Economic downturn suffocates start-up agencies

Periods of recession have traditionally shaken up the PR industry with a raft of new entrants, but the elongated economic downturn may be inhibiting those looking to launch fresh ventures.

Double act: Paddy Harverson (left) and D-J Collins
Double act: Paddy Harverson (left) and D-J Collins

Two weeks ago, PRWeek broke the news that Clarence House's Paddy Harverson and Google's D-J Collins are to launch an agency next year. But their new venture is somewhat of an exception to the rule, with most new market participants coming from spin-offs or global firms expanding.

While 2012 saw a number of small and nimble ventures launch, new agencies of scale have been few and far between and have not fitted the typical start-up template. Perhaps the most notable examples were Bell Pottinger's move into private hands and Edelman's expansion of Zeno Group into the UK.

Earlier this year, Threepipe founder Jim Hawker launched a PRCA-backed Entrepreneurial Group to help start-up agencies.

The group's vice-chairman Adrian Brady, Eulogy CEO, commented: 'Start-ups are driven by people's expectation of the risk. The mantra that a recession is a good time to launch is valid if you have got little to lose, but we're in a tough market and it's not valid if you feel you can't take that risk in the first place.'

One founder of a comms consultancy that opened this year dismissed the idea that start-up costs were minimal in the PR industry. 'The reality is the costs are very high to build a business of any substance,' he said. 'If it were easy, everyone would do it.'

The PRWeek Top 150 had no newly launched agencies in the top 50 in 2012, but there is still notable start-up activity at a lower fee-income level.

Greg Jones co-founded consumer agency Glass Jar earlier this year and said there was market opportunity for new niche players. 'It is a difficult economic climate, but to a certain extent there's a benefit to that,' he said. 'If you are just a couple of people in a room with few overheads, you can be far more nimble and agile than bigger agencies.'

Rob Brown, who last month set up Rule 5 from the ashes of Manchester agency Staniforth, agreed: 'The thinking for a new agency is largely the same, irrespective of the economic conditions. You need to be entrepreneurial - this means a mindset that is prepared to take certain risks and planning with precision.'

US expansion into London boosts top-end PR market

Although fewer large-scale ventures have launched in the UK PR market compared with other marketing disciplines, 2012 saw the first real shake-up at the top of the industry for at least half a decade.

July's spin-off of Bell Pottinger from Chime into Bell Pottinger Private, led by Lord Bell, saw the splitting up of the UK's top PR consultancy, with the Good Relations portion of the business staying with Chime.

Elsewhere, two potentially significant new players came from the expansion into London of US agencies.

Edelman-owned Zeno Group established a London office in June, as did US corporate shop Prosek Partners in July.

Existing agencies also launched businesses, such as Blue Rubicon separating out consumer agency Surname & Surname and strategic arm Thirty Six Strategy.

New consumer start-ups included Glass Jar, Rule 5 (see above) and Aduro Communications, established by former Shine associate director Natalie Luke.

On the corporate side, there was a bumper 2011, with Newgate, Pendomer and Morgan Rossiter launching last year. Andrew Honnor, formerly of Tulchan and News International, officially launched Greenbrook Communications in February.

HOW I SEE IT

Jim Hawker, Co-founder, Threepipe

Agencies are being run in a demanding way but it can be counterproductive and acts as a catalyst for new agencies, as senior figures believe they can do better themselves. Next year, we will see more collaboration and mergers between agencies that are seeking to offer a wider range of services.

Steve Earl, MD Europe, Zeno Group

We see a big opportunity in offering the best of both worlds - the client-centricity, creativity and spark of a boutique fused with the things that make large global agencies. There is an appetite for disruption, particularly in the PR market. It's a time for the fearless.

Key figures

23 New entrants in PRWeek's Top 150 PR Consultancies 2012*

0 Number of new Top 150 entrants in the top 50 largest agencies*

£20m Reported cost of MBO to take Bell Pottinger into private hands**

6 Number of months for which people leaving cannot solicit clients or staff*

Source: *PRWeek; **The Guardian.

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