As published in the Telegraph-Journal September 1, 2012
I have been talking about the need for New Brunswick to pursue an “all of the above” strategy for economic development. This approach entails turning over every rock in search of opportunities big and small that could collectively move forward the provincial economy and strengthen our provincial government’s fiscal position.
Architectural and engineering services could be one of the rocks that need to be turned over.
A decade ago there were less than 1,600 people working in the architectural, engineering and related services sector in New Brunswick. In 2011 that figure had jumped to more than 2,500 workers (a 58 percent increase). In May/June of this year, unadjusted total employment has topped 3,000 workers.
In addition to employment growth, average industry wages are on the rise. Between 2000 and 2005, the average weekly earnings growth in this sector was well below average. Between 2005 and 2011, the average weekly earnings grew by more than 32 percent. On an annualized basis, the average worker in the architectural, engineering and related services sector in New Brunswick now earns $65,000/year which is 58 percent higher than the average across all industries.
Even with the recent employment growth spurt, New Brunswick still has one of the smallest architectural, engineering and related services industries across Canada adjusted for the size of the economy. Only Manitoba and Prince Edward Island have smaller industries.
I’m not sure why the industry is in a mini-boom right now.
Average annual profit margins in the architectural, engineering and related services sector were in line with the national average between 2000 and 2005 but have declined in the past few years and are now below average.
In the last few years, a number of the province’s engineering firms have been acquired by national or international companies. One of the largest firms, Fredericton-based Neill and Gunter was acquired by Stantec and another long time Fredericton institution, ADI Limited, carved off and sold much of its business to Trow Global (now exp Services Ltd.) in 2009.
Despite the fear of pundits at the time, it doesn’t seem these acquisitions have led to negative effects (i.e. jobs moving elsewhere). In fact, the industry’s continued growth could mean these firms are expanding here.
How do we ensure this industry continues to grow?
There are several ways. One, we need to focus on building expertise here and then exporting that expertise outside New Brunswick. I recently talked with an engineer in Fredericton who told me that at least one-third of all revenue generated by the Fredericton engineering services cluster comes from markets outside the province. At the same time, Saint John-based engineering firms have been expanding their energy and mining related expertise. Hopefully, this expertise can also be exportable to other markets.
We also should try to convince the national and multinational firms with offices in New Brunswick to expand here – not to capture more local market share – but to establish centres of excellence from which to export services around the world. Fredericton already has a solid track record in environmental engineering and Saint John is strong in energy-related engineering.
We can just ignore industries such as this and hope they will grow. A thousand new jobs in this sector would create more than $125 million worth of new annual gross domestic product (GDP) and close to $30 million/year in tax revenues for government.
The decline in the advertising and public relations business in New Brunswick (as outlined in my last column) is an excellent reminder that over time professional services can be consolidated out of a place like our province.
If there is a nugget of opportunity in the architectural and engineering services sector, let’s do what we can to exploit it.