Flagship UK marcoms groups Huntsworth and Chime have reported damaging client fee cancellations over the past month, with the former explicitly blaming ‘global economic uncertainty’. More widely, agencies are reporting last-minute project wipeouts and downward pressure on retainers.
An in-house source at a leading global pharmaceutical firm told PRWeek the current environment meant it was becoming ‘tighter and harder to secure budgets for PR’.
‘Everyone is being squeezed so when you’re fighting for your pot, it’s becoming more and more necessary to justify the value that you bring,’ said the source, stating that part of the problem was that PR could not be directly linked to sales.
Ketchum Pleon London CEO Avril Lee said that clients were currently under ‘tremendous pressure’.
But while Lee suggested a ‘just in time’ approach to agency manpower, others were saying further redundancies may be in the pipeline.
Lansons CEO Tony Langham warned of further reductions in headcounts in agencies that started gearing up for recovery too early.
Huntsworth has vowed to cut costs, but chief executive Lord Chadlington said his company was ‘taking a view that we will take out other costs first – there are plenty of costs to take out before people’.
Some agency bosses insisted there were opportunities in the current climate. Bite CEO Kath Pooley pointed to ‘content and digital asset creation’ and more projects for clients, adding that traditional media relations was ‘being squeezed’. Langham added that opportunities remained in corporate issues and crisis work.
Another consumer agency boss said that agencies needed to restructure the way they pitched. ‘Developing performance-based agreements, or adjusting upwards after three months – there are creative ways to get your foot in the door,’ he said.
But whatever the opportunities, market conditions remain tough for the foreseeable future. Pretty Green founder Mark Stringer said: ‘2012 will be about carving out a result. Single-digit growth, year on year, would be a good year for most agencies.’
HOW I SEE IT
Chief executive, Lansons
The economy isn’t picking up – across corporate Britain people are wary of 2012. Discretionary spending is being delayed, if not cancelled. Another worry is that PR salaries got too high in the last boom – we’re now seeing a long-term correction.
UK CEO, Ketchum Pleon
This volatility is likely to continue and everyone in PR is having to be flexible about how we use resources and our most precious asset – our people. The need to cultivate and find great talent, and having it available ‘just in time’ when campaigns do get the green light, is often our most pressing day-to-day challenge.
£4m Fees lost due to cancelled project work at Huntsworth*
63% Percentage of Huntsworth revenues from UK and Europe*
7% Huntsworth like-for-like revenue growth*
33% Drop in Huntsworth share price since announcement**
Source: * Huntsworth interim management statement; ** Correct at time of going to press