OPINION: NEWS ANALYSIS - Will you be prepared if the recession strikes? - Recession may not have properly hit, but many PR firms are behaving as if it has. The industry should be cautious, says Gidon Freeman, but not afraid

A chill economic wind is blowing across the Atlantic. Tales of job

losses and shows of corporate belt-tightening receive blanket

coverage.



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

than then.'



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.



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