2002 GLOBAL RANKINGS: Europe - Europe was quiet on the PRacquisitions front last year, and financial firms struggled with drymarkets, but Adam Hill finds that the French are boosting PR budgets andfees are fast rising

The advent of the single currency in January 2002 was a momentous event for the citizens of the 12 European Union states that signed up for it.

The advent of the single currency in January 2002 was a momentous event for the citizens of the 12 European Union states that signed up for it.

Besides the euro, Europe's PR chiefs have had other things on their minds, namely surviving the slowdown in new media, telecoms, and financial markets.

Growth came from the specializations that traditionally grow in a downturn: change management, internal communications, public affairs, and crisis management. In most cases, the tech sector was a write-off, but Weber Shandwick Worldwide president of international operations Lutz Meyer says: "I'm seeing the corporates that survived the tech downturn show more demand for classic corporate communications than marcoms. They are also now looking more at CSR, investor relations, and financial relations this year. Corporate social responsibility grew as a new specialization, and the healthcare sector also saw growth.

There were few major acquisitions in Europe among the owned groups, except in Italy, where Mavellia/MS&L acquired Chiappe Bellodi, and Hill & Knowlton bought environmental firm Gaia. Incepta's Citigate Group added First Financial to its Netherlands capabilities in the first quarter, and later Sanchis in Spain and Gunpowder in Italy.

Omnicom's Fleishman-Hillard made two pure acquisitions in the UK (GPC in the UK and Europe, and Herald Communications).

Many posted negative growth

At the top of the list in the UK, WSW increased income almost $14.4 million to $59.4 million following its merger with sixth place agency BSMG in October - but a staggering 21 of the top 50 PR agencies in the UK did not grow at all or posted negative growth. The dot-com bubble burst, M&As and IPOs almost ground to a halt, and although consumer spending remained surprisingly buoyant, the atrocities of September 11 further undermined confidence.

Average growth was limited to 8% in the top 50 agencies. Medium-size firms fared slightly better than their larger counterparts, with the those ranking between 51 and 100 growing on average by an impressive 10.4%, while smaller agencies - the firms ranked 101-150 - grew on average by more than 17%.

Germany's top 200 PR agencies generated fee income of $393.12 million in 2001, up 6% on last year. But market growth fell behind the hefty 26% of the previous year. Lack of activity on the financial markets made life tough for financial PR firms, and IR specialist Haubrok fell out of the top 10 after its fee income nosedived 44%.

By contrast, France's PR market turned in an overall growth rate of around 10%. The growth of assignments such as image or crisis management briefs has boosted average client budgets by 25% during the past three years, according to Syntec, the professional body for French PR consultancies.

The number of agencies garnering more than three million euros ($2.96 million) in fees has doubled in two years to ten PR firms last year.

The proposed enlargement of the EU, perhaps as soon as 2004, means that European consultancies with public affairs capabilities can envision significant growth potential in the coming years: the three-way integration of BSMG-owned Adamson with Shandwick Belgium and Shandwick European Affairs has created a well-placed consultancy in Brussels, for example. But H&K CEO of Continental Western Europe, Elaine Cruikshanks says, "More and more Brussels is seen as a hub for not only public affairs and issues management programs, but also for b-to-b and b-to-c." Still, local agency Interel Marin retains the top spot in the rankings. The tech downturn was partly offset in 2001 by an increase in crisis accounts, such as those created by problems at national airline Sabena and The Belgian Post.

Last year, the Netherlands recorded its lowest level of growth since 1993 - a 1.1% rise in GDP compared to an average 3.3% rise between 1997 and 2000 - and this year may be even worse. IT and telecoms companies have had a very rough time, while the unprecedented assassination of right-wing politician Pim Fortuyn earlier this year has added to a sense of unease. Despite massive redundancies at domestic corporates such as Ericsson, the PR industry in Sweden continued to grow in 2001 by around 15%. The largest players in Sweden remain the home-grown agencies Kreab and JKL, with GCI the biggest network presence. Total fee income for agencies last year is estimated at about $97.92 million, compared to $84.96 million in 2000. Larger, more established firms had the highest growth rate last year, as opposed to 2000 when much of the growth was fueled by smaller IT-oriented agencies, according to professional body Precis.

