EUROPEAN LEAGUE TABLES 2003: State of Flux

Many European PR markets suffered in 2002, but others thrived.

It's the same story once again. Due to US legislation, several European trade associations have been unable to supply league tables for the PR industry in their local market this year. The Sarbanes-Oxley Act, which came into effect following the US corporate governance disasters of 2002, has prevented all PR agencies with US-listed parent companies from disclosing any financial results. While it's impossible to make comparisons with last year's league tables, it is clear none of the European PR markets managed to avoid the effects of the international downturn in 2002.

GDP in the Euro zone rose by just under one per cent in 2002 and, as a result, most PR markets have been affected. In addition, the Iraq war generated a great deal of uncertainty and created budget planning headaches across the continent. In almost every market, the outlook is one of uncertainty and client companies - particularly large multinational corporations - are restricting investment in PR to a conservative, short-term footing.

Perhaps the only sweetener in a bitter pill has been that, in most cases, PR has not suffered as dramatic a fall in revenues as advertising.

Figures were supplied by the following associations: BPRA in Switzerland, BGPRA in Belgium, Assorel in Italy and Precis in Sweden. Figures and analysis for Germany were compiled by sister magazine PR Report as was the Austrian analysis, while Austrian data was provided by Bestseller.

Reports on the PR industries of Finland, Ireland and Portugal were compiled with the co-operation of The Finnish Association of PR Consultancies, the PRCA in Ireland and APECOM in Portugal.

Austria

There is one bright light on the horizon for European PR business.

The Austrian market league tables, provided by Bestseller, unveil a rather optimistic mood. According to figures from PR agencies, last year's development was much better than expected, generating the belief that PR specialists did not suffer as much from client companies' budgets cuts as advertising firms. Analysts report that, for two years in a row, PR business is standing strong, while advertising agencies see themselves under pressure.

Market leader ECC Publico saw fee income growth of eight per cent over 2001. The Vienna-based agency, headed by Wolfgang Rosam and Markus Schindler, reports a fee income of more than £7m, and, according to Rosam, lobbying and crisis management were growth areas.

Hochegger Comms had a fantastic year, with fee income up 72 per cent over last year to £6.3m. MD Peter Hochegger modestly calls it a good year.

'In an increasingly complex world, linear models do not work any more,' he says. 'We rely on high-level communication models and deliver conflict management and crisis communications services.'

Trimedia Communications and Ecker & Partner also gained substantial growth rates. Trimedia grew by 42.1 per cent while Ecker was up 48.6 per cent.

However, the Skills Group did drop by 12 per cent. The group management attributes this fall to a good 2001, with the introduction of the euro, which they were not able to compensate for in 2002.

At the same time, a more precise definition of PR (fixed by Bestseller and local industry associations) led to the exclusion of GRACE Communications.

Using a mixture of integrated comms, product-placement and promotion, GRACE had reached the number three position in the 2001 Bestseller ranking.

Now the firm does not appear in the listings at all.

EURO CONSULTANCIES AUSTRIA

Rank Company Fee income Growth

2002 2002 2001 %

1 ECC Publico 7,396,598 6,818,560 8

2 Hochegger Comms 6,348,564 3,687,594 72

3 Trimedia Comms 4,222,656 2,971,862 42

4 Ecker & Partner 2,675,400 1,800,951 49

5 The Skills Group 2,350,720 2,676,438 -12

All figures relate to the year ended December 2002. Fee income = PR fees

only Data supplied by Bestseller

BELGIUM

The Belgian PR industry is unique in Europe. Since Brussels became the administrative and political centre of the European Union, the industry has developed two distinct tiers, each following different trends and evolving at different paces.

The local Belgian PR market carries out assignments at a local and national level, while the burgeoning public affairs industry, centred in Brussels, services the growing demand for pan-European PAassignments.

Belgian PR association BGPRA held a roundtable of its key members at the beginning of the year and found that, on average, growth was negative at between five and ten per cent.

However, due to the structure of the industry, the general trend has not affected all sectors.

'The local Belgian PR market has suffered, but the Brussels public affairs market, for most large players, has remained strong,' notes BGPRA president Jean-Leopold Schuybroek.

