Practice chiefs warn economy must be kept afloat at all costs
Much bolder action is needed by the Treasury to keep the UK’s construction industry afloat, leading architects are warning.
Quantitative easing of the kind used for banks in the 2008 financial crisis, business rate holidays and delays on tax payments will be required to stop good firms going under, they warned.
In yesterday’s teatime update the chancellor announced a £330bn loan fund for struggling businesses that architects will be able to apply to, but he stopped well short of the measures industry leaders were hoping to see.
Former RIBA president Jack Pringle, London principal of global architecture giant Perkins & Will, said what the architecture sector – and the economy in general – required was a form of quantitative easing of the kind used for banks in the 2008 financial crisis to prevent good businesses from going under.
“The crisis is going to cost hundreds of billions of pounds, but the key thing is to keep the economy going,” he said. “If we don’t, really good companies will go to the wall. Now is the time for bold actions.
“I don’t think there’s much you can do with interest rates. I think [French president] Macron has been much more proactive in approving support for business. The government has to get on and give business confidence that they are going to be helped out of trouble. Everyone needs confidence that they’re going to make it through; everyone in the chain,” he said.
Everyone needs confidence that they’re going to make it through; everyone in the chain
Jack Pringle, Perkins & Will
“They found a mechanism to do it for the banks and now they need to do it for other companies. It might be underwriting loans, but a formula has to be found. Every country in the world is going to be printing money.”
Brendan Kilpatrick, senior partner at PRP, which has about 270 staff in four offices, said a delay on tax payments and a business rates holiday “could be the lifeline practices need”.
Speaking to Building Design before the chancellor’s speech, he said: “Things like that will allow a business to get through the next 3-6 months and emerge intact, which is what the government and all of us want.”
He echoed Pringle’s views on confidence, saying: “My message to clients is, collectively we need to do our damnedest to carry on business as usual so we emerge on the other side with not too much damage.
We need to do our damnedest to carry on business as usual so we emerge on the other side with not too much damage
Brendan Kilpatrick, PRP
“I like to think we are reasonably well managed but we are so dependent on our clients keeping the wheels oiled. Architecture depends on cash. That will be one of our biggest concerns.”
He said he had begun texting clients and that he and his fellow partners would be making phone calls in the next few days. Encouragingly, he said, PRP had taken calls about new projects even this week.
“We are almost 100% busy at the moment and have enough work to keep us busy until the end of April,” he said. “But if clients are not trying to carry on in the way we are there will be a logjam some way ahead.”
He warned the practice could face a drop in turnover of as much as 40%. But, he added: “It may be that in a few weeks we get used to this crisis and begin to find ways of working round it. I’m reasonably confident that will happen, so my optimistic side says we may instead be negatively affected by 20% of turnover.”
The other “big threat” facing architects was site closures, he said.
“That’s a big concern, that closures or delays to the programme because of shortages of materials may happen from Easter onwards. It all depends on how bad it gets. We’re not hearing anything like that yet but it’s relatively early days for the UK.
“We have a huge single-phase PRS scheme, Cherry Park, on site at Westfield in Stratford. We have 18-20 people working on that project so if that site closes it will have an impact on business.”
He warned the practice could face a drop in turnover of as much as 40%
Asked about possible redundancies among practices down the line, he said: “That will be challenging. I think that will depend. We would have to take a view from our client on a large site like that. Is it a two-week stop because someone has contracted coronavirus and it’s merely precautionary? We can easily bridge that gap.
“But China’s construction sites across the entire country stopped. That would have serious effect on UK PLC let alone PRP LLP.
“It’s bound to have an effect on some firms. Some larger sites will stop, placing a serious challenge on the need to save jobs within architectural practices.”
Last week Darling Associates announced nine redundancies which it blamed on a downturn in overall workloads and early coronavirus impacts, with staff self-isolating.
Kilpatrick said his other key concern was operational: the resilience of IT systems and the ability to maintain and monitor productivity once 90% of its staff were working from home, a situation it was expecting from today. A skeleton staff will be keeping the London office open, he said.
Finally, he said the practice was dependent on the willingness of planning departments and others to hold pre-app meetings.
Some larger sites will stop, placing a serious challenge on the need to save jobs within architectural practices
Brendan Kilpatrick, PRP
“We’ve already encountered a variation in attitude from one local authority to another about external meetings,” he said.
One council outside London was not happy to host visitors, while another in south London was hosting a PRP team only yesterday morning, he said.
Both Kilpatrick and Pringle said they had confidence in their practice’s remote working procedures.
But Pringle said: “I know for a fact that it’s not always the case with other practices and other firms.”
Medium-sized practices that relied on office-based computer systems might be worst-affected because they were “anchored to their desks”, while staff at bigger firms and small operations were more agile, he said.
Meanwhile he was reluctant to name sectors that might be more vulnerable than others, although he predicted that one consequence of covid-19 was likely to be increased investment in healthcare infrastructure.
“How you fare depends on whether the contracts are let,” he said. “Keeping the design process going, serving our clients and encouraging them to keep going are things we can do.” However he accepted that site visits would be “difficult”.