Am I only the only one to view the OBR’s prediction of a 35 per cent economic contraction in the second quarter as fairly optimistic for a period when we can’t leave our homes, let alone go clothes shopping or book holidays?
The impact on many businesses is clearly devastating, including for a vast number of comms professionals - as noted here last week.
We can also see from the swinging cuts announced by big marketing services groups this week – see Omnicom and Publicis – that brand marketing spend has taken a massive short-term hit, with threats continuing in the medium term at least.
That said, there are some areas of communications that remain surprisingly buoyant. I will leave aside the pharma/healthcare and tech sectors for the moment, because these warrant specialist pieces.
Almost as bullish however, is corporate comms and public affairs, which tends to be counter-cyclical and in high demand at times of crisis.
One CEO of a big corporate consultancy I spoke to this week sounded cautiously sanguine: “We appear to be part of the solution, not part of the problem. So far I’d say comms has ‘had a good war’.”
His judgement is based on the fact that any corporate or financial comms adviser on a retainer fee will have been kept very busy over the past month, advising boards on how to best respond to the crisis in the short term. They are working relentlessly with in-house professionals on announcing rights issues, changes to executive remuneration, or cutting corporate dividends.
Another well-known corporate PR chief had the same view: “We’re doing a lot of corporate counsel at the moment. There’s been an increase of scrutiny on corporates – about executive pay or the use of state aid – and that is likely to continue. Communicating corporate purpose has also become a bigger priority. Some companies are doing great things and becoming poster children during all this, others much less so.”
Similarly, in such a fast-moving political-economic situation, public affairs is a priority for many businesses. “Any consultants with intimacy to the Treasury are extremely valuable at the moment,” one agency boss told me. “Business-Government relationships will become very important over the coming months.”
We can therefore expect those consultancies covering corporate, financial and public affairs to outperform the rest of the agency market. Interestingly, this is the continuation of a key trend for the past few years, but only accelerates during this crisis.
It means that unlike many other businesses – and many other agencies in consumer PR or indeed advertising – these firms are not cutting salaries or laying people off.
That said, even these bosses realise they’re not out of the woods yet. One corporate comms CEO confided: “Things will get significantly worse if the economic news remains downbeat in two months’ time. Q1 for us will be flat. And if Q2 revenues are down by, say, just ten per cent that would be a victory. But we all hope for a significant uptick in Q3.”
Another boss of a successful mid-sized generalist described corporate work as “holding steady, rather than buoyant, and “a mixed picture.”
“Some clients need to over-communicate to reassure and support their customers, but others have seen a sharp decline in revenue and have cut budgets. The bigger client companies are definitely weathering the storm better than smaller organisations, mainly due to strong balance sheets and solid cash reserves. March was a definite spike in demand for corporate, crisis and internal comms, but it’s levelled off now we’re in a new normal.”
And this is a key point. As client organisations start to think longer term about the next six or 12 months, there is a growing fear they may start cutting back on all non-core expenditure, which may even include corporate counsel.
It is here where a consultancy’s close relationship with the c-suite of its clients, particularly with CEOs, will insulate them better than others.
So while some PR agencies that are fortunate/wise enough to be operating in certain sectors may be avoiding the pay cuts and redundancies so far, the bosses admit privately that there are unlikely to be any pay rises, bonuses and promotions for the rest of 2020. This is also likely to be true for in-house corporate comms specialists.
One experienced agency head in such a business told me this week: “The reality may be that 2020 is ruined. It’s probably a write-off in terms of growth and real profitability.”
Despite a tough year ahead, practitioners on the corporate, reputation management and crisis side of the communications business are likely to fare much better than those in consumer PR or brand promotion.
One corporate specialist says: “Overall, this crisis will be good for the industry because of the increase in interest in the way trust is built; in the opinion of experts and stakeholders, which is really old-fashioned public relations. But there will be significant changes in the way we all operate.”
Indeed COVID-19 is likely to play into the hands of specialists who already employ a flexible working model, both in terms of their practices and the types of client they advise.
The founder of one such agency says: “We have lost one client and seen fees cut by another directly related to COVID-19. However, we have at the same time gained several new clients with a number of others in the near-term pipeline. No one has been fired or furloughed and I certainly don’t intend that to happen. Indeed, for a number of our clients there is significantly increased activity as a direct result of the crisis.
“I think the combination of our geographic spread and relative lack of exposure to the most-hard-hit sectors is a factor here. No one is immune and no-one has a crystal ball, but at the moment it is a case of “steady as she goes”.