Total revenue saw 17% increase in year to May 2023, but profits edged up by just 2%
UK architecture practices have staged a “spectacular” return to growth over the past two years driven by booming workloads overseas, a RIBA report has found.
Total revenue across all RIBA chartered practices surged by 17% in the 12 months to 1 May 2023 to £3.6bn in what the institute described as a “global success story” for the sector.
RIBA’s 2023 Business Benchmarking Report found income had soared across all work sectors, increasing by 28% for private housing, 25% for commercial work and 25% in health, education and the public sector.
Average revenue has grown across the board, with small and medium practices performing particularly well.
But it is a huge 43% increase in international work mostly among larger practices which has been the driver behind the sector’s recovery, which followed three years of no growth leading into and during the pandemic.
Practices which employ 100 or more staff are looking increasingly outside the UK for work and were responsible for 86% of international revenue during the survey period, with work in the EU seeing the biggest increase, followed by North America.
Practices are also gradually becoming more diverse, continuing a trend seen in past surveys. Male staff accounted for 62% of the profession, compared to 63% in the previous 12 months, while ethnic diversity is improving at a similar rate.
The report found 84% of staff were white, compared to 85% in the previous 12 months and 87% in the 12 months before that.
RIBA’s head of economic research and analysis Adrian Malleson said this year’s “remarkable” findings showed UK practices were “resilient, adaptable, and innovative”.
But while revenue has jumped, profits saw only a marginal 2% improvement on last year’s report, and fell as a percentage of revenue.
“We are not yet out of the woods,” Malleson said. “Practices still face high inflation, causing overheads to rise and eat away at profits. Increased interest rates make project financing more expensive and difficult to obtain for potential clients.
“The planning system is holding back and even halting projects, and the stagnant general economy weighs on client demand.”
The report also found that 38% of work comes from repeat business, and 24% comes from word of mouth.
RIBA head of economic research and analysis Adrian Malleson said:
“This year’s findings show a remarkable recovery. Despite the challenges faced since 2020, UK practices have once again proved to be resilient, adaptable, and innovative.
After two years of reduced income, total practice revenue has risen sharply. There has been growth across almost all sectors, prompted in part by the post-pandemic domestic ‘race for space’. And the profession continues to lead the way in the design and creation of safe, sustainable, and prosperous villages, towns, and cities.
Overseas work has increased dramatically – and Brexit doesn’t appear to be holding UK architects back from growing their commissions across the Channel, with the biggest leap in overseas work coming from the EU.
This growth in overseas work isn’t just an economic success story, it’s also testament to the profession’s global reach, its ability to adapt to different places and people, and to produce building design that resonates around the world. Architecture continues to contribute to one of the UK’s enduring successes – its creative industries.
In the face of adversity, architects have once again displayed remarkable resilience, navigating external difficulties, including the pandemic, product scarcity and high inflation. The latter has taken its toll over the past year - while revenue has skyrocketed, profits have increased only marginally.
We are not yet out of the woods. Practices still face high inflation, causing overheads to rise and eat away at profits. Increased interest rates make project financing more expensive and difficult to obtain for potential clients. The planning system is holding back and even halting projects, and the stagnant general economy weighs on client demand.
But even against this grey backdrop, practices are not gloomy about their prospects. For the first time, this year’s report gives information about expectations for the coming year. In 2023/24, on balance, revenue is expected to rise, and more staff are expected to join practice. Innovation continues, as the profession embraces new ways of working, emerging technology and working in new sectors as routes to increased profitability.
We actively monitor trends and opportunities on behalf of our members. Adaptation and innovation in the way architects conduct business will be key to maintaining resilience. We will continue to offer high quality support to all our members, helping them to thrive wherever they live or work.”