Continued growth has been spurred by three key factors: EU enlargement, the growing numbers of international companies relocating European headquarters to Brussels and the large talent pool of lobbyists that flock to Brussels from all over Europe.

In 2001, Burson-Marsteller took the decision to focus its Belgian business on public affairs, and now 90 per cent of its business is related to working on EU competition policy, market liberalisation, trade and EU-US relations.

'We still provide PR in the Belgian market, but we mainly work on EU policy for large multinational companies. Last year was an excellent year for us,' explains B-M Brussels MD Jeremy Galbraith.

The trend for international agencies to focus on pan-European public affairs continues. Last year, several merged their PR and public affairs operations under one roof. Weber Shandwick and BSMG merged their public affairs businesses with Weber Shandwick Belgium to become Weber Shandwick Adamson.

According to Schuybroek, this trend has been driven by a growing sophistication in the European public affairs market: 'Belgian PR used to be media relations and public affairs was more government relations. But now, public affairs is more like in the US sense - an integration of all disciplines of PR and public affairs.'

EURO CONSULTANCIES BELGIUM

Rank Company Fee income Growth

2002 2002 2001 %

1 Interel 4,361,676 4,273,2201 2

2 Euro Comms Strategies 1,920,830 1,821,9681 5

3 PRP 1,116,061 - -

4 Impact Comms Consulting 829,873 - -

5 B&S/Syntagmes 430,367 - -

All figures relate to the year ended December 2002. Fee income = PR fees

only 1 2001 figures as submitted for PRWeek 2002 European Consultancies

tables. Data supplied by BGPRA

GERMANY

When PRWeek's sister title PR Report began its annual agency survey, a significant number of CEOs were surprised and shocked by the strict corporate governance rules released by their international holding firms following the Sarbanes-Oxley law. Some managers even had to withdraw data they had already supplied.

As eight agencies out of the top 30 were affected by the restrictions, PR Report estimated figures based on the previous autumn trend monitor for firms such as ECC and Weber Shandwick, which is led by MD Christiane Dirkes.

Even if all figures were available, the German market would still be weak in 2002. After revenues had exploded by 25 per cent annually between 1998 and 2000, the growth rate was reduced to six per cent in 2001, followed by 1.37 per cent last year. Almost ten per cent of employees lost their jobs.

However, the majority of agency managers do not expect to continue cutting staff numbers. While 16 per cent estimate further cuts after having seen the development in the first quarter of 2003, 44 per cent say they would maintain the number of staff.

For agencies, the only advantage of this first real market crisis in Germany since the mid-1990s is the opportunity to review their management structures and operating processes. Approximately half of all managers expect increasing profits for their companies in the long term. But the trouble is, no one can predict when the crisis will be over. The earliest date seems to be at the end of 2004.

Fee income growth, whether officially stated by PR firms or estimated by PR Report, differs widely in the current ranking. While, for example, Media Consulta and fischerAppelt saw their income increase by more than 25 per cent, Hunzinger, Weber Shandwick, Fleishman-Hillard and ABC Euro RSCG (all estimated figures) recorded significant falls.

EURO CONSULTANCIES GERMANY

Rank Company Fee income Growth

2002 2002 2001 %

1 ECC-Agenturen (est)1 26,091,223 23,623,134 10

2 Weber Shandwick (est)1 11,846,093 13,735,828 -14

3 Media Consulta Deutschl'd 9,941,591 7,262,298 37

4 fischer Appelt 9,046,144 7,029,282 29

5 Trimedia 8,636,780 8,389,544 3

All figures relate to the year ended December 2002. Fee income = PR fees

only 1 These companies could not enter figures, those shown are

estimated by PR Report. Data supplied by PRReport

FRANCE

French PR consultancies faced a battle against a declining market in 2002, and continue to do so. Characteristically, most agencies are reporting growth only in services of value to a market in trouble: change management, crisis communications, internal comms and all the services associated with corporate restructuring.

The French economy, the second largest in the euro zone, shrank overall in 2002 and, despite meagre but continued growth in the first three quarters of 2002, by the fourth quarter the French economy had shrunk by 0.1 per cent.

