International work by UK chartered architecture practices jumped by 43% last year, accounting for over a fifth of all revenue and providing a buffer against domestic market volatility
The latest RIBA Benchmarking report shows revenue generated by RIBA chartered practices from international work hit new heights, leaping 43 per cent in 2023 to hit £750 million for the year. This jump will be welcome after it gently dipped following the pandemic.
Overseas work now accounts for 21 per cent of the total revenue generated by UK chartered architectural practices. Such a high share is good news for architects. Not only does it provide more revenue, it also provides a buffer against the characteristic volatility and uncertainty of construction activity within the home market.
Architects, along with most people, will be craving more stability after exceptional levels of economic, social and political turmoil in recent years. A higher share of overseas work should, hopefully, provide a little more certainty. It also should boost the confidence and reputation of UK architecture services.
Over the past 15 to 20 years, the activity of UK-based architects overseas has expanded rapidly, as we can see in Chart 1 (below). This data, from the Office for National Statistics (ONS), only runs up to 2022 and may not directly correlate with that derived for the RIBA Benchmarking. But while timings and definitions may vary, both paint a positive picture.
It is important to note that overseas work can be done across multiple global offices and businesses. This means trade may pass back and forth across national boundaries. The spike in both imports and exports in the ONS data for 2021, as seen in the chart, may well reflect this issue, while the RIBA figures provided by practices may have netted out this effect. What is important for the sector is that the balance of trade has turned upward after a slump and is once again showing strong growth.
This impressive performance over the years is helping to cement the UK’s place as the biggest global player in exporting architectural services. The latest data available from the World Trade Organisation (WTO) suggests the UK tops the international table for exports of architectural services.
Using the WTO data, Chart 2 (below) shows the average share of global exports of architectural services from the UK and the US over a moving five-year period. It clearly shows how the UK has grown in stature in the international market for architectural services compared with the US, which for many decades was a dominant presence on the global scene.
Returning to the Benchmarking data, it will also please many that the recent surge in activity within the EU suggests, at least to date, that Brexit has not undermined opportunities for work on the continent.
While WTO data up to 2022 shows that the EU is a big market for UK architectural services, over the period 2018 to 2022 the largest markets were China and Saudi Arabia. The country-by-country rankings (Chart 3, below) show North America was also a strong spot for UK architectural activity, with the USA and Canada in third and fourth place respectively. Unsurprisingly, given its proximity, Ireland was also a big market, while the Russian market has fallen away because of sanctions restricting activity.
One factor that may be strengthening the UK’s position in the global architecture market is the rise over the past two decades of multidisciplinary UK-based arms of internationally focused, integrated consultancies of engineers, surveyors, designers and advisers. Some are foreign-owned, some not, but they have a very strong presence in London, which is growing as an international hub for professionals working in the built environment.
Data from the ONS Business Register and Employment Survey shows an expanding number of employees within businesses delivering architectural services, rising from 78,000 in 2015 to 95,000 in 2022. But within this sector, London is expanding faster. The figures suggest it now accounts for more than 43 per cent of those employed in the architectural services sector across Great Britain, compared with less than 39 per cent in 2015.
Being big does tend to carry weight in international markets. As the Benchmarking report notes, most overseas work (83 per cent in 2023) is carried out by larger (+100 staff) practices. However, the growing presence of large UK-based operations on the international built environment scene will smooth the path for smaller and often more specialist practices to enter overseas markets.
Whatever the causes, the net effect on the UK economy is positive. Chart 4 (below) shows the surge in work taken on across the broader sector, which will include the likes of civil engineers. These ONS figures for economic activity across the wider architectural and engineering sector show strong growth following the pandemic. The impact of more overseas work will be reflected in the figures.
Looking to the future, there is little doubt that the fallout from the pandemic and the Russia-Ukraine war has unsettled international construction markets. The impact on costs alone sent shudders through the global construction market with inflation in key commodities testing the viability of some projects. The sharp rise in interest rates prompted by rising inflation inevitably caused pause for thought within the development community and will have seen many plans put on ice.
However, Turner & Townsend’s 2024 International Construction Market Survey suggests a brighter economic outlook than might have been expected, which should prompt more confidence among investors. The world economy is expected to grow gently if unspectacularly over the next few years. But importantly, interest rates are expected to steadily fall across most developed and key emerging economies. This should support if not spur investment in new projects.
But looking across the markets covered by Turner & Townsend, the general picture is one of markets that are currently warm or lukewarm. This is a far cry from the 2019 report when 18 out of the 64 markets covered were deemed hot or overheating. Nevertheless, optimism remains. Most markets in Asia and Africa appear to be either stable or improving. Europe, however, appears from Turner & Townsend’s perspective the weakest, with most markets expected to cool. North America should broadly hold its pace.
On the upside, the words from the International Monetary Fund that the global economy has been ‘surprisingly resilient’ will help to build confidence among international investors in the built environment.