It has been a vintage year for the British PR industry, according to figures filed for our Top 150 PR Consultancies survey. Fee income earned by the Top 150 agencies in 2014 soared past the £1bn mark for the first time as the cyclical upturn in the economy combined with structural shifts in the media landscape to take the sector to new heights.
Total fee income (including estimates) was £1.002bn, a 10.9 per cent increase on last year. When adjusted for inflation of 1.5 per cent, real growth in 2014 was 9.4 per cent. That is half as much again as the real growth for 2013, when an eight per cent increase in fee income was modified by 2.5 per cent inflation.
At the top of the table, Edelman put on more than £4m in fee income to overtake Brunswick and become the biggest agency in the UK. Edelman UK CEO Ed Williams tells PRWeek that he believes it is the first time a UK PR agency has reported annual fee income above the £50m mark.
Movers and shakers
Other significant top ten movers include Hill+Knowlton Strategies, up from seventh to third. (However, the growth rate may flatter the WPP-owned agency as we now know that its fee income was significantly underestimated in last year’s survey.)
Of the top 30 agencies, Portland was by far the best performer both in percentage terms and in absolute amount. Fee income grew by 70 per cent to £21.5m, earning Portland a place in the top 20 for the first time. Portland founder Tim Allan attributes his agency’s success to its ability to adapt to changing client demand: "We seem to get better as we get bigger. The PR market is changing fundamentally. It was a conduit between clients and journalists. Now businesses that can provide strategic advice, create great content and distribute it are the ones that will flourish."
Exposure was the other big agency showing supercharged growth. Income was up by 51 per cent in 2014, or £5.3m in cash terms. Chief executive Raoul Shah offers a very similar analysis of his agency’s strong performance: "There are definitely more clients searching for less traditional PR solutions, placing creativity and digital content at the heart of their briefs. These two factors combined were a major part of our 2014 success."
The right direction
Further evidence of the robust state of the industry comes from how few agencies saw a decline this year. Just 17 of the Top 150 agencies experienced reduced income. Most of these were in the lower reaches of the table where businesses are more susceptible to the effects of single events such as senior people leaving or clients moving on.
One loser was MHP Communications, owned by marketing services group Engine, which lost 14 per cent of its income – largely due to unresolved issues dating back to its creation from three smaller agencies a few years ago. Other well-known agencies in decline were The Red Consultancy, down four per cent, Iris Culture, down five per cent, and Golley Slater, down eight per cent.
Middle and tail gain ground
Strong though the performance of the larger agencies was, one notable trend is the revival of the medium-sized agencies, which appear to have freed themselves of their ‘squeezed middle’ tag. The average of the growth figures for agencies ranked 1-50 in our table was 14.6 per cent, but agencies ranked 51-100 grew by 16.9 per cent while those from 101-150 averaged 17.9 per cent.
It is not immediately clear why. It may be just statistical noise. But some agency chiefs suspect that being medium-sized hits a sweet spot for the moment. At a time of rapid change related to digital and social media, medium-sized and larger boutique agencies have the resources to invest in change and the flexibility to implement that change. They also have the right combination of the ability to produce high-quality work with the capacity to execute it.
That said, their growth rate still lags behind the ‘tail’, with the bottom 50 agencies growing their income by 17.9 per cent. Obviously, their growth comes from a lower base, but the rapid expansion of 130-placed Dynamo (growth of 87 per cent) and Clarity PR (135th, growth of 131 per cent) suggests others will be looking over their shoulders in the years ahead.
Spreading the love
So, overall, it has been an excellent year for the Top 150 consultancies. Of course, the tables only describe what is happening in one part of the industry – the agency world. The PRCA, the trade body for the UK PR industry, estimates that the total value of all PR activity in the UK was £9.62bn in 2013. But that includes in-house activity and the thousands of smaller firms, one-man bands and occasional practitioners who comprise PR’s exceptionally long tail. It is possible that all that is happening is that the head is eating the tail and the industry is not really growing at all. But the consensus seems to be that everyone is feeling the love this year, wherever they are.