The dismal performance in the wider economy meant the same for the PR industry. Impressive growth rates of 31.3 per cent in 1999, 24.2 per cent in 2000 and ten per cent in 2001 will in no way be matched in 2002, admits president of industry association Syntec Public Relations Sophie Renard

While Syntec's research into the French PR market will not be available until later in the year, Renard forecasts growth will be three per cent.

Syntec's research shows PR employee numbers grew by nine per cent and fees grew by just over nine per cent. But 2002 figures are expected to be far more gloomy, says Renard: 'In 2002, we saw international PR campaigns and European PR co-ordination budgets cut. These were mainly coming from the US.' The healthcare sector was largely unscathed, but tech continued to operate in a depression. Consultancy managers say the ripple effects of US accounting scandals at Enron and Worldcom caused cuts in client PR budgets.

However, domestic political concerns hampered industry growth more than any other factor. An optimistic start to the year was reflected in minor GDP growth, but early investment confidence was scuppered by the strong showing of National Front candidate Jean-Marie Le Pen in the first round of the presidential elections in April.

'It (Le Pen's strong result) was such a surprise,' says Hill & Knowlton Paris managing director Stephane Billiet. 'Companies were showing an interest in CSR, but they weren't sure how to position themselves in the political uncertainty.' Despite Le Pen's trouncing in the second round by Jacques Chirac a month later, parliamentary elections in June perpetuated business uncertainty with a knock-on effect for PR.

'Mid-July to mid-August is a quiet period in France, but in the "back to school" period, they decided to buy PR, but only on a short-term basis.

It was a succession of bad events that had a dreadful impact,' adds Billiet.

High-profile campaigns in the US to boycott French products, following the country's failure to support the invasion of Iraq this year, have had no reported effect on the industry. Nonetheless, the campaign has caused concern.

I&E Consultants managing director Jean-Pierre Beaudoin says: 'B2B and business-to-government areas need to be watched very carefully.' He fears the boycott of French products could prejudice the chances of French companies bidding for large government tenders in the long term, which could damage the PR sector enormously.

ITALY

The outlook for the Italian economy is slightly brighter than for many European markets. The Economist Intelligence Unit (EIU) is predicting a slight recovery this year. From its decline to GDP growth of 0.4 per cent in 2002, EIU has forecast GDP growth of 0.9 per cent this year.

This may be a far cry from the rosier years between 1997 and 2001, when growth of two per cent was the average, but the country's PR sector is still hopeful of a recovery.

'During the autumn of 2002, there has been an increase in the number of tenders, and this has raised our hopes for 2003,' says Franco Guzzi, president of industry association Assorel.

Another 'positive light', he adds, is the re-ignition of investment in PR among international clients, after a spending hiatus that lasted for much of 2002.

What has probably sustained agencies during 2002 has been the high proportion of local clients that make up most agency books. Estimates suggest client lists at the top 15 agencies are split 65/35, with the majority of clients being local, where investment in PR has been less drastically cut.

Healthcare has proved perhaps the only sector to be truly recession proof, with Italian PR firms reporting stable, positive growth. However, agencies have not reported any demand for crisis communications so far, despite the downturn.

'Only now is crisis revamping because companies are taking the restructuring route. The situation is beginning to unblock, and we are expecting lots more restructuring,' says H&K Italy CEO Cesare Valli.

Agency managers have shown concern about the effects the downturn has had on efforts to offer more sophisticated PR services in recent years.

The market has taken a back-to-basics approach since the September 11 attacks and further terrorist threats, which are cited as the cause of Italy's ongoing uncertainty.

Assorel notes client spending has been strongest in consumer and corporate, but has been pruned back to a quarter-by-quarter approach.

'Companies tend to wait and see how they are performing, and only when the quarterly revenues are sure and safe does the management liberalise the following quarter's budget,' says Guzzi.

'The backbone of the Italian PR industry is still media relations. Being able to offer good media relations has allowed quite a few agencies to survive,' says Burson-Marsteller Italy managing director Eric Gerritsen.

In a further fundamental shift in the Italian PR industry, last year H&K became the second PR firm in Italy, after Fleishman-Hillard, to join Assocomunicazione, a rival association to Assorel that includes direct marketing, advertising and all other comms sectors.

