Architects’ fees up - and so are retentions - The BESA
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Monday, November 2, 2015

Architects’ fees up - and so are retentions

Malcolm Thomson, BESA President

There was a painful irony in the emergence of two key statistics last week: Architects fees have risen to their highest level since 2000; while specialist contractors have lost out on £30m worth of retentions this year.

Average hourly rates for architects are up by 7% compared with a year ago, according to The Fees Bureau, who research such things and reported that the surge in private housing activity was fuelling the increase. For senior staff, the rates were up by 20% to £90 an hour.

The Royal Institute of British Architects (RIBA) said many of its members were now able to negotiate better fee levels due to “a supply-and-demand effect as the spare capacity in the profession decreases”.

Undercutting

It also said there was evidence that the “aggressive undercutting” seen during the recession was at an end with ‘sole principals’ enjoying a rise from £59 to £75 per hour this year.

While all this happy news was emerging for architects, the Specialist Engineering Contractors’ (SEC) Group released figures that suggested life was tougher than ever for many small building engineering firms because of the ongoing scourge of payment retentions.

An estimated £30m of small firms’ money has gone west in retained payments already this year with public sector clients among the worst culprits.  It has become common practice for many local authorities to hang onto specialist contractors’ money in order to fund other projects with retentions – often as much as 10% of the invoiced amount – regularly withheld until four years after the project is completed.

In any other walk of life this would be a huge scandal with lurid headlines proclaiming fraud and theft. In construction, it seems it is accepted as a fact of life with small companies expected to act as bankers to much larger organisations.

Threatening

The Business Secretary Sajid Javid told SEC Group he was aware of the problem, but that there were “no plans” for legislation to tackle an issue that is threatening the very existence of thousands of small UK businesses. Instead, he said, the government would “continue to work with our stakeholders to promote fair payment in construction”.

This is completely unacceptable and a massive betrayal of small business. Also, Mr Javid seems to be missing the point that if many more specialist firms go under, the government will simply be unable to deliver on many of its ambitious infrastructure plans. It won’t have the skills or resources available.

Yet, there is a solution, which the SEC Group, of which B&ES is a member, has been proposing for years. This is for retention money to be placed ‘in trust’ so it cannot be unfairly withheld and can be released in the event of an insolvency upstream that could threaten the whole supply chain.

Transparency

B&ES has also been lobbying for digital online payment to be imposed across construction to improve transparency and ease the flow of money through the supply chain. Both initiatives have received glowing words of support from government ministers and other interested parties and are starting to gain traction across the sector. However, some legislative teeth could seal the deal.

I am genuinely delighted for architects that they are starting to see the fruits of their hard labour and are enjoying better times. Good for them. Would that the same glow of prosperity could be spread to the ranks of building engineering contractors.

These two key financial statistics emerged at almost exactly the same time the government’s new Enterprise Bill was being debated in the House of Commons. Surely, this is the ideal opportunity to embed fair payment practices in our country’s legal system and secure the future of many hard working businesses whose skills are crucial to our future economic and social well-being?

It is not as if we are asking for anything more than we deserve. Small firms need to be paid fairly and on time – something businesses in other sectors take for granted.

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