Survey of UK Construction Professional Services

Transcription

1 Survey of UK Construction Professional Services 2005/06 This survey was led and project managed by: Construction Industry Council (CIC), CIC is a partner in ConstructionSkills And jointly undertaken by: Davis Langdon Management Consulting and Experian BS

2 This research was funded by ConstructionSkills, the Sector Skills Council for Construction, and carried out by the Construction Industry Council (CIC) as lead partner.

3 Survey of UK Construction Professionals 2005/ Report Contents 1 Executive Summary... i 1.1 Headline findings... i 1.2 Structure and earnings (see Section 3, page 6)... i 1.3 Key changes since 1995/96 (see Section 8, page 26)...ii 1.4 Profile and type of work (see Sections 4 & 5, pages 12 and 17)..ii 1.5 Regional and overseas profile (see Section 6, page 19) 20)...ii 1.6 Employment (see Section 7, page 22) 23)...ii 2 Introduction Survey aims and scope Scope of the report Summary of survey sample and response Classification of Firms Analysis of Responses Structure of the CPS sector and fee income Headline findings Structure of the CPS sector Gross Fee income by type of business (2005/06) UK Fee income by size of business Fee income by type of business Profile of work by sector and discipline Headline findings Main services provided by type of firm Breakdown of services Type of work Headline findings Overall breakdown Sector of work (DTI Classifications) Type of project Regional and overseas profile of work Headline findings UK Regions Overseas Fee Income Employment Headline findings Employment profile Breakdown by type and size of business Per capita fee income Headline changes since Headline findings Fee income Trends in construction and professional activity Improvements in the performance and productivity of the CPS sector Services provided Sector and type of work Region of work Employment... 32

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5 Survey of UK Construction Professionals 2005/ Report i 1 Executive Summary 1.1 Headline findings This is the third comprehensive survey of the Construction Professional Services (CPS) sector in the UK carried out by the Construction Industry Council (CIC). The project follows earlier surveys that were conducted in 1996 and Its aim has been to assess the size of the UK market for construction professional services. The results have been based on detailed information of fee income and the services provided by construction professional services firms in the financial year 2005/06. They represent the responses of a representative sample of over 800 construction professional firms of all types and sizes. Size of market 2005/06 UK professional services firms earned a total of 13.9 billion on projects in the UK There were approximately 27,950 professional firms in the UK. UK Market shares (% of UK fee income) Engineering services accounted for 28% of all work, 3.9 billion Architecture services accounted for 24% of all work, 3.3 billion Surveying services accounted for 17% of all work, 2.3 billion Management accounted for 12% of all work, 1.7 billion. Income by type of firm Per capita fee income for professionals increased steadily by size of firm and mean per capita fee income for the smallest firms (< 200k fee income pa) is 65K per annum. Income by size of firm A small number of large firms (2%) generated almost 80% of UK fee income. Regional and Overseas Markets A third of UK fee income is earned on projects in the South East and Greater London 2.5 billion of fee income is earned by UK firms on work overseas. Employment Approximately 270,000 people were employed by construction professional firms 77% of this total were male. 1.2 Structure and earnings Approximately 27,950 professional services firms earn a total of 13.9 billion on UK construction projects. The size of the overseas market for UK CPS firms is estimated to be approximately 2.5 billion 15% of total fee income. 79% of all CPS firms operate from a single office and 84% employ less than 10 people - 28% of all firms are single person practices. 2% of firms earn over 10 million per annum and employ more than 50 people yet this small group of firms are responsible for generating 78% of all UK fee income.

6 ii Survey of UK Construction Professionals 2005/ Report Firms that describe themselves as being multidisciplinary earn almost 50% of all UK fee income and 50% of all CPS output is generated in the provision of architecture and engineering services. 1.3 Key changes since previous surveys Output of CPS firms has risen by approximately 4% (in real terms) in the four years since the last survey, which is slightly below contractors output for the same period. There has been very little change in the proportion of core services that are provided by the sector but there have been significant changes in the type and profile of firms that deliver these services with growth in the proportion of outputs from multidisciplinary firms. Residential projects have experienced the largest rise as a proportion of all work since 2001/02, accounting for 42% of all fee income an increase of 26% in the overall proportion since the last survey. Per capita fee income per professional has decreased since the time of the last survey, with a fall of 13% in real terms. This is likely to be the result of increasing staff levels. The proportion of male to female staff within each type of CPS firm has not improved significantly, 77% of all employment in the sector is male. 1.4 Profile and type of work Almost two-thirds of fee income is earned on new work (62%) with 32% being earned on refurbishment projects and the balance 6% being earned on repair and maintenance work. Fees earned on building projects (in particular offices) account for the largest proportion (43%) of fee income closely followed by fees earned on residential projects (42%). The proportion of fees earned on infrastructure projects is considerably smaller (15%). In terms of clients, 75% of fee income was generated from private sector clients (including PFI/PPP projects) with the remaining 25% coming from public sector clients. 1.5 Regional and overseas profile A third of all fee income was generated on projects in the South East of England and Greater London. Other regions with relatively large CPS inputs are the South West and Scotland. Approximately 2.5 billion of fee income was received by practices in the UK for professional services provided on overseas projects. 1.6 Employment The CPS sector employs approximately 270,000 permanent employees. On average, 77% of all employment in the sector is male. When fee income and employment are compared, engineering firms employ 17% of all staff and are responsible for 15% of all income. Architects employ 14% of the total workforce and generate 11% of fee income. Surveying practices employ 16% of staff and are responsible for 15% of all fee income.