H&K's decision to leave Assorel has sparked debate in some quarters of the Italian PR industry on whether or not the industry's interests are best represented by its own association or by a larger, less

homogenous body.

EURO CONSULTANCIES ITALY

Rank Company Fee income Growth

2002 2002 2001 %

1 Barabino & Partners 7,996,263 7,992,700 0

2 Mediante Group1 3,555,346 - -

3 Edelman 3,276,310 3,272,755 1

4 Business Press 2,899,227 - -

5 Noesis Communicazione 1,875,747 1,728,474 9

All figures relate to the year ended December 2002 Fee income = PR fees

only. Data supplied by Assorel 1 Mediante Group comprises EPR

Communicazione and MN

THE NETHERLANDS

The Dutch economy was not sheltered from the global economic slowdown in 2002 and continues to face its own economic concerns this year. With consumer and business confidence falling during 2002, eco-nomists are predicting only a slight recovery this year. Set against an average GDP growth of 3.3 per cent between 1997 and 2001, the 0.3 per cent growth recorded in 2002 clearly illustrates the state of the economy.

Domestic issues compounded the effects of the international downturn to create a general economic malaise in 2002. Not least of these concerns was the political vacuum that started in May last year, when right-wing politician Pim Fortuyn was assassinated and several rounds of elections failed to produce a coalition national government. Coalition talks between the Christian Democrat CDA and Labour PvdA parties were finally resolved a year later with the formation of the new government last month.

While the lack of political certainty did not damage the Dutch public affairs industry, since the machinery of government continued, it was a large contributor to the lowest consumer confidence levels recorded since 1983.

'Holland was hit by both internal and external factors in 2002, and although Dutch consumers are down to earth, they are always looking for safety,' explains Hill & Knowlton group director of marketing comms Bas van Kampen.

'People said: "I will just sit back and concentrate on my family." That created a "take it easy" approach among consumers.' Neither PRECOM nor VPRA, the two professional associations of Dutch PR agencies, produced league tables this year. However, PRECOM chairman Jaap De Jong points out growth for the PR industry was flat in 2002.

'Last year was a year of standstill - not really bad, but not good either.

Some agencies saw marginal growth, but the average income was the same as in 2001,' says de Jong.

'The second half of the year was the worst. In the first half, clients maintained existing budgets, so the PR industry was still optimistic.

But by the second half we saw the first signs of cutting budgets, and that went on into 2003.' He adds that any growth in 2002 and so far this year is mostly in local and provincial government work.

Several high-profile corporate controversies at IT firm Getronics, food industry giant Royal Numico and grocer Ahold hit the headlines during the period, further damaging investment and consumer confidence. Undoubtedly, the scandal that most shocked the market concerned Dutch grocery group Ahold, which overstated its earnings for 2000-2002 by $880m at its Foodservice distribution unit in the US.

'They had a great impact,' explains van Kampen. 'They had major positions of respect in Dutch society. Following these incidents, people were cautious and spent a long time waiting to see if there were any more shocks around the corner.'

The IT sector, which had previously withstood the recession, was finally hit by the downturn last year, with PR budgets 'down to almost zero', according to de Jong.

The two areas where PR consultancies are seeing slight hope this year are media training and crisis communications.

De Jong reports new business leads are increasing, but new assignments are hampered by slow decision-making, while competition for new accounts remains intense.

SPAIN

Despite the global economic slowdown, Spain's GDP grew at two per cent in 2002, down from 2.7 per cent in 2001 - outperforming the forecast GDP growth for the eurozone as a whole, which is not expected to reach one per cent.

Tourism is the 'national industry' of Spain, accounting for 12 per cent of GDP and employing around 1.5 million people. Despite a major downturn in tourism globally due to the September 11 attacks, tourism staged a minor recovery, with a 3.3 per cent rise in numbers of visitors to Spain last year.

But such positive signs belie a growing unemployment rate, which rose to around 11.5 per cent last year. Economists forecast GDP growth of only 2.1 per cent for 2003. Consequently, the PR industry has suffered and anticipates a slow recovery.

'The trends that started to manifest at the end of the first quarter of 2001, such as the internet bubble collapsing, then compounded by 9/11, moved into 2002. Overall it was the worst full year we've had in Spain in the last decade,' says Burson-Marsteller European co-chief executive Carlos Lareau.

