employment steady, which in turn gives you the best chance of sustaining the practice through an uncertain period.”
In fact, agility is the key word – an architect’s practice must make sure it builds in mechanisms into its working processes that allows them to roll with the punches, react quickly and shift into a safer space.
He is hoping that feasibility studies will prove to be one such area for Xsite. Clients may not want to commit to investment when facing an economic shock, but will be looking at what they can do with a building or a piece of land when things recover. This can add up to a significant volume of work, he suggests.
His own prediction is that the looming uncertainty over materials’ costs and availability, such as steel, will strengthen the case for retrofit of existing buildings in city centres, at the expense of new build projects on greenfield sites.
But he warns that looking to diversify into new sectors may not be easy this time around as existing specialists will be competitive and the costs of jumping into a new market can be prohibitive.
“You can expect people to be extremely competitive in their own furrow. This is born out of direct experience.
“But this is a perfect opportunity to take a fresh look at your business model, which is probably a bit entrenched, a bit rusty, and go through it to make it fit for purpose. Look at how you can add value to the expertise you already have to gain revenue, rather than jumping unprepared into a new competitive environment.”
What is best financial practice for architects during challenging times?
Audit, tax, and consulting firm RSM UK – a RIBA Specialist Practice Consultant – also offers some suggestions for helping practices review their processes so they can be as robust as they can be going forward.
RSM’s Head of Professional and Business Services, Hywel Pegler, agrees with Bailey and says that proactive budget management is essential. This means regularly reviewing and adjusting budgets. Creating financial buffers and headroom to absorb unexpected shocks is key as this will provide flexibility to ensure that project budgets can accommodate price fluctuations, safeguarding profitability.
Continuing on the agility theme highlighted by Bailey, Pegler says that building the ability to be agile in other areas of the business is crucial, including contractual safeguards. ”Contractual safeguards, including reviewing and updating engagement letters is a sure-fire way to protect firms in an everchanging environment,” he says.
Elsewhere, maintaining strong cash flow is vital for absorbing cost increases as cash is king in challenging times (as we saw during Covid). Assessing financing options and tax savings strategies, will help firms to position themselves financially to navigate market volatility.
And one final suggestion from Pegler: proper financial reporting and compliance are essential. “Understanding the accounting implications of tariffs, including cost capitalisation (to record a cost or expense on the balance sheet for the purposes of delaying full recognition of the expense), contracts with customers, and income taxes and reporting on these accurately will help manage the impact of tariffs on operating results and liquidity,” he says.
While the long-term impact of the tariffs on project timelines, material costs and the wider economy is yet to be seen, practices can help to safeguard themselves by taking precautionary action now.
How can architects interact with clients during tricky times?
In terms of impacts to emerging or current projects, it’s also vitally important to keep engaging with current clients.
In a RIBA professional feature from 2022, Mark Kemp – Director at Launceston-based practice, PLACE Architects – spoke about client engagement in challenging times. His message was clear: when tough times bite hard, he recommends keeping in contact with clients more regularly.
“Gaps are a natural part of the design and construction process but keeping in touch with clients - even if it is just to tell them that nothing has happened since you last spoke - keeps the lines of communication open,” he recommended.
“Keeping in more regular contact may also flush out clients who are starting to waver and gives architects an early warning sign that they might not wish to proceed further with a project. This is valuable to know in itself and can prevent time being wasted.”
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Thanks to Tim Bailey, Head of Practice, Xsite Architecture; Hywel Pegler, Head of Professional and Business Services, RSM UK.
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RIBA Core Curriculum topic: Business, clients, and services.
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