7 Survey of UK Construction Professionals 2005/ Report 1 2 Introduction This report contains the findings of the first major survey of the UK Construction Professional Services Sector to have taken place in the last four years. It is a survey of professional services practices and firms, their outputs and activity, for the financial year 2005/06. The organisations that responded to this survey form a broad and representative cross section of the professional services sector. The results detail the findings from over 800 companies, who between them employ over 45,000 full time members of staff and generate a fee income of over 2.5 billion. The results have been used in conjunction with available population data to provide estimates on the size and output of construction professional services firms. This is a survey of firms that are in private practice and does not therefore represent the totality of professional services that contribute towards UK construction. Many construction professionals work within large contracting or client organisations and this survey does not include the inputs that such individuals contribute to UK construction activity. This is a cross sectional, snap shot, study and therefore it has not been possible to provide a longitudinal analysis of the intervening years between this and the previous survey. However, a section of this report is devoted to highlighting the key differences between the comparable results for the surveys of 1996, 2002 and those of Survey aims and scope This survey is a collaborative project involving the Construction Industry Council, their principal professional members and ConstructionSkills. The principal investigators for the research have been Davis Langdon Management Consulting (DLMC) and Experian, both consultancy practices carried out the previous research. The study s key objectives have been to: quantify the volume of outputs of the construction professional services sector in the UK provide various breakdowns of professional services output, which include: o the type of services traded by UK construction professional practices o the type of service providers and suppliers o the main elements of construction work for which professional services are traded o regional variations in the survey results identify the various service functions undertaken within each of the major professional disciplines provide data and information that is of interest to all of the major stakeholders in the project, including the CIC, its member organisations, ConstructionSkills and professional services firms themselves maximise the response rate to the survey to provide the most statistically robust results within a sampling frame of 12,924 firms. 2.2 Scope of the report Part 1 (this report) provides the analysis of responses in the main survey and highlights the main issues that arise from it. There is a summary of key findings at the start of each section

8 2 Survey of UK Construction Professionals 2005/ Report of the report, which is followed by a more detailed commentary of survey responses. Part 2 of the report documents the methodology that has been adopted for the survey. Brief explanations of the key issues that have affected the analysis have been included in this document but please refer to Part 2 for a detailed explanation of the key issues that have affected the overall analysis. 2.3 Summary of survey sample and response The results that are presented in this report are based on 801 completed questionnaires, from an original sample of 12,924 firms (a response rate of 6.2%). The research team originally set a target of 1,000 responses in order to achieve an acceptable level of accuracy when presenting the findings. While the response rate was not as high as had been sought at the outset, it falls somewhere between the response rates obtained on previous surveys, as such we believe the results as presented are statistically valid. The 2002 survey achieved 927 valid responses, from an original sample of 10,000 firms (a response rate of 9.3%). The 1996 survey achieved 824 valid responses from a sample of 15,000 firms (a response rate of 5.4%), both proved to be statistically robust for the headline issues that were covered by those studies. We believe that respondent fatigue may be a factor in the decline in response rate evident between the second and third surveys. Since the last survey there has been increasing interest in the CPS sector generally, and we are aware of a growing number of survey requests made on Construction professional service firms. Given the highly sensitive and complex levels of financial information that each respondent has had to supply, the research team are extremely thankful to all those that took part and are pleased with the overall response. One sampling source has been used for the survey, which has been provided by Experian. In carrying out initial research for the survey it was found that no comprehensive data is kept by institutional or government sources that provides a sound basis for the sampling and grossing of the CPS sector a situation that is essentially unchanged since previous surveys. The need to look outside institutional and government records therefore became an important element of our work in developing the sampling frame. In seeking a suitable source of data, the research team carried out a review of other sources. In particular the Inter Departmental Business Register (IDBR), which was used in the 1996 survey. Significant problems exist with the IDBR. These include: the lack of any personal contacts to whom the questionnaire could have been sent, risking an adverse affect on the overall response rate a classification based on high level SIC (Standard industrial classification) codes, which introduces a high risk of questionnaire redundancy because of the inability to identify true construction organisations within the sample restrictions on the data s use, when used by third parties, which would have created severe time constraints for the survey.

