PR margins at lowest level in decade, but pressure easing, says Kingston Smith

Operating profit margins at the UK's top 40 PR firms have hit lows not seen for a decade - but the pressure would seem to be easing, according to research by accounting firm Kingston Smith W1.

Kingston Smith’s Marketing Monitor report took data at the end of June from the accounts most recently filed at Companies House by the UK’s 40 biggest PR firms.

It found margins – calculated by dividing total operating profit for those 40 firms by their total gross profit – was 10.9 per cent. That figure has been 12 per cent or higher for 11 of the previous 12 of Kingston Smith’s biannual surveys, and was higher than 14 per cent for both of the 2009 and 2010 reports.

"If we drill down into individual agencies we see that for those filing latest accounts in 2015, the results are in fact a mixed bag. Over half of those filing in the first half of 2015 have reported growth in operating margins, some in double digits," the report says, although it goes on to say those that have seen margins drop – such as DF King Worldwide (Europe) and Hotwire PR – have seen margins drop significantly.

The report also says: "Agencies continued to struggle to control salaries, as upward pressure pushed employment costs to over 62 per cent of gross income. Such pressure, however, is in line with general market conditions as the economy continues to improve.

"Despite these results, there is a positive feel within the sector. Consultancies are beginning to embrace the move away from retainer to project-based work and are providing typically non-PR services within digital and social media. In addition, as CEOs begin to take their corporate reputation more seriously, the outlook is encouraging."

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