From the editor-in-chief: ‘Furloughing is just kicking the can down the road’ – PR now faces tough decisions

This ninth locked-down week has been something of an emotional rollercoaster.

The build up to a warm, sunny VE Day weekend felt positive, with many papers running ‘Magic Monday’ or ‘Happy Monday’ headlines in anticipation of Monday 11 May, which the Government was promoting as a long-awaited release of the lockdown.

And yet Boris Johnson’s Sunday night national address, followed by the hard reality of the Monday morning afterwards, brought considerable confusion over the new social guidelines and widespread ridicule over the government’s new ‘Stay Alert, Control the Virus, Save Lives’ messaging.

One recognises the difficulty in conveying a more nuanced message than simply ‘Stay at Home’, but the truth was that Johnson’s much-feted address on Sunday felt a damp squib. Typically, the British weather dropped about ten degrees, leaving a cold and depressing start to the week.

Then, on Tuesday, the mood improved. Not only had the Government clarified its roadmap to more freedom – with a much welcomed ability to socialise (responsibly) with loved ones – but chancellor Rishi Sunak also announced a substantial extension of the furlough scheme.

The extension to October, with tapering contributions after July, prompted a huge sigh of relief to many worried workers and business bosses, including PR and marketing professionals. Mass unemployment was probably avoided, for now.

Particularly relieved were senior managers in brands and agencies that had been close to announcing redundancies on the basis the furlough scheme would not extend beyond the end of next month.

Francis Ingham, director-general of the PRCA, responded: “It’s good news that furlough scheme is being extended. It’s a vital tool to avoid large-scale redundancies, and to keep businesses afloat. The ability to bring back employees on a part-time basis, with ongoing financial support from the Government, is very positive.” (although the PRCA also called for additional Government help and initiatives).

One worries, however, whether the extension of the furlough scheme is re-applying a flimsy sticking plaster over a nasty wound that is unlikely to heal.

“Sunak’s extension is welcome but I fear it’s just delaying inevitable redundancies,” the CEO of a successful mid-sized PR shop tells me. “A fall in economic activity means lower PR spend, especially in hard-hit sectors. This means fewer jobs. 

“Furloughing is kicking the can down the road, but I hope the overall job market is better by October so anyone made redundant can find alternative employment. The bottom line is that the PR sector will contract before it starts to grow again.”

This now seems to the widespread view among experienced PR bosses. 

The head of one large UK agency confided: “Listen, the furlough scheme buys everyone time; it is good to postpone redundancies, but the big question is how does one run businesses beyond the furlough? We were all hoping the lockdown was a defined period from which we could quickly recover, but the recession is looking rather L-shaped. There will be no normal resumption of many PR business for the next four to six months.”

The CEO of another mid-sized agency went further: “Furloughing is of limited use. We really need to decide what business looks like for the next year, ensure we have the right people for that scenario, and move on quickly. We need to cut heads where they are not useful, because I’m not prepared to cut the salaries of my key people in even the medium term. I need them to be motivated to lead the business out of this period.” 

Of course, some sectors have already taken tough decisions on cuts - for example, the travel industry. Companies in this sector have realised their revenues will not come back any time soon and Europe’s largest holiday firm, TUI, became the latest travel operator to indicate it would cut 30 per cent of its workforce, meaning 8,000 redundancies across its global operation.

Travel bosses clearly came to the conclusion that business will fail to return to pre-Coronavirus levels until around 2023, so they might as well right-size now and get their strategies back on track, their key executives focused and motivated.

Talking to leading PR executives, that’s where we are right now – in the bargaining stage of the cycle – a point at which many companies having forced to make tough decisions about the future.

One is acutely aware that some smaller businesses, including smaller PR agencies, may be forced to sell or merge to survive.

Chancellor Sunak is also aware of the need to get the market operating again as soon as possible. He must wean businesses off the ‘heroin’ (as one Treasury adviser rather dramatically put it) of furloughing.

It was significant to hear this week that Weber Shandwick, the world’s second largest PR agency, had communicated internally that it intended to make a meaningful reduction its global workforce. This would be achieved via a combination of “unpaid leave, reduced working hours or voluntary furlough or redundancy,” according to a staff memo. Workers could choose six months' unpaid leave or 10- or 11-month working years.

This is a clear sign if we needed one that many business leaders see no V-shaped recovery pattern this year. 

Indeed, one wonders whether the world’s biggest PR company Edelman is regretting its reassurance to its 6,000 staff, in early April, that there “would be no job losses related to the COVID-19 situation.”

However, there is also an optimistic way of looking at all this. 

It is reassuring that large agencies such as Edelman and Freuds have told their staff that job losses are unlikely. And though Weber Shandwick is the first big agency to specify longer-term resourcing cuts, these are predicted to be around four per cent of the workforce. The company looks to be offering encouraging levels of work flexibility, with a view to getting staff back to full working hours as soon as possible.

So I restate my confidence that the PR industry is well-positioned for this crisis; that in-house comms teams and agencies remain determined to retain their valued colleagues; that the business is flexible, adaptable and innovative enough to emerge even stronger afterwards.

It’s just that the ‘afterwards’ may well now be 2021, rather than the autumn.

See, I told you this week had been an emotional rollercoaster.

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