9 Survey of UK Construction Professionals 2005/ Report 3 Our research showed that Experian s National Business Database provided the most useful, practical and cost effective source of data in developing the sample framework, especially in relation to smaller firms, for which there was extensive coverage. The Experian National Business Database The sampling source for the survey was Experian s National Business Database, which is an amalgam of the Thomson, Yellow Pages and Companies House data covering approximately 4.2 million businesses in the UK. Our sample has been chosen from a population of approximately 28,000 organisations in 24 construction related categories in the Experian dataset. The majority of firms within the sample have been drawn from the traditional disciplines of architecture, engineering and surveying. A full breakdown of the sample structure can be found in Part 2 of this report. Selection for the sampling frame by type of firm and region was in relation to the proportion of firms in the global population, with the exception of Northern Ireland. For Northern Ireland, the size of the survey sample was boosted to the total population of firms to ensure that the minimum of 50 responses required to provide a robust analysis of the sector in Northern Ireland was received. For size of firm, the sample was biased in the direction of large firms to ensure the greatest coverage of the sector in terms of fee income and employment. 2.4 Classification of Firms The stratification of the survey sample has been based upon the type of firm, size of firm and region. This has been based on classifications, which are loosely based on SIC Minor Codes (Standard Industrial Classifications), which have been adapted, extended, or condensed to suit the format of the sampling frame. The questionnaire used fewer categories than the 24 that were used to develop the sample. For the purposes of simplicity and interpretation, the classifications have been recoded into: Architects Quantity surveyors Surveyors (other) Building services engineers Civil and structural engineers Planners (town planners) Project managers Multidisciplinary practices 2.5 Analysis of Responses Response by type of firm The survey was sent out at the beginning of November 2006, with responses requested by the end of that month. Of the 891 questionnaires that were returned by responding companies, 801 contained sufficient data to be considered valid, representing an overall response rate of 6.2%. Over 90% of those that responded provided answers for their practice as a whole with the remainder providing responses in terms of a local office. Responding firms employed some 45,432 members of staff and generated over 2.56 billion of UK fee income.

10 4 Survey of UK Construction Professionals 2005/ Report The response to the survey largely reflected the structure of the overall population by type of firm, size band of firm and region. Figure 2.1 shows the distribution of respondents by size of firm and Part 2 of this report provides a breakdown of responses, against the structure of the original population. Figure 2.1: Survey responses distribution of respondents by size of firm (DTI classifications) Percent >1200 No. employees inuk Note: Size bands relate to those used in DTI s Construction Statistics Annual, 2007 When viewed in terms of firm size, the sample displays typically, negatively skewed characteristics. The shape and relative proportions of this distribution are very similar to that for construction contracting organisations. Companies that employ less than 4 employees within the sample represent approximately 45% of all firms by number. These companies employ 1.4% of all of the employees within the sample and generate 1.2% of the fee income. While firms that employ over 300 members of staff represent approximately 2% of all firms in the sample (by number), are responsible for 75% of employment and 76% of total fee income within the sample. The unadjusted fee income data is heavily skewed towards the largest firms, with 60% of the fee income being generated by 1% of the firms. The sample has therefore been normalised with respect to fee income, to ensure that the largest firms have not unduly influenced the results. The overall fee income generated by the unadjusted sample is 2.6 billion. The adjusted, normalised sample, which forms the basis of the various fee income estimates presented in this report, accounts for some 1.5 billion of fee income. To provide a robust estimate of the actual number of firms in the sector we have deduplicated all of the records in the original population dataset, both within and between the various corporate classifications. Where the same companies have appeared in more than one of the dataset classifications (for example, as both Acoustic Engineers and Building Services Consultants) we have included them within the larger, core discipline.

11 Survey of UK Construction Professionals 2005/ Report 5 3 Structure of the CPS sector and fee income 3.1 Headline findings Firms There are approximately 27,950 firms in the CPS sector 79% of CPS firms operate from a single office 28% of CPS firms are single person practices 84% of CPS firms employ less than 10 people 45% of CPS firms earn up to 200,000 per year Only 2% of all firms earn more than 10 million per year 2% of CPS firms employ over 50 people Fee income The sector generated approximately 13.9 billion in fee income during 2005/06 Architecture and engineering services account for 52% of fee income Nearly 50% of fee income is earned by multidisciplinary firms 3.2 Structure of the CPS sector We estimate that there are now approximately 28,000 CPS firms in the UK, compared to our estimates of 23,500 firms in Our commentary relating to this change can be found in Section 8. Breakdowns of the sector by size of firm and turnover are presented in Tables 3.1 and 3.2. Table 3.1: Estimated number of CPS firms by main type and number of employees (% and no.) No. of employees >50 Total Architects Civil & structural engineers Building services engineers Other surveyors Quantity surveyors Managers Others (including planners) Total Note: Figures in italics are proportions