Spain's PR industry association ADECEC did not produce a league table this year, due to the Sarbanes-Oxley Act, but has surveyed its members.

According to the association, the Spanish PR industry grew by 16 per cent last year, but zero growth is expected this year. And while its members employed 1,085 people in 2002, the number has dropped to 1,000.

One of the reasons for this expected dramatic downturn is clients' delayed reaction to market conditions.

'Assumptions in 2002 were too optimistic about a pick-up late in the year, which meant that when clients did their budgets for 2003, they over-compensated,' notes Lareau. 'We've seen enormously restricted budgets.

This is a huge over-swing from 2002.'

Concerns for political stability are also on the radar. Spanish Prime Minister Jose Maria Aznar's Popular Party lost votes in local elections in May, ceding power to the opposition Socialist Workers' Party in the Madrid region for the first time in eight years. The swing is explained by commentators as a reaction to Aznar's strong support for the war in Iraq.

'Budget cuts due to the recession and political uncertainty are one of the key trends this year,' points out ADECEC secretary Susana Gil.

But Spanish agencies, facing increasing competition for business, are also under pressure to offer more sophisticated services, such as crisis communications and CSR counsel, as well as more sector specialisation.

Inforpress chief executive Nuria Vilanova says one of the most noticeable positive trends has been the increase in the creation of senior in-house communications roles.

'The increasing importance of communication has made the big companies change from having a person in charge of communication to having well-trained heads of comms able to manage their supporting team,' she adds.

But undercutting much of agencies' hopes for growth are widespread reports of price-cutting, particularly among the many boutique and small firms.

'It's a demand-driven market, and some agencies are reducing their fees to clients,' adds Lareau.

SWEDEN

The Swedish PR industry may have witnessed a bumper year of 15 per cent in 2001, but as with many of its European counterparts, 2002 saw a decline of around ten per cent.

The poor global economic outlook was partially to blame for this, but Sweden's market downturn has also been led by the fall in demand for new economy services, especially telecoms.

For example, there is considerable uncertainty regarding future demand for telecommunication equipment, and the downturn has created great problems for Swedish telecoms giants, such as Ericsson.

The sectoral slump has been so substantial that export volume in 2004 is expected to be just under 60 per cent of the peak year of 2000.

'The collapse of the telecoms and IT sector (IT-specialist Segerfeld and Partners closed shop in 2002, as a result of the harsh environment) has had a tremendous impact on the whole Swedish economy,' admits Burson-Marsteller Sweden managing director Anders Bylund.

Total fee income for PR agencies in the Swedish market in 2002 is almost £60m.

Kreab Sweden, the country's largest agency, has worked increasingly on issues management, crisis and reputation management during the period.

But Kreab managing partner Charlotte Erkhammer says a return to 'basic PR' has tended to dominate in much of the market.

'Media relations and the media perspective is as important as the internet was a few years ago,' says Erkhammer.

The Swedish public affairs industry has continued to grow as the country prepares for a referendum in September on adopting the single currency.

This has also led to some investment uncertainty, with a knock-on effect in the PR market.

However, there are also positive forecasts for the rest of the year.

'PR on a bigger scale is somewhat new in Sweden, but companies and organisations are becoming aware they are under-investing in PR, compared with, for example, advertising,' says chairman of PR association Precis Johan Bobert.

'You can see a trend emerging for a growth in non-paid media space.'

Despite a modest rise in unemployment, the economy is expected to remain fundamentally sound, with GDP forecast to grow by 1.5 per cent this year.

EURO CONSULTANCIES SWEDEN

Rank Company Fee income Growth

2002 2002 2001 %

1 Kreab 11,913,729 12,618,884 -6

2 JKL 6,182,915 5,843,227 6

3 Journalistgruppen 4,296,480 5,159,445 -17

4 GCI Rinfo 4,217,887 3,543,233 19

5 Citigate Gramma 3,572,292 - -

All figures relate to the year ended December 2001. Fee income = PR fees

only 1 All 2001 fee income as submitted for PRWeek 2002 European

Consultancies tables. Data supplied by Precis

SWITZERLAND

Experts predict GDP growth for the Swiss economy to reach only 0.2 per cent this year, following a year of stagnation. This trend has been mirrored closely by the PR sector.

