As squeezed budgets and cost-conscious clients become more prevalent across the globe, the European PR industry has inevitably felt the effect.
Issues such as stock market volatility and the recent Iraq war have shaken the market's confidence. This is married with a low or static GDP growth within the major European economies over the last year. By the fourth quarter of last year, France, the second biggest market in the Eurozone, saw its economy shrink by 0.1 per cent, while in Germany, the largest market, GDP dropped by 0.2