12 6 Survey of UK Construction Professionals 2005/ Report 79% of the respondents within the survey operate from a single office. The proportion of single office practices is highest amongst planners, at 95%, followed by architects at 90%, which compares to 50% of multi-disciplinary firms, the group exhibiting the lowest proportion of single office practices. Of the 20% of CPS firms that operate from multiple offices, 78% of these operate from four offices or less. Only 6% of these practices operate from 10 offices or more. Table 3.2: Estimated number of CPS firms by main type and fee income (% and no.) Fee income Small < 200k Medium 200k- 1m Large > 1m- 10m Largest > 10m Architects Total Civil & structural engineers Building services engineers Other surveyors Quantity surveyors Managers Others (including planners) Total Note: Figures in italics are proportions Table 3.3 below highlights the operating structure and fee income of CPS firms. The majority operate as private Limited companies, followed by sole practitioners. In terms of fee income Limited companies both public and private account for the vast majority of fee income. Indeed, while PLCs only account for 1% of firms they account for 42% of fee income as would be expected given that these are the largest firms in the sector. Also of interest is the number of sole practitioners providing construction professional services, although the fee income they generate is relatively small. Table 3.3: Operating structure of CPS firms (%) No of firms % Fee income % Partnership LLP Ltd Co PLC Sole practitioner Total

13 Survey of UK Construction Professionals 2005/ Report 7 Table 3.4 below indicates that most CPS firms have a regional or local focus to the work they undertake. 22% of CPS firms undertake work on a national basis however only a very small proportion undertake work on an international basis. In terms of fee income, firms which conduct the majority of their project work on a national basis account for almost three quarters of UK fee income, again indicating the importance of the largest firms in terms of fees earned. Table 3.4: Geographic focus of CPS firms (%) No of firms % Fee income % Local Regional National International Total Gross Fee income by type of business (2005/06) UK Fee income When subcontracting is taken into account (approximately 4% of all fee income is subcontracted data from 2002 survey) we estimate the total UK income of CPS firms during 2005/06 to be approximately 13.9 billion. This fee income is generated by the provision of the core CPS services that are shown in Figure 3.1. Engineering and architecture services dominate the profile of professional service delivery in the sector, accounting for 52% of total fee income. Planning accounts for only 10% of CPS outputs. However, it is important to note that the data only includes planning outputs that have been generated by private practices and excludes the inputs of planners working in the public sector. Figure 3.1: UK CPS fee income by type of service provided (%) Planning 10% FM & other 9% Engineering 28% Surveying 17% Management 12% Architecture 24%

14 8 Survey of UK Construction Professionals 2005/ Report The amount of fee income generated in the provision of each of these services is estimated to be: Engineering 3.9 billion Architecture 3.3 billion Management 1.7 billion Surveying 2.3 billion FM and other 1.3 billion Planning 1.4 billion Total 13.9 billion A thorough breakdown of this fee income is included in the following sections. 3.4 UK Fee income by size of business For reporting purposes we have classified firms as being small, medium, large and largest, based upon four turnover bands. These bands are based on those that were used in the previous survey and have been adjusted to allow for inflation of fee income since The four size band groups are: Small - earning less than 200k per year Medium - earning between 200k and 1 million per year Large - earning over 1 million but less than 10 million per year Largest earning equal to or more than 10 million per year Figure 3.2 details CPS fee income by size of firm. Not surprisingly, the largest firms generate the majority of all fee income. CPS firms in this category generate approximately 78% of all fee income ( 10.8 billion) and yet they account for only 2% of all firms by number (approximately 550 organisations). As the size of CPS firms increases, the geographical profile of their work widens. Firms earning less than 1 million generate the majority of their fee income on local projects or regionally (accounting for approximately 85% of all work). The data shows that the majority of the largest firms tend to operate nationally, with over 82% of their work being generated on a national portfolio of projects (refer to Section 6). Figure 3.2: UK CPS Fee income by size of business ( billion) > 10m > 1m- 10m Size of firm 200k- 1m < 200k UK fee income ( bn)

15 Survey of UK Construction Professionals 2005/ Report Fee income by type of business Estimates of fee income by type of firm Our data suggest that over 48%, or 6.6 billion, of all fee income is earned by organisations that describe themselves as being Multidisciplinary. These firms account for only 8% of all CPS organisations (by number). Other types of CPS firm account for the remaining 52% of fee income ( 7.2 billion). Engineering firms generate 15% of all fee income ( 2.1 billion) and account for 21% of all CPS organisations by number. Architectural practices account for 11% of total fee income ( 1.5 billion) whilst surveying firms account for 16% of overall output. Multidisciplinary firms do provide a broad range of services. However, in many cases one service tends to dominate the profile of firms who choose to describe themselves as multidisciplinary. The provision of any one service by such firms often exceeds 50% of total fee income but is rarely above 70%. Figure 3.3: Proportion of UK CPS fee income earned by type of firm (%) Other 3% Quantity surveying 14% Project management 6% Planning 1% Surveying 1% Architecture 11% Building services engineering 7% Civil and structural engineering 8% Management consultancy 0% Multi-disciplinary 49% Multidisciplinary practices The data support the fact that these firms do offer a wide range of services, from more than one core discipline (Figure 3.4). The dominant service offered by such firms, in terms of fee income, is engineering, which accounts for 26% of the outputs from multidisciplinary firms (approximately 1.7 billion) followed by architecture services which account for 23% (approximately 1.5 billion). The core disciplines of surveying and management generate roughly equal proportions of outputs for multidisciplinary CPS firms (between 16% and 18% each), whilst FM services and planning account for 17% of the total fee income from these firms.