Swiss PR agency association BPRA conducted a survey in October last year, in which its 18 member agencies predicted a decline in total net fees of almost six per cent for the year - a reversal from the period of prolonged growth that stretches back to the 1980s. A league table of its now 23 members confirms an actual decline of 8.7 per cent.

BPRA members attributed the downturn to a postponement in projects and a lack of new business to replace them.

Due to the unusual structure of the Swiss PR sector, in which there are many small agencies and a few large players, but no medium-sized firms, the market was divided, with the large agencies experiencing harsher effects from the downturn.

For example, the two biggest agencies, Farner PR and Consulting and Trimedia Communications saw fee income drop by more than 20 per cent in 2002, while int/ext gruppe, the 13th largest agency in the country grew by 22.7 per cent.

'The big agencies have more problems because big Swiss multinational clients have more problems than small and medium-sized companies,' says BPRA president Ulrich Bollmann.

Trimedia Communications partner and senior consultant Michel Gutknecht confirms the trend.

'Big clients had a bigger PR spend drop than small clients, whether international or local. This has meant the gap between large and small consultancies is now closing,' he says.

The downturn has also affected agency staff levels, which fell by 6.3 per cent. No market growth is expected this year.

The healthcare and consumer sectors were the healthiest during 2002, and continue to be so.

EURO CONSULTANCIES SWITZERLAND

Rank Company Fee income Growth

2002 2002 2001 %

1 Farner PR and Consulting 8,310,535 10,516,090 -2

2 Trimedia Suisse 8,187,090 10,247,978 -20

3 Wirz Corporate Comms1 7,410,728 8,186,815 -9

4 c-matrix group 3,613,537 3,377,810 7

5 Mediapolis 3,458,268 3,168,904 9

All figures relate to the year ended December 2001. Fee income = PR fees

only 1 Figure provides after deconsolidation of Zahner + Partner,

including PR from Wirz IdentityData supplied by BPRA

EU ROUNDUP

FINLAND

The Finnish PR market has enjoyed strong annual growth of between ten and 20 per cent in recent years, far outpacing most European GDP figures.

However, the Finnish Association of PR Consultancies (FAPRC), which has 36 members, has estimated growth in 2002 was only two to three per cent, with this year starting out 'flat'.

FAPRC president Kim Nyberg says: 'The year began optimistically but then came the Iraq war and Sars, and this spurred the downturn.' Like much of the Scandinavian market, Finland has yet to adjust to the bursting of the tech bubble. According to Nyberg, tech PR is not growing.

Consequently, he predicts widespread downsizing among tech PR agencies this year.

However, a recent cut in income tax rates holds hope for a lift in consumer spending that will, it is hoped, lift the PR market.

Recent studies show that SMEs are most optimistic this year and are also expected to grow as a share of the PR market, in contrast with large multinational corporations that continue to tighten all investment, including in PR.

IRELAND

The PR consultancy market in Ireland has grown rapidly, in pace with the national economy. The PRCA in Ireland has no figures on the growth of its 38 member firms. However, the trade association's chairman Hugh Gillanders says the global economic downturn has been slow to affect the Irish PR market.

'Tech and financial have obviously performed poorly, but other parts of the market continue to grow, such as healthcare,' says Gillanders.

The PRCA is currently challenging the quality of government tenders, which represent a significant portion of the market. It is demonstrating that inordinately long lists of firms invited to pitch for public contracts - often ten to 20 agencies - are straining consultancy resources unnecessarily.

Its aim is to improve the way procurement of both PR and advertising is managed.

PORTUGAL

Portuguese PR trade association APECOM estimates growth for the PR sector overall last year was around 5.6 per cent, which is slow by former standards of 20, and sometimes 35, per cent.

'But, taking into account an inflation rate of 3.4 per cent, it almost means stagnation in real terms,' says APECOM president Alexandre Cordeiro.

Unlike in most countries, the Portuguese tech PR market is still buoyant (APECOM has no sector figures) as is healthcare and pharma.m.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in