I’ve written often in 2021 about the fierce war to hire and retain talent that’s been raging in the industry since the beginning of the year, and last month I looked at why employees appear to have become so unsettled.
One of the outcomes of all this may be spiralling salary inflation, which at the moment seems most acute in PR agencies, at certain levels of seniority, and particularly in London and the South East.
Alex Myers, founder and CEO of successful London-based consumer agency Manifest, told me this week: “I’d say folks are asking for 10-30 per cent more, in terms of salary, than in 2020, depending on seniority. We’ve needed to be strict with ourselves to maintain our commitments on pay parity.”
Another CEO of a London agency, this one larger and more generalist, said: “I reckon we’re seeing salary inflation of 15-20 per cent at moment. For example, we’re having to offer £60k for a role that previously was £50k. The inflation is most obvious in what I’d call the mid-range of seniority, so £30-80k. But that’s the vast majority of our workforce so it has a big impact on the bottom line.”
And a boss of a large financial/corporate shop told me recently that her agency was “definitely seeing salary inflation in double figures at the moment.”
The boss of a West Country-based PR agency said he too was “seeing candidates at all levels pushing their expectant salaries upwards” but that he was resisting actually allowing wage levels to inflate. “Yes we want the talent but we’re not entering a salary war,” he insisted.
“Salaries here are around 18 per cent lower than in London. We have increased salaries for each advertised role but only marginally. Some agencies in the region have bumped salaries up beyond what I consider to be realistic.
“A couple of recruiters have told us they’re working on account manager roles that are being offered at £35-40k, yet such positions are typically £25-30k. It’s dangerous territory if other members get wind of this and realise they’re receiving less and are more senior.”
Another agency CEO in a North-based consultancy also said he was not seeing London-style hikes: “Honestly, it’s not something we’ve really considered. Yes, I’d expect there would be an above-inflation increase across all salaries from 2019 to levels at the end of this year and early next, reflecting the increase in demand for comms professionals and the relative shortage of candidate supply.
“But I don’t think it will be at the level being cited by London agencies. The London market must either be very tight or businesses have underpaid and undervalued people previously.”
There is certainly a sense in the market that there was a significant exodus of talent out of London and the South East last year, during the height of the pandemic’ as workers didn’t see the need to stay in expensive accommodation if they were predominantly working from home.
And of course, this may have led to some relocating to the regions permanently, leading to worse staff shortages in London than elsewhere.
That said, another West Country-based agency head told me last week that she too was finding a shortage of talent. “In the early days of the pandemic workers were moving out of London to the South West but that appears to have reversed a little of late, with staff drifting back again.”
One experienced London-based recruitment consultant said she was “not at all surprised” by salary inflation in the agency world and that in-house jobs were also requiring “significant hikes in salaries to attract the right candidates” albeit at lower rates of increase than the levels being cited by agencies.
She also noticed she was seeing more candidates who have worked in agencies but now choosing to take in-house jobs, saying they were “seeking a less stressful lifestyle.” She implied this was a perception rather than necessarily a reality of in-house comms roles.
The recruiter warned that the staff shortage could get even worse for agencies in the short term as client-side marketing and comms teams started to recruit again: “Last year clients were putting lots of work into agencies as they preferred to keep their own teams tight, maybe furloughed and to outsource activity. But now clients are getting their own teams back up to speed and hiring again.”
Of course, it’s not all bad news for comms consultancies that, across the board, are reporting that they’ve never been so busy.
The shortage of talent, however, is meaning they’re now being forced to turn down lucrative client work because they cannot service it properly and they prefer to consolidate existing client loyalty.
“It’s a strange business at the moment” reports the experienced chief of a large agency that has its HQ in London. “It’s a seller’s market for agencies but also a seller’s market for talent. There’s inflation all around.”
Does that then mean that agencies will have to hike their rates to clients up?
“Absolutely it does,” believes the London agency chief. “Consultancy charge-out rates have been flat for many years and I’m sure lots of agencies have been discounting prices as well, but that’s no longer sustainable if we want to maintain decent margins.
"There’s long been a narrative that the UK PR agency market is ‘oversupplied' but I’m not sure it is anymore, particularly post-pandemic.”