16 10 Survey of UK Construction Professionals 2005/ Report Figure 3.4: CPS services provided by multidisciplinary practices (%) FM & other 6% Planning 11% Engineering 26% Management 18% Surveying 16% Architecture 23%

17 Survey of UK Construction Professionals 2005/ Report 11 4 Profile of work by sector and discipline 4.1 Headline findings Core services Engineering services generate 3.9 billion of fee income Architectural services generate 3.3 billion of fee income Surveying services generate 2.3 billion of fee income Management services generate 1.7 billion of fee income Planning services generate 1.4 billion of fee income FM and other services generate 1.3 billion of fee income Type of firm Multi-disciplinary firms provide the majority of construction professional services in all disciplines Breakdown of services 70% of all architecture is generated on traditional design Engineering services are dominated by structural, building services and civil engineering Building surveying accounts for almost one half of all surveying outputs Project management and contract administration dominate the profile of management services 4.2 Main services provided by type of firm Figure 4.1 shows the amount of fee income that is generated in the core professional services. Section 3 has shown that architecture and engineering dominate the profile of services that are provided by CPS firms in the sector - being responsible for approximately 7.2 billion (52%) of fee income annually. Surveying and management services follow with the other disciplines being somewhat smaller. Figure 4.1: UK CPS Fee income by services provided (showing grossed outputs - bn) Planning, 1.4 FM & other, 1.3 Engineering, 3.9 Surveying, 2.3 Management, 1.7 Architecture, 3.3

18 12 Survey of UK Construction Professionals 2005/ Report Table 4.1 below details UK fee income earned by type of CPS firm and the services that they provide. Table 4.1: Breakdown of core services provided by type of CPS business Percent Planning services Architecture services Engineering services Surveying services Management services FM & other services Architects Building services engineers Civil and structural engineers Multi-disciplinary Planning Project management Quantity surveyors Surveyors Total Breakdown by type of firm Table 4.1 shows that multi-disciplinary firms provide the majority of CPS services in all disciplines. Indeed, multi-disciplinary firms provide over one half of the total of architecture, engineering and FM services. This is not surprising, as the multi-disciplinary practices tend to be the largest firms, who in turn generate the majority of fees in the CPS sector as a whole. 4.3 Breakdown of services Figure 4.2 shows the proportions of individual services that fall within the core service headings, irrespective of the type of firm. These display the following main characteristics Architecture The field of architecture is dominated by the architectural design of buildings. This may not seem surprising and architecture shows the least amount of spread between its various subdisciplines. Approximately 70% of all architecture outputs are in the architecture and design category, accounting for approximately 2.31 billion of fee income annually. 11% of architectural fee income is generated by the provision of architectural technology services (approximately 360 million) with other services being somewhat smaller Engineering Engineering displays a relatively even spread of outputs between the various sub-disciplines that make up this service category. The three largest fee-earning categories are structural engineering (34% / 1.33 billion), building services (26% / 1.01 billion) and civil engineering (18% / 700 million). Fire engineering and waste management engineering are responsible for the smallest proportions of engineering related income, at 1.2% and 1.6% respectively. Dedicated environmental and sustainability projects account for approximately 6% of engineering fee income ( 230 million).

19 Survey of UK Construction Professionals 2005/ Report Surveying Quantity surveying accounts for almost half (46%) of all surveying outputs (approximately 1.06 billion), followed by building surveying which accounts for over a third of all surveying outputs, equating to 805 million of fee income. Other surveying service are considerably smaller although surveying outputs dedicated to environmental or sustainability projects exhibit the highest proportion amongst all of the core service categories Management and legal services This is the broadest category, containing 13 sub-categories of management service. Eight of these sub categories (which include risk, financial, quality control and environmental management) do not exceed 4% of total fee income generated within this core service. Project management (29%), contract administration (17%) and on site supervision (16%) dominate the profile being responsible for 63% of all management outputs ( 1.05 billion) Planning services Planning services are dominated by the provision of planning applications, appeals and inquiries output. These services account for 62% of planning fee income (approximately 868 million). In addition, a significant proportion of planning income (15% / 210 million) is generated in project feasibility Facilities management and other services Overall, facilities management and related services generate the lowest proportion of fee income in the CPS sector, accounting for 1.3 billion. Within this classification facilities management (48%) and conservation (35%) provide the largest share of output.

