REVIEW

THE SWEDISH MARKET
THE AVERAGE
PROFIT MARGIN
WAS 5.8% IN 2015.
Price development in the sector has been
sluggish now for a number of years. But a
tendency towards improvement has been
observed during 2015 and 2016. However,
it is moving slowly and many companies
are complaining about extensive price
pressure, above all in connection with public
sector procurements. In the latest member
company opinion survey, 43 % of those
questioned responded that they have raised
their fees during the course of the year, at
the same time as only 10 % stated that they
have lowered their prices. This strengthens
the picture of a price scenario in the process
of recovery. But the weak price trend
will be one of the sector’s major challenges
in the months ahead.
The profitability equation does not really
add up, considering the current boom
and demand for architect and engineering
consultant services. The profitability
should increase by considerably more than
one tenth of a percentage point. The question
is then, where in the equation has the
error been made? Lack of assignments?
No, the order books were full – to such
an extent that the sector expanded by 8 %.
On the other hand, there was a shortage of
available competence, despite the fact that
the sector grew by 4 000 employees during
the course of the year. The billing levels
increased. But so too did the payroll expenses
– by as much as 5.2 % in 2015 (measured
as the total payroll expenses per employee
for the 300 largest companies in the
sector). The prices, however, did not accompany
the development. In a comparison
of price development and payroll expenses
between 2012 and 2016 (including
September) the average fee charged by
the engineering consultants increased by
2.4 % during the period, the architects’ by
6.8 % and the average fee of the industrial
consultancies decreased by 3.5 %. At the
same time, the average payroll expenses increased
by 13 %. It is here that the equation
does not really tally. If the average fees increased
by between 0–5 % and the payroll
expenses rose by 10–15 %, it is difficult to
retain profitability even if the billing level
is raised slightly. This is one of the sector’s
major challenges in the months and years
ahead. There are a number of possible solutions
to this: 1. Companies manage to
convince procurement managers of the
Manpower development
%
100
80
60
40
20
0
-20
-40
T2-3
07
Architect firms Engineering consultancies Industrial consultancies
T1-3
08
T1-3
09
T1-3
10
T1-3
11
T1-3
12
T1-3
13
T1-3
14
Cityblock
”Annedal” in
Stockholm.
The expectations regarding how manpower will develop show net figures between the proportion of
firms which believe their working force will increase minus those who believe it will decrease over the
coming six-month period.
Source: The Swedish Federation of Consulting Engineers and Architects
T1-3
15
T1-3
16
PHOTO: TORJUS DAHL
100
SECTOR REVIEW • THE SWEDISH FEDERATION OF CONSULTING ENGINEERS AND ARCHITECTS • DECEMBER 2016
80
60
13