“....a stroppy little Island of mixed up people..”*
30 Jun 2016
Well, here we are in a boat, navigating a storm with no paddles, a scenario we considered in the last blog but genuinely did not imagine would come to pass.
In fact very few people would have predicted the result of the referendum, and no one seems to know what the decision actually means. It is an issue that has not only split both the Conservative and Labour parties, it has opened a huge crack in the very fabric or our society, divided generations and set families at war.
The world has a very different view of the British now. Whilst they may have been willing to forgive the behaviour of the England football fans in France a week or so ago, as race crime escalates and Farage parades around Brussels, I suspect that they now think that it is fairly representative of our national characteristic. All in all a thoroughly depressing and culturally humiliating state of affairs.
It is quite extraordinary that neither Leave nor Remain had prepared a plan to deal with an exit vote. It will be 3 months before we have a new Prime Minister, it will take 3 to 6 months for the new cabinet to work out a strategy, and we may even have a General Election in that period, possibly a way to give the electorate an opportunity to vote on the issue again.
Brexit was something that we discussed at Director level before the vote, but in truth none of us at Stiff +Trevillion imagined that the UK (England and Wales in fact) would vote out. The consequences for architects will be significant. It is likely that there will be a recession in our industry as property values fall, developers pause to take stock, and projects are put on hold. We had already noticed a marked slow down in 2016, and we will be monitoring our fee forecasts and debtors lists very closely in the coming weeks. Our profession is always one of the first to feel the pain.
There will of course be some positives, a weak pound will attract investment, deals will be done, and a lot of developers and funds are cash rich, they will snap up some bargains. We are in effect moving from a development market to an investment market, so the type of work architects will be doing will change, but even this will take time, uncertainty is the enemy of development. It is difficult to imagine that house building will stop, people need homes, but the viability of using the private sector to provide social housing will be challenging.
I worry for the younger practices. I feel that this is bigger than 2008, more akin to 1989 when the phone stopped ringing and the workload dried up, that was the first recession we went through as a practice and it was very painful. So based on that experience what practically should we do?
- Monitor fee forecasts daily
- Chase overdue payments hard
- Reign in expenditure and cut costs
- Keep an eye on how much non-fee generating work you do
Understand your market:
- Ignore the hysteria and look at the facts
- Speak to your clients, other professionals and form an opinion based on the markets you operate in
- Be decisive and prepare to make tough decisions
It is all very sad, I hope that I am wrong but I think that this time, as it was in the early 1990’s, it may take us years to recover and rebuild the industry. That was when many of us went to Europe to find the work that kept us going as the UK economy struggled. Will we be able to do that again?
* Damon Albarn – Three Changes 2007