The bankruptcy of national carrier SwissAir in October dented Swiss pride following the boom of 2000. The second half of 2001 was particularly rocky and, as elsewhere in Europe, demand for crisis and issues management grew, while tech PR spending was drastically reduced. Agencies average expected revenue increase for 2001 was found to be a meager 1.3%. A year earlier it would have been 15%. But overall, PR held up better than the ad market and cross-border campaigns grew. Trimedia has been overtaken at the top of the Swiss rankings by one of Europe's oldest PR consultancies, Farner.

Italians keeping it in-house

While the IMF is predicting 1.4% growth for the Italian economy for 2002, growth for Italy's PR industry during 2001 came in at around 3%-4%. Crisis prevention and issues management services, public affairs, brand marketing, and PR relating to ethical business practice have all risen in popularity, but Edelman Europe president Rosanna D'Antona says, "Clients prefer to keep internal communication, b-to-b activities, and local community relationships in-house. Deregulation of the pharmaceutical market has created some opportunities, notably in direct-to-consumer communication.

Full figures on Spanish PR agencies are not yet available for 2001, but the expectation is that growth will be around 10%. The deterioration of the political and business environment in Latin America has had a dramatic effect on Spanish multinationals, and the prognosis for 2002 is that growth will slow further, maybe to around 6%. Any increase in fees stimulated by the arrival of the euro would be welcome.

There was strong fee income growth among many of the top 20 agencies in Austria last year, with market-leader Publico ECC, now a sister agency of Germany's market-leader ECC Kohtes Klewes, increasing almost 15% to $8.12 million. Ikp Vienna became Trimedia Austria, extending Switzerland-based Trimedia's capabilities further across German-speaking Europe, while top-10 agencies The Skills Group and Pro & Co. merged to take fifth place in the ranking.

Corporate and crisis communications became more important while lobbying is booming, after a late start in Austria. IT, telecom, and biotech are also performing well.

The prospect of EU enlargement as early as 2004 offers Austrian PR agencies a raft of public and private sector programs. And EU hopefuls such as Hungary, the Czech Republic, and Poland continue to emerge as markets offering their own PR opportunities, according to Alistair McLeish, CEO, central and eastern Europe, for MMD, which has ten offices in the region.

"Seventy percent of all external PR spend is in those three countries," he says. But Romania, with a population of 23 million, has great potential too, he adds. Ruxandra Mateescu, director of the Bucharest office of WSW affiliate Action PR, says, "Obviously, budgets are no longer as large as they were in 2000. But companies are still very interested in PR. People haven't stopped doing business. Action picked up media relations work in the country for British Airways.

The region has been to some extent insulated from the "dot-bomb. "The tech sector has avoided severe cutbacks, but it was coming from a smaller base in the first place, McLeish says."We didn't have the dot-com boom and bust."

Burson-Marsteller decided it was better off out of Poland, closing its office there last year. It retains a network office in Prague, and gives project work to Budapest-based Gulden Communications, formerly Gulden B-M, and now part of the Young & Rubicam advertising brand. Countries like Macedonia, population two million, are home to smaller shops such as Skopje-based Pristop Communications, which handles PR for national mobile operator Mobimak, as well as project work. "PR is increasing in Croatia, says one Croatian PR executive. "People are realizing that it's not advertising or marketing, but it is a learning curve for the market. Even in a country of 4.5 million people, global brands such as Nike, Microsoft, and Siemens Mobile are keen to establish themselves, and need PR agencies, such as Zagreb-based WSW affiliate Premisa, to help them.

