UK PR agencies shrugged off the uncertainty caused by Brexit to report a buoyant 2016, with the bigger players, in particular, improving their performance, according to analysis by PRWeek.
Total UK revenue earned by the PRWeek Top 150 consultancies was £1.2bn in 2016, up 10.1 per cent on the previous year.* Growth was faster than the 8.4 per cent recorded in 2015, and just behind the 10.9 per cent of 2014. In 2015, smaller agencies grew far faster than their larger counterparts, but in 2016, growth was more even. The average revenue rise among agencies ranked 100 to 150 was 19.8 per cent, down from 21 per cent in 2015. For the top 50, the average rose from 10 to 15.1 per cent.
The major beneficiaries among bigger firms were those that combine corporate comms and significant public-affairs offerings, with Brexit fuelling demand for political expertise. There was strong growth for Edelman, which remains the UK’s biggest PR shop, and Portland.
Portland CEO Tim Allan says: "Given the uncertainty in the geopolitical situation, we found clients were increasingly looking for agencies that could combine corporate communications and public-affairs expertise. We expect this trend to continue in 2017."
Several of the bigger agencies bounced back in 2016 from periods of reorganisation. Revenue at the newly merged FleishmanHillard Fishburn was up seven per cent, while growth accelerated for both MSLGroup and Freuds. The latter’s revenue rose almost 30 per cent, as it benefited from its substantial corporate offering, which now accounts for about half the business.
Changes that Freuds embarked on in 2015 appear to be paying off. "In 2015 I decided to disrupt the agency," says chairman Matthew Freud. "I decentralised the structure, giving more autonomy to individual business units with their own cultures. This has unlocked a huge amount of value."
Other bosses of large agencies were enthusiastic about their UK performance. Golin co-CEO Matt Neale hails a "storming" year of double-digit UK growth.
Revenue dipped at two big players, Grayling and Bell Pottinger, with both still emerging from reorganisations last year. Bell Pottinger CEO James Henderson describes 2016 as "a year of consolidation and change", which included the departure of founder Lord Bell.
In the mix
Meanwhile, mid-sized and smaller agencies also profited from the mix of public affairs and corporate. These included Headland, Cicero and Hanover, all of which returned strong growth in 2016.
The latter increased revenue by almost a fifth, to £9.9m, reflecting another notable trend: growth through diversification.
In previous years PRWeek has highlighted the ‘squeezed middle’ agencies; those falling between the global consultancies that benefit from wide reach and resources, and smaller, often younger, agencies with fresh ideas and a nimble structure.
Now, however, ‘Goldilocks’ agencies have emerged. These are big enough to cater to clients’ needs with an increasingly diverse offer, but are also a viable option for clients who don’t want a global network.
They have been born out of smaller and mid-sized agencies joining the bigger players by significantly expanding their offers.
Hanover, for example, is traditionally known for public affairs, but has expanded into areas such as sport and healthcare, and last year opened a creative shop called The Playbook.
M&C Saatchi PR, which grew its revenue by 23.7 per cent last year, to £7.1m, is another such ‘Goldilocks’ agency.
CEO Molly Aldridge says its success in 2016 was due, in the main, to the consultancy "continuing to diversify and evolve… across creative, strategic, digital and influencer and experiential expertise".
She adds: "We’re able to move nimbly and quickly, hiring the best talent to ensure we deliver our clients both cultural and commercial impact via the right blended teams, passion and brutal simplicity of thought."
Diversification was also achieved through acquisitions last year. W, for example, bought House PR, the hospitality and leisure specialist, while Zeno, the digital-focused sister company of Edelman, merged with London agency 3 Monkeys.
In general, the striking growth of mid-sized and smaller consumer-focused agencies continued. There was significant expansion for Hope&Glory (39.2 per cent), The Academy (31.3 per cent) and Taylor Herring (32.9 per cent).
It was, however, a difficult year for many financial PR specialists, with the prolonged period of uncertainty before and after the EU referendum, compounded by the shock of Donald Trump’s presidential election victory in the US, leading to a slowdown in global M&A.
Most tellingly, there was minimal growth for UK financial comms mainstays Brunswick and Finsbury.
US-listed FTI Consulting, whose UK revenue in its Strategic Consulting arm benefited from the strength of the dollar against the pound, also noticed the trend. "[Last year] was not the year it was in 2015 in terms of the volume of capital markets activity," says Ed Reilly, CEO of the division.
Nonetheless, the major financial agencies agree that their cross-border capability is helping them to win big clients and benefit from the recent market recovery.
Elsewhere, it was a boom time for the specialists, not least health-focused firms, which experienced some of the fastest growth in the Top 150. Examples include 90Ten (up 55.5 per cent), W2O Group (up 58.4 per cent), Axon (up 38.5 per cent) and Incisive Health (up 36.1 per cent).
"[There was] healthy investment by pharma companies in an exciting array of new product launches," says 90Ten chairman Paul Tanner. "There was a real embracing of digital communications with budgets going to healthcare PR, rather than dedicated digital agencies. A lot of global clients actively switched from large, networked agencies to more creative global independents."
Several tech specialists had a good year, including Text100 (which grew 20.2 per cent) and Octopus (17.3 per cent).
The impressive 32.2 per cent growth of automotive-centred Performance Communications – a new entrant, at 51 in the table – also points to the benefit of being a focused boutique. Brexit did not appear to dampen the desire for sector M&A, which continues to shake up the Top 150.
Four Communications, with revenue up 17.5 per cent to £27.4m, is leading the pack. With funding from investment company Business Growth Fund, the London group made three acquisitions in 2015, and a further two last year.
Golin, which increased its revenue an estimated 14 per cent over the year, bought London creative shop The Brooklyn Brothers.
Pegasus, meanwhile, which followed rapid growth in 2015 with an 8.6 per cent increase in revenue last year, was acquired in April 2016 by listed healthcare outsourcer UDG Healthcare. The latter is an example of the new buyers making their mark in the sector.
Professional services firms entered the industry M&A fray in 2016, with Deloitte’s acquisition of comms agency Regester Larkin. This followed Accenture snapping up Kaper PR owner Karmarama.
Expect M&A to continue changing the agency landscape. Indeed, since the start of the year, two notable public affairs specialists have been bought by bigger agencies: Insight Consulting Group by Four Communications, and Champollion by Instinctif.
Despite some downbeat predictions about the impact of Brexit on UK PR agencies, in general, the sector had a good 2016. Larger agencies, particularly those with public-affairs and corporate expertise, capitalised on the turbulent times with their broad and ever-more integrated offers, while mid-sized shops diversified, and many specialists – especially in health – thrived.
Uncertainty remains, but the industry can look to the future with cautious optimism.
* Direct comparisons with 2015 are not possible because three of the Top 150 entrants declined or were unable to provide 2015 revenue figures.
For these, PRWeek took the 2015 revenue figure to be the same as in 2016 to calculate the aggregate total for 2015.
Each year several agencies fail to submit their figures. Among the Top 150 regulars that did not take part this year were: Lewis, Pagefield, Ruder Finn, Seven Dials, The Communications Store and Unity.