A chill economic wind is blowing across the Atlantic. Tales of job
losses and shows of corporate belt-tightening receive blanket
The trend brings with it major concern in the PR sector that when the UK
economy follows the US into a slowdown, the communications disciplines
will be hit hard.
One fresh barometer of market atmosphere is provided by the broken down
figures of the PRCA's enquiry and referral service, PReview. The system
counts client companies that approach the PRCA asking to be put in touch
with PR consultants fitting a range of criteria. Against a monthly
average in 2000 of more than 70 referrals a month, the first three
months of this year notched up barely 60 each.
PRCA director-general Chris McDowall accepts the figures reflect a new
economy collapse, but stresses that such a collapse could act as a
catalyst for the country talking itself into a recession. 'Nine months
ago we had dreamers coming in. We have returned to businesses with real
money, not wannabes.'
This development - a drying up of the new business flood, which
characterised last year's boom - is the common experience of major
agencies. One MD said: 'Last year we would get two or three fresh briefs
each week. At this stage, we are lucky to get one.'
Industry veteran Brian MacLaurin backs this up: 'Everyone reads the FT
and thinks, 'we must scrimp and save to prepare for recession,' but
scrimping and saving hastens the onset of recession.'
The boom of the last decade - UK PR fees have soared from pounds 150m to
pounds 600m since 1990 - is under threat. More precisely, it faces new
threats on certain fronts. Some industry sectors are likely to fare
better than others and there is agreement that if belts are to be
tightened, it is consumer PR which will take the biggest hit.
Incepta CEO Richard Nichols says his firm is less exposed than others to
a slump in consumer PR. 'Consumer marketing cuts don't impact on
high-end corporate advice. They deal with different people and strategic
advice is arguably more important in a recession.'
This stands in Incepta's favour, but despite Nichols' bullishness, the
company's share price has halved in three months. Indeed, the style of
Incepta's vast recent growth may leave it more exposed than other
marketing services groups as the economic climate cools. Investors are
widely thought to look less kindly on companies built up through
acquisition than those grown organically. Homegrown outfits may be,
culturally, better tuned to survive austerity.
Some parts of the industry may even be recession-proof. Crisis
management and corporate PR stand to benefit from what is elsewhere a
run of bad news. This accounts for what some observers have claimed:
even if some PR sectors contract, the industry as a whole will emerge
just fine. As ever, panic should be avoided if caution is exercised.
Results Business Consulting head of corporate finance Tony Bond says he
is aware of client budgets being trimmed back but expects PR to weather
the storm: 'It's easier to cut your marketing budget by axing ten or 15
per cent of the ad spend than half your PR costs,' he says.
This is backed up by one agency source, who describes PR as 'a drop in
the ocean' compared with ad costs, and by reports last week that
consumer giants Ford, Unilever and L'Oreal were all cutting down on
their ITV spots buying.
Even if clients deny they are slashing PR costs, anecdotal evidence
suggests they are tightening the purse strings.
One effect of these conditions is a toughening of the PR recruitment
market. Interpublic has imposed a hiring freeze across its public
relations businesses. MacLaurin says that while last year he had trouble
getting recruitment consultants to return calls - such was the glut of
vacancies and candidate drought - he now has recruiters phoning every
day offering candidates for non-existent vacancies. In Top 10 agencies,
where as much as 15 per cent of the work will be done by freelances,
there is talk of a freelance freeze.
Recruitment firm JFL MD Ros Kindersley says while areas such as
corporate, issues and crisis PR remain buoyant, there has been a slip in
consumer job availability and a sharp dip in the freelance sector. Again
the downturn in the new economy is a factor. Good PROs left for
dot.coms, she says, leading to 'two or three months of having not many
candidates to offer'.
Kindersley hopes the recession - it is not inevitable, but a further
Bank of England interest rate cut suggests wise heads think it is
imminent - will not scar the industry as former ones have. 'I was around
for the last recession (in 1990-1991),' she says, 'and PR is more mature
This view is endorsed by McDowall, who points to the PRCA Consultancy
Management Standard as having prepared the industry for tough times:
'Last time most firms found it tough. Now they are better prepared. Some
won't survive, those with too many under-trained people or who are
dependent on, say, one major client,' he says.
For the rest, readjustment now may mean short-term pain but improved
chances of long-term survival. Shodily-run firms will go to the wall,
but professional and competent agencies may emerge stronger than before.