黑洞社区

Gardiner & Theobald鈥檚 decision to close a number of UK regional offices, as revealed in 黑洞社区 two weeks ago, highlights a growing geographical divide in the industry. More than ever, construction is split into a two-speed economy: while London is seeing skyscrapers - not least the Shard - take shape and streets dug up to make way for Crossrail, the life has all but drained from the wider UK market. And for consultants, who sit at the front end of projects, often with little visibility of their forward pipelines of work, the issue is even more acute.

And Gardiner & Theobald (G&T), of course, is not the only one to notice. Steve McGuckin UK managing director of Turner & Townsend (T&T), which has nine English offices as well as three in Scotland and one in Belfast, says: 鈥淚 travel around the UK a lot and you can see what鈥檚 happening. In Manchester and Liverpool, you will still see people driving around the centre in Porsches, but off the beaten track it is certainly not like that.鈥�

According to Experian Economics鈥� most recent report on construction in July, new work output in the first quarter of 2012 fell across nine of 11 regions in England, Scotland, and Wales. The exceptions were Greater London, which grew by some 9%, and the South-east (+0.9%). Experian recorded particularly severe, double-digit declines in new work output in Wales (-17%), the West Midlands (-14%), Scotland (-13%) and the North-west (-11%).

So the question is, should consultants decide that enough is enough and close underperforming regional branches, or is it worth finding imaginative ways to keep the fires the burning outside the capital for when the market finally does return?

Shutting up shop

Consultants are responding to the skewed state of the UK market in a variety of ways. Some will decide to close offices. Hence G&T鈥檚 decision to 鈥渁malgamate鈥� its Cardiff office with its Bristol branch, and its Birmingham with its Oxford office. This restructure of the regional business, which was responsible for a quarter of G&T鈥檚 拢110m turnover in 2011, is intended to concentrate resources on infrastructure and overseas markets (see 鈥淔ollowing the work鈥�, below). Tony Burton, a senior partner at G&T, says: 鈥淲e have always adjusted the business model to the opportunities in the markets in which we operate. Sometimes that means closing an office, right-sizing and amalgamating offices or sometimes it means exploring new sectors or services.鈥�
Gleeds, meanwhile, is in the process of closing its Gloucester office. Richard Steer, chairman of Gleeds, which got 75% of its 拢74.4m 2011 turnover from the UK, says: 鈥淵ou have to respond to the depths of the recession and if that means closing an office, so be it. But we are transferring [most] of our 12 Gloucester staff to Bristol, from where we鈥檒l maintain a presence in Gloucester.鈥�

At T&T, which drew 46% of its 拢275m 2011/12 turnover from the UK according to its last annual report and where turnover is roughly split between London and the rest of the country, 鈥渃onsolidation鈥� of regional offices is not planned, McGuckin says. However, he says he understands why closing a branch may be necessary at times for some firms.

鈥淚f an office has not made any money for two years but you think it鈥檚 going to turn around in another year you are kidding yourself. One the hardest things in life is to recognise reality, accept it and act on it. But as a businessman you鈥檝e got to.鈥�

Indeed, McGuckin says T&T鈥檚 regional offices are under constant scrutiny. 鈥淲hen a lease on an office is up we take a view on whether we need somewhere smaller, bigger or to close. Our lease breaks all fall at different times so we are reviewing offices on a close to quarterly basis.鈥�

Yet he is sympathetic to anyone reluctant to shut an office. 鈥淚t breaks your heart to lose capacity you have built up over 10 years.鈥� Exiting a region will also leave consultants at a disadvantage if work picks up. 鈥淚f you鈥檙e not there during the recovery, clearly you will miss out,鈥� he says.

