Creston this week announced the US closure - and a subsequent £600k deficit - less than a year after opening there. Its London COO Barrie Brien blamed the ‘global economic uncertainty' brought on by the US credit crunch.
Agencies under the umbrellas of mid-sized conglomerates such as Chime, Next Fifteen Group and Huntsworth, which are reliant on central costing, could now find their budgets under close scrutiny from clients, according to analysts.
The MD of Creston subsidiary Nelson Bostock said his agency remained ‘bullish' about expansion despite its parent company's decision to halt US acquisitions.
Martin Bostock claimed his agency's model would ensure its ability to win US work despite the economic downturn. The consumer tech specialist uses a network of affiliate agencies, and has sent London PRO Lisa Allen to the US to oversee its American clients.
But he warned that other UK agencies could struggle if faced with a similar situation. Bostock said the ‘huge cost infrastructures' of global agencies would see nervous clients looking for cheaper alternatives such as affiliate networks.
Bostock added: ‘In a recession everyone wants bang for the buck. Those with the lowest overhead will respond more quickly. Our current model, an affiliate network, means that we're not carrying the costs of other agencies.'
Red Door Communications, the other major UK PR agency under the Creston umbrella, is in the final stages of signing an agreement with a US affiliate. Creston's share price has fallen to 68 pence down from 200 pence a year ago.
Investor and analyst David Giampalo, CEO of London-based Pi Capital, said agencies must remain flexible during a recession, making any model involving fixed costs ‘dangerous'.
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