Clients cutting back PR budgets

Recession fears: agencies feel the pinch as a significant minority of firms slash or squeeze fee spend

Fees slahed: Fishburn Hedges' client BT Global Services
Fees slahed: Fishburn Hedges' client BT Global Services

PR agencies are seeing the first signs of recession fears hitting the industry – with some agencies starting to experience fee cuts.

Fishburn Hedges is one agency that has been hit by the cash squeeze, with client BT Global Services slashing its fees by more than ten per cent.

Industry sources revealed that Global Services – the part of BT that networks multinational businesses – is looking to improve its profitability and margins after a less than successful first quarter, during which profits dropped by seven per cent.

The cuts are not believed to apply to other parts of BT’s business, such as Fishburn Hedges’ accounts BT Business and BT Retail.

BT declined to comment, but issued a statement saying: ‘As you would expect, we constantly keep our PR budgets under review at all times, as part of best practice in procurement.’

BT is not the only firm cutting back on PR budgets, according to the latest quarterly trends barometer from the PRCA. Of the agencies surveyed, more than 40 per cent reported either a marginal or significant decrease in client spend. Only 13.5 per cent said that clients increased their budgets in Q2 2008.

Many respondents were also less optimistic about the general outlook for PR. While only 17 per cent were ‘less optimistic’ in Q2 2007, just a year later this figure has now risen to 64 per cent.

However, when the agencies were asked whether the last quarter had made them feel more or less optimistic about prospects for their own consultancy, the results were far less grim. Some 27 per cent were more optimistic about their own prospects.

PRCA director general Francis Ingham said: ‘The results show that the key problem in the industry is not results; it is the fear of what may be happening elsewhere.’

The industry will also be buoyed by last week’s news that the Bell Pottinger Group reported operating income of £27.7m in the first half of 2008 – up 15 per cent on last year.

How I see it

Kevin Murray
Chairman, Bell Pottinger Group

‘We are managing costs in the event that client spending does decrease, but I haven’t seen strong evidence that this is happening. When marketing budgets do come under pressure, clients are thinking of cutting their ad budget and gaining better value for money by diverting that spend to PR.’

David Gallagher
CEO, Ketchum

‘I haven’t seen any reduction of fees. However, prospective clients are taking longer to make decisions. Pitches used to take a month; now they’re taking three. This is happening mainly in consumer, not in corporate or healthcare. But there are also more pitch opportunities.'

 

10% Decrease in BT's projected PR spend (Source: industry sources)

91% Agencies expect graduate recruitment not to fall (Source: PRCA survey)

32% ... saw the highest quarterly growth in corporate business (Source: PRCA survey)

27% ... are more optimistic about own agency after last quarter (Source: PRCA survey)

15% Rise in Bell Pttinger's first-half operating income (Source: Bell Pottinger half-year results)

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