Operating from the regions allows us to be more competitive in the London market

David Stevenson, Edmond Shipway

It is also possible that an office closure could lead a consultant to miss out on work happening now - scant as it may be. At Mott MacDonald, for whom London made up 50% of its 拢337m 2011/12 UK turnover, Guy Leonard, regional managing director, Europe, UK and Africa, says: 鈥淚s it important to keep offices in the regions? Absolutely. Some clients don鈥檛 mind where you do the work but many do - you鈥檒l struggle to win work in Scotland, for example, without a local office.鈥�

Clients may want local knowledge and the ability to meet in person and many, especially in the public, transport and utilities sectors, are committed to employing local people. Mott MacDonald has an office in Cumbria, says Leonard, to help its nuclear power client Sellafield meet such commitments.
Shutting an office is also 鈥渃ripplingly expensive鈥�, points out Neil Clemson, managing director of London and the South-east at Faithful + Gould (F+G), which draws 70% of its UK income of 拢102m from outside the capital. 鈥淵ou suffer reputational damage and financial costs, there are personal costs to people losing their jobs and you reduce your capacity for increasing workload,鈥� he says.

Toughing it out

So how can you hang on to a regional office in a tough local economy? F+G has benefited from having a powerful parent, Atkins. Clemson says: 鈥淲e might have withdrawn from some of the fringe places [otherwise]. If you are faced with a long and expensive lease for a small team in a depressed market you might have to close.鈥� However, F+G has been gradually amalgamating its offices into Atkins鈥� branches since 2002, as leases expire.

Capita Symonds, which gets a third of its 拢338m UK revenue (2011/12) from London, is tackling the problem by trying to pro-actively foster its own work opportunities. Jonathan Goring, managing director, says: 鈥淲e鈥檙e responding to scant inward investment in the regions by finding ways for the private and public sectors to create income and that, in turn, creates jobs in construction.鈥� One idea is to install commercial retail in hospital receptions. So far Capita has been involved in delivering five such projects, which have seen branches of Boots and Starbucks installed inside general hospitals.

Another tactic is to assemble a workforce able to work in multiple sectors. Leonard says this is why Mott MacDonald鈥檚 regional offices are 鈥渟ustainable, if not growing鈥�. 鈥淲e have staff who are multi-skilled and we tend to work in sectors that don鈥檛 tend to involve leading edge technology, such as water and highways, which means staff can move around easily.鈥� To ensure this continues, younger employees are given experience of multiple sectors.

Our ability to respond quickly to the changing landscape is a benefit of being financially independent

Tony Burton, Gardiner & Theobald

A popular way to keep regional offices going is to channel work from London or overseas to them. Burton says: 鈥淚t is good business practice to utilise the skill-set available to you, and that sometimes means involving teams from a different office or regional location who have unique skills required for a particular project. Our employees work flexibly on projects across regions.鈥�

Regional offices can even be transformed into fully fledged hubs for specialist skills, as at Gleeds and Aecom. Gleeds has focused its Newcastle office on producing bills of quantities, while Warrington specialises in energy and is one of the firm鈥檚 best performing offices, according to Steer. He says: 鈥淚f you have a weakish local market, this means you can keep the office open, as long as it is making a profit on its specialisms, so it is ready for when the work comes back.鈥�

Steve Morriss, chief executive, Europe, at Aecom says: 鈥淥ur Edinburgh office is a centre of industrial expertise, so we have done work for clients like Rolls Royce and Diageo there.鈥� The Cambridge office specialises in the education sector and Oxford in health and science. Following this strategy, the firm made roughly 25% of its 拢355m 2011 UK revenue from London and 75% from the regions. Morris says the approach suits Aecom鈥檚 policy of providing expertise from its global network to clients. The model can be enhanced by strong ICT infrastructure, such as easy computer file sharing, instant messaging and video conferencing, as well as hot desking and flexible working. F+G has rolled this out and Mott MacDonald is about to. Leonard says: 鈥淭he new ICT system will help people work together on the same project from different locations.鈥�

The drawback of this can be, as Steer admits, that this 鈥渂ack office鈥� model can damage morale. 鈥淭here is a danger with morale when the exciting projects are not there - but then this is a problem for the whole industry.鈥� However, Morriss insists it can work well, keeping regional offices vibrant, but that these specialist focuses aren鈥檛 - and should not be - imposed from above. 鈥淚t鈥檚 based on local enthusiasts and expertise that has naturally developed in a particular location,鈥� he says.

Flexibility, then, goes a long way to tackling the London versus the regions problem. Whether inventing your own projects, developing teams that can switch between sectors or working on projects in different geographical locations. In the skewed UK market the more adaptable the consultant, the better it will fare.