Weak Economy for Architectural and Planning Services

Architects and technical planners will be facing difficult times. The economic situation has further deteriorated markedly during the winter quarter of 1997. When compared to the same quarter a year ago as well as to the previous quarter, almost all economic indicators deteriorated dramatically. These results are the findings of a representative study carried out by the Centre for European Economic Research (ZEW) in collaboration with the "Verband der Vereine CREDITREFORM" in Neuss. Since June 1994, ZEW and CREDITREFORM have quarterly surveyed 1000 firms from the business-related services sector, which also include 225 architects and technical planners.

Collapse in Demand

The reason for this low-point is the weak demand for architectural and planning services. The prospects for a sustained improvement of the prevailing demand situation remain negative. The German building industry is not only facing an economic but also a profound structural crisis. Therefore, major demand impulses are not expected to arise in the building industry in the medium term. This situation is aggravated by the fact that an increasing number of “pseudo-privatised” state-owned companies perform planning services for cities and municipalities.According to the German Association of Consulting Engineers (VBI), 43.5 % of technical planners and consulters see their own existence threatened by such companies. Since the launch of the ZEW/CREDITREFORM survey in summer 1994, the demand for architectural services has steadily been deteriorating. The assessment concerning the demand situation and future expectations has never been as negative as in the last quarter of 1997. Technical planners equally have to cope with the worst figures in terms of demand since the launch of the ZEW/CREDITREFORM survey. All the same, they were able to score a small interim high between autumn 1996 and summer 1997. The weak demand is reflected in the assessment concerning turnover, revenues and personnel. No other branch in the business-related services sector compares to the negative assessments regarding the economic situation of architects and technical planners. In the course of the demand collapse, the personnel situation for architects and technical planners likewise deteriorated dramatically during the winter quarter of 1997. The economic downturn in this branch may in part be due to seasonal effects. However, seasonally adjusted data and comparisons to the same quarter a year ago also reveal that the situation has worsened dramatically. This applies particularly for East German businesses.

Adapting to Demand Fluctuations

Architects and technical planners are highly dependent on the building industry, which in turn is highly dependent on economic and seasonal cycles, making them all the more vulnerable to demand fluctuations. It is therefore vital for architects and technical planners to be able to adapt to such fluctuations in demand. In the ZEW/CREDITREFORM study, half of the architects and technical planners stated that they were indeed subject to strong or very strong fluctuations in demand. By contrast, only about 40 per cent of the surveyed firms in the whole business-related services sector are affected to the same extent as architects and technical planners, who adjust their capacities according to the average demand in the course of the year.

Flexibilisation of Working Hours

Since labour is the key input factor in these particular branches of the business-related services sector, it comes as no surprise that architects and technical planners resort to overtime and short-time work in order to compensate for demand fluctuations. Architects further set great store by new technologies, while technical planners concentrate on awarding subcontracts to third parties. Both branches consider employee development and freelance workers as an adequate measure to adapt to demand fluctuations. The results of the ZEW/CREDITREFORM survey show that modern forms of working time flexibility become increasingly significant especially for architects and technical consulters. Prospectively, these particular branches will make use of freelance workers and fixed-term work contracts to a much higher degree than today, which is yet another aspect that separates architects and technical consulters from the rest of the business-related services sector. All of this indicates that architects and technical planners are reluctant to engage in long-term commitments in times of a poor economic situation. Thus, they play a pioneering role in regard to the flexibilisation of the labour market.

Marginal Employment without Any Influence

However, architects and technical planners consider marginal employment as a completely inappropriate measure, which distinguishes themselves from the other branches of the business-related services sector. According to the ZEW/CREDITREFORM survey, jobs falling below the social security threshold are only of significance for businesses that are subject to strong seasonal and economic fluctuations in demand. One of the reasons why 610 DM jobs play such an insignificant role for architects and technical planners is the fact that these two branches mainly hire highly qualified staff. In comparison to the German national average, architects and technical planners hardly make use of marginally employment staff with a mere share of 3.9 percent and 1.7 percent, respectively. Figures for Germany vary considerably depending on the individual sources. For instance, according to the Institute for Employment Research in Nuremberg, the share of marginally employed staff in businesses makes up 11 percent. On the other hand, the figures of the Federal Statistical Office for marginal employment in businesses and households are considerably lower with a share of five percent. According to all estimations, however, the share of marginally employed staff lies below that national average in the case of architects and technical planners. In the whole business-related services sector, an average of 3.5 percent of employees falls below the social security threshold. Technical planners and consulters are thus clearly below this average, while architects are very close to it. As a result, marginal employment plays a rather insignificant role in branches which have a high demand in highly qualified staff, as it is the case for architects and technical planners.

For further information please contact

Prof. Dr. Ulrich Kaiser, Phone: +49 (0) 621/1235-134, E-mail: kaiser@zew.de