20 14 Survey of UK Construction Professionals 2005/ Report Figure 4.2: Breakdown of professional services provided by sub-discipline (%) Planning Project feasibility Site appraisal Transport planning Planning applications Urban/regional studies Environmental studies Proportion of total planning services % Engineering Waste management Environmental Water management Building services Civil Highways Fire Structural Geotechnical Proportion of total engineering services Architecture Technology Environmental Interior design Space planning Architectural design Landscape Urban design Proportion of total architecture services

21 Survey of UK Construction Professionals 2005/ Report 15 Environmental advice Building surveying Quantity surveying Land surveying Proportion of total surveying services Management Dispute resolution Environmental On-site supervision Contract administration Contract negotiation Health & safety CDM Quality control Project Financial Risk Value engineering Strategic Proportion of total management services % FM & other Conservation Research & development Property management Facilities management Proportion of total FM & other services %

22 16 Survey of UK Construction Professionals 2005/ Report 5 Type of work 5.1 Headline findings Type of work New work accounts for 62% of fee income billion Refurbishment accounts for 32% of fee income billion Repair and Maintenance (RMI) accounts for 6% of fee income billion Residential accounts for 42% of CPS fee income billion Building accounts for 43% of CPS fee income billion Infrastructure accounts for 15% of CPS fee income billion Private work accounts for 75% of CPS fee income billion Public work accounts for 25% of CPS fee income billion 5.2 Overall breakdown There are various ways in which the actual types of project on which CPS firms become engaged can be broken down. Typically these include: breakdowns by new work, repair and refurbishment breakdowns by public or private modes of procurement broad classifications of work (such as those used in the DTI Housing and Construction Statistics) breakdowns by type of project. All four of these classification types have been addressed in this survey and are described in this section New work, repair and refurbishment Figure 5.1: UK CPS Fee income by type of work (%) Repair & maintenance 6% Refurbishment 32% New construction 62%

23 Survey of UK Construction Professionals 2005/ Report 17 Figure 5.1 shows that the profile of CPS firms is dominated by their inputs to new construction, with approximately 8.7 billion (approximately 62%) being devoted to this category. Repair, maintenance and improvement (RMI) accounts for only 6% of CPS fee income, whilst refurbishment projects account for the remainder (32%). Collectively these two categories generate just over 5 billion of income for the sector. 5.3 Sector of work (DTI Classifications) When broken down by broad categories of work, the majority of CPS fee income is generated in the following proportions. Residential 42%, or 5.8 billion Building 43%, or 6.0 billion Infrastructure 15%, or 2.1 billion The classifications of work by type can also be considered in terms of their broad procurement category. The breakdown of CPS inputs to Private or Public projects is as follows: Private 75%, or 10.5 billion Public 25%, or 3.4 billion 5.4 Type of project Within each broad type of work there are specific building or project types on which professional services are employed. In residential projects this includes conventional housing units (terraced, semi-detached and detached), refurbishments and the construction of purpose built apartment blocks. The 2006 CPS survey asked respondents to provide details on the specific types of building to which they provide services. The numbers of respondents in each element of the analysis are not as high as in other areas of the survey. The results are therefore not as statistically robust as those that have been presented elsewhere in this report but we include them here, as we believe that they provide a useful indication as to the inputs that the CPS sector provides to specific types of work CPS inputs to building projects The data suggests that CPS firms provide the following inputs to various types of building projects (as a proportion of all building work): Offices 24%, or 1.45 billion Retail outlets 12%, or 0.75 billion Leisure facilities 11%, or 0.64 billion Educational buildings 16%, or 0.96 billion Healthcare facilities 9%, or 0.53 billion Factories and warehouses 14%, or 0.82 billion Other buildings 14%, or 0.85 billion The majority of CPS fee income earned on building projects comes from services provided in office construction, followed closely by fees earned on educational buildings and factories and warehouses. The proportion of fees earned on other building projects is somewhat smaller.

24 18 Survey of UK Construction Professionals 2005/ Report CPS inputs to infrastructure projects The professional inputs to infrastructure projects, as a proportion of all infrastructure work, is described below: Rail projects 10%, or 0.20 billion Road projects 30%, or 0.64 billion Port projects 2.1%, or 0.04 billion Airports 6% or 0.13 billion Energy projects 11% or 0.22 billion Cable projects 5% or 0.11 billion Water projects 22% or 0.46 billion Other infrastructure 14% or 0.30 billion The majority of CPS fee income earned on infrastructure projects comes from services provided in road construction, followed by fees earned on water and sewerage projects. The proportion of fees earned on other infrastructure projects is somewhat smaller.

25 Survey of UK Construction Professionals 2005/ Report 19 6 Regional and overseas profile of work 6.1 Headline findings Level of fee income A third of all CPS fee income is generated on projects in the South East and Greater London Other regions of note are the South West and Scotland A greater proportion of fee income is earned on new build projects in the South East and Greater London than any other regions in the UK Overseas fee income 6.2 UK Regions Overseas fee income of UK CPS firms (remitted back to offices in the UK) is approximately 2.5 billion Figure 6.1: UK CPS fee income by Government Office Region (%) Wales 4% Scotland 10% Northern Ireland 7% North East 3% Yorkshire & Humber 5% East Midlands 6% East of England 7% North West 8% South East 20% West Midlands 7% South West 10% Greater London 13% Firms have been asked to allocate their fee income to the regions where their relevant projects were located, as opposed to the location of their corporate offices. The distribution of this fee income is shown in Figure 6.1. The largest proportion of UK professional fee income is earned on projects in the South East and Greater London. We estimate the gross levels of fee income generated in each region of the UK to be: North East 0.36 billion Yorkshire & Humber billion East Midlands billion East of England billion South East billion

