EDITORIAL: Profit squeeze is true benchmark

If the current economic climate can be compared to an icy winter, agencies that still manage to hire people and put on fee income are the industry's Pen Hadows. The comparison may seem glib - polar exploration is obviously both more brave and more foolhardy than running PR firms - but there can be no doubt that determination and risk-taking are required to thrive on the metaphorical ice floes of declining budgets and shrinking markets.

In this context, the PRCA Benchmarking Survey, unveiled at the organisation's annual conference last week, underlined some clear trends and picked out some new ones.

First, the existing ones. Despite the skewing absence - as in our own Top 150 - of the major US-owned networks, smaller agencies are doing better than large ones. The average profit margin at small consultancies - defined as those with fee income of up to £850,000 - actually rose slightly last year, from 16 per cent to 18 per cent. Across the board, margins converged on 12 per cent.

The new trends are more eye-catching. When asked what changes in strategy agencies had made in the last year, 20 per cent said there was an increasing focus on cost control, against 41 per cent the year before. And yet, 57 per cent say there is an increasing focus on stimulating new business, against 47 per cent the year before. The picture this paints is of an industry where all the cost that can be taken out has been, and it is now simply a bloody scrap for whatever business there is out there.

For all involved, there is also the fervent hope that the rescue plane of an upturn arrives before the chocolate and nuts run out.

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