EDITORIAL: Agencies struggle as downturn bites

2001 could not have been more different to 2000 for the PR industry. After a boom fuelled by dot.com mania that saw PR come to the vanguard of the marketing services sector, last year saw a future rich with promise seemingly fizzle away.

This year's Top 150 League Table bears the scars of the downturn on outsourced PR in the shape of falling fee income, fewer staff employed in the sector, and a reduced client base.

Most shocking to league table watchers will be the plight of the top five. Neither Weber Shandwick - with more than £41m in fee income - nor Citigate Dewe Rogerson, Hill & Knowlton, Bell Pottinger and Countrywide Porter Novelli grew in 2001, with four of them recording a fall in income.

Most agencies have dealt with the challenges of the year by restructuring their business, reducing costs, and marshalling their resources to take advantage of the few growth areas of this year, such as internal communications, healthcare and corporate social responsibility.

It is hoped such rationalisation will mean agencies can emerge leaner and more focussed for when a recovery comes.

The talent war is also clearly over. Redundancies in consultancy have meant the Top 150 agencies employed 7,488 people last year, compared with 7,902 the year before, a fall triggered by a shrinking in the outsourced PR market. The same agencies serviced 6,429 clients last year after sharing 139 more clients in 2000.

The most pronounced finding in the growth averages in the Top 150 is the difference between the top 50 and the medium-sized agencies. The top 50 grew by an average of only 8.3 per cent, compared with more than ten per cent for medium-sized firms (small firms did better again, with an average growth of more than 17 per cent).

The gloom that affected the larger agencies and those based in London was also not as pervasive in the regions. For the first time, PRWeek is to publish a regional table of the Top 50 Agencies Outside London with league tables for each of the five major PR centres in the UK regions. This will examine the factors that sheltered regional firms from the downturn that hit hard in London.

Minds inevitably turn to one question when faced with such results: when is the recovery expected?

WPP's results are regarded as a firm indicator of broader trends within the marketing services sector - and the outlook does not look good.

Sir Martin Sorrell, whose PA and PR interests fared particularly badly, will not even be drawn on his predictions for a timescale of recovery. There is anecdotal evidence of a speeding up of the decision-making process when it comes to new business hires - an indicator of increased confidence. But it is far too early to talk of a recovery.

The wisest minds are predicting, at best, a stabilisation this year.

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