It is a pattern that The Willard Group CEO Mike Willard, has seen before.

From Kiev, in Ukraine, which borders Poland, he says multinationals in the region "tend to come with marketers, not PR people, but you see a change as there is a demand for strategic counsel, media training, and crisis management."

Accurate fee income is hard to come by in eastern Europe. While it is pointless to consider the region as homogenous, there are opportunities.

TOP TEN AGENCIES OPERATING IN EUROPE

Rank Agency Name                        European Income (dollars)      %
2001                                          2001           2000  chnge
1    Incepta (Citigate)                171,015,856    123,162,000     39
2    Weber Shandwick Worldwide         103,411,620    109,623,955     -6
3    Euro RSCG Corporate
     Communications                     88,100,640     66,537,000     32
4    Hill & Knowlton                    86,444,640     79,265,000      9
5    Chime Communications               81,614,880     81,195,200    0.5
6    Burson-Marsteller                  69,178,000     80,491,000    -14
7    GCI Group/APCO Worldwide           54,518,060     51,478,934      6
8    Cordiant Communications Group      50,103,360     40,968,000     22
9    Fleishman-Hillard                  44,116,000     34,147,000     29
10   Porter Novelli                     42,867,000     48,366,000    -11

Notes: 2001 Euro figures converted at FT average ?1 = $1.515. 1999 at ?1 = $1.48 for all Euro tables.
All figures relate to the year ended December 2000. Fee income = PR fees
only.




KEY MARKETS IN EUROPE
Rank France                                  Income (dollars)          %
2001                                          2001           2000  chnge
1    Euro RSCG                          40,790,880     46,882,080    -12
2    I&E                                13,305,600     12,233,247      9
3    Burson-Marsteller                   7,630,102      7,510,895      2
4    Porter Novelli                      5,514,512      5,514,512      -
5    Brodeur SRRP                        4,239,557      3,715,200     14


Rank Germany                                 Income (dollars)          %
2001                                          2001           2000  chnge
1    ECC Agenturen                      29,986,945     28,286,193      6
2    Weber Shandwick Deutsch'd          17,437,184     18,027,972     -3
3    Trimedia Communications            10,652,078      9,533,163     12
4    GCI Hering Schuppener              10,616,273      8,951,327     19
5    Media Consulta Deutsch'd            9,219,866      6,919,376     33


Rank Sweden                                  Income (dollars)          %
     2001                                     2001           2000  chnge
1    Kreab                              18,171,192     16,463,520     10
2    JKL                                 8,414,247      7,348,320     15
3    Journalistgruppen                   7,429,601      8,172,120     -9
4    GCI Rinfo                           5,102,256      4,831,200      6
5    Hallvarsson & Halvarsson            4,654,689      5,172,228    -10


Rank UK                                      Income (dollars)   %
2001                                          2001           2000  chnge
1    Weber Shandwick*1                  59,446,514     71,782,403    -17
2    Citigate Dewe Rogerson2            44,990,091     47,902,831     -6
3    Hill & Knowlton UK*                41,554,080     41,664,960      0
4    Bell Pottinger Communications*3    41,188,320     43,889,760     -6
5    Countrywide Porter Novelli*4       29,729,864     30,104,101     -1

Notes: All figures relate to year ended December 2001. Fee income = PR
fees plus mark-up. *Denotes PRCA member.

1 Includes BSMG, which merged with Weber Shandwick Worldwide in October
2001 2 Includes Citigate Communications, Citigate Smarts (pro rata),
Citigate Northern Ireland, Citigate Marchcom 3 Includes Bell Pottinger
Consultants, Bell Pottinger Financial, Bell Pottinger Public Affairs,
Bell Pottinger Public Relations, First Financial, Teamspirit, Landmark
Consultants, Environment Marketing, Heresy, AMD Property Marketing, AMD
in Real Life 4 Includes Fodor Wyllie

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