26 20 Survey of UK Construction Professionals 2005/ Report Greater London billion South West billion West Midlands billion North West billion Wales billion Scotland billion Northern Ireland 0.97 billion Breakdowns by region Projects in Greater London and the rest of the South East are responsible for 33% of CPS fee income. This is no surprise given that these two regions account for the bulk of the UK s population and in turn construction spending. The regional pattern of fee income is broadly in line with contractor s output in the same period, in that a large proportion of all income is generated in Greater London and the South East. Indeed, contractors output in these regions accounted for 33% of all work in Other regions of note, where CPS output exceeds 1 billion, are Scotland, the South West and the North West of England. 6.3 Overseas Fee Income Profile of overseas fee income When the figures are grossed up, using a similar methodology to that used in the estimate of UK fee income, overseas fee income is estimated to be approximately 2.5 billion. This represents approximately 15% of total fee income of UK CPS firms, a similar proportion to that reported in the 1995/96 survey but significantly higher than that reported in the 2001/02 survey. However, the data presented above has to be interpreted carefully, as the survey returns only reflect fee income that has been remitted back to offices in the UK. Furthermore, we believe that: information on overseas fee income could have been very difficult to obtain for many respondents. there are significant problems in finding a suitable coefficient for fee income inflation when comparing 2005, 2002 and 1996 overseas fee income levels Profile of overseas fee income by type of firm and service Table 6.1 below indicates that even the smallest CPS firms undertake some work overseas, as would be expected there appears to be a very strong relationship between the size of firm and the propensity to work overseas.

27 Survey of UK Construction Professionals 2005/ Report 21 Table 6.1: Size of CPS firms and propensity for overseas work (%) Yes % No % Small Medium Large Largest The largest proportion (49%) of CPS firms that undertake work overseas have one overseas office, 76% have less than five offices overseas. In terms of the type of CPS business that operates overseas, the largest proportion is within engineering firms, in particular building services engineering with almost 50% of firms undertaking some work overseas.

28 22 Survey of UK Construction Professionals 2005/ Report 7 Employment 7.1 Headline findings Profile of employment The CPS sector employs approximately 270,000 employees 77% of all employment in the sector is male Engineering firms generate 15% of income and employ 17% of all staff Architectural firms generate 11% of income and employ 14% of all staff Surveying firms generate 15% of income and employ 16% of all staff Multi-disciplinary firms generate 48% of income and employ 41 % of all staff Professional per capita fee income rises steadily by size of firm 7.2 Employment profile The total number of staff permanently employed by UK CPS firms in the UK, excluding subcontractors is estimated at approximately 270,000. Figure 7.1: Profile of professional employment by CPS discipline (%) Tow n planning professionals 2% Legal/business professionals 1% Administrators 12% Other construction professionals 6% Architects 7% Architectural technologists 4% Building services engineers 9% Contract & project managers 6% Business managers 6% Civil engineers 17% Scientists 2% Quantity surveyors 7% Building surveyors 2% Other engineers 12% Technicians 7%

29 Survey of UK Construction Professionals 2005/ Report 23 Figure 7.1 above indicates the professional staff profile of CPS firms in the UK. Engineering staff dominate CPS employment in the UK and account for 38% of professional employment. Civil engineers exhibit the largest proportion (17%) which represents approximately 45,000 fully qualified professional members of staff. Other engineers (i.e. structural) are the next largest category representing almost 30,000 members of staff. 7.3 Breakdown by type and size of business Male and female employment We estimate that of the total number of UK staff employed by CPS firms in the 2005/06 survey 77% are male. The dominance of males within each profession means that the proportion of male/female employment is relatively constant within each of the professions. The data show an exceptionally high proportion of male employment generally, which in most types of firm and discipline is not dissimilar to the rest of the construction sector. Employment in contracting is currently approximately 90% male (according to the most recent Labour Force Survey estimates) and within the construction operative trades male employment is currently above 95% Profile of employment by type and size of firm The profile of total employment, by firm s main activity, is estimated to be in the proportions indicated in Figure 7.2. Figure 7.2: Profile of employment by CPS firms main activity (%) FM & other Planning 4% Management 3% 5% Architecture 14% Engineering 17% Multi-disciplinary 41% Surveying 16%

30 24 Survey of UK Construction Professionals 2005/ Report Figure 7.2 indicates that multi-disciplinary firms employ the highest proportion of professional staff as would be expected given their share of total output. 80% of all professional employment is in the largest firms, which earn more than 10 million per annum. 7.4 Per capita fee income Overall, we estimate that the average per-capita fee income of the CPS industry in 2005/06 is in the region of 51,500. However, as would be expected this measure varies with the size and type of firm. Data in Figure 7.3 indicates that the mean per capita fee income in the smallest firms (fee income less than 200,000 pa), is some 65,411. Generally fee income per capita increases with the size of firm measured in terms of fee income. The overall profile of per capita fee income per professional is at its highest in engineering and multi-disciplinary practices. There is a level of consistency in the per capita fee income profile of these main types of firm, with the exception of architects and surveying practices, who appear to earn significantly less than the other disciplines, per member of staff, in the larger firms and practices. Figure 7.3: CPS Per-capita fee income by type and size of firm ( ) Per capita fee income - permanent staff ( ) Architecture Engineering Surveying Multi-disciplinary Small Medium Large Largest

31 Survey of UK Construction Professionals 2005/ Report 25 8 Headline changes since Headline findings Fee income, growth and performance CPS fee income has risen by 4% in real terms since 2001/02 Rate of income growth is below that of contractors output for the same period Growth in the professional services has been consistent since 2002 Services provided There has been very little change in the overall proportion of services provided by the CPS sector The proportion of work undertaken by multi-disciplinary firms has increased and now accounts for almost one half of total CPS output The overall profile of output by broad size of firm has changed little but there has been a substantial rise in the amount of output generated by the largest firms Type of work Fee income on new work has increased by 3%, whilst fee income earned on RMI work has decreased by the same amount as a proportion of all work Residential projects have seen the largest rise and now account for 42% of all fee income Offices have seen substantial growth in non-residential building projects Roads have seen substantial growth in infrastructure projects Employment 8.2 Fee income Per capita fee income has decreased by approximately 13% in real terms since the last survey The proportion of male to female staff has not improved significantly since the 2001/02 survey, although the results indicate a consistent increase in the numbers of female staff in the CPS sector Headline changes We estimate that output of the construction professional sector has risen by approximately 4% in real terms since 2001/02, from 13.4 billion to 13.9 billion. Our estimates of fee income are based on a total population of 27,950 CPS firms, compared to our estimate of approximately 23,500 firms in the 2001/02 survey (refer to notes on population size below). At the time of the last survey we estimated CPS output to be 18% of UK contractors output. This proportion has remained constant at 18% in 2005/06. The level of growth in fee income (+4%) is below growth in contractors output, as reported in the DTI s Construction Statistics Annual (2007). This has increased by approximately 13% in the same period. However, it is consistent with the overall growth in output from firms that are in the same peer group and whose output is measured by the ONS (Office of National Statistics) as part

32 26 Survey of UK Construction Professionals 2005/ Report of the Real Estate and Associated Business Services sector - Section K of the Annual Business Inquiry (ABI) Key factors in the interpretation of results Estimates of the change in absolute levels of fee income in the CPS sector are inherently difficult to make and caution should be taken when interpreting the results. For example, such estimates are not as reliable as measuring the relative changes between specific variables in the surveys, such as breakdowns of service provision or employment. However, we are confident that the overall magnitude of the increase is correct and that it represents some improvement in the growth of fee income since the time of the last survey. Difficulties in making such comparisons arise because of: the lack of reliable and longitudinal data on the performance of the CPS sector in the intervening period the different populations that have been used as a basis for the surveys difficulties in finding and applying an appropriate measure of fee income inflation. In addressing these three fundamental issues we have firstly used the All industries implied deflator for Gross Domestic Product at market prices to inflate the estimates of UK fee income of CPS firms from the 1995/96 and 2001/02 surveys to 2005 prices. There are no definitive statistics for the actual inflation of professional fees during this period, but we believe that the all industries implied deflator is the most reliable when compared to other available measures such as the Tender Price Index which is not wholly relevant to professional services. Secondly, we estimate that at least 10% of the firms who have been surveyed in 2006 would not have been included in the 1995/96 population or sample because of the wider and more selective sampling processes that have been employed since that survey. An adjustment has therefore been made to further inflate the 1995/96 estimates to account for the output of firms that would not have been included in that survey. Finally, we have referenced data supplied by the ONS on the output and employment of firms within Section K of the ABI to ensure that our methodology does not produce results that could not possibly be supported in robust observations of the wider economy. 8.3 Trends in construction and professional activity There is no specific data on the output of the CPS sector since the time of the last survey. However, it is useful to review the trend in outputs and employment for the wider construction sector, as it may be assumed that trends in the development of the CPS sector will have shared much in common with the wider construction economy. Construction output has grown by 11% in real terms between 2001 and 2005, and by 43% in current prices. After the recession of the early 1990s, when construction output reached it lowest point in 1993, it rose in 1994, but fell back slightly in Thus the 1995/96 survey took place at a point that is now considered to be the start of the last growth cycle in construction which peaked in Indeed, 2005 saw the first decline in construction output for a decade. Thus the 2001/02 survey took place during a period of sustained growth, while the most recent survey has been undertaken during a period of a decline in construction output. This trend can be seen in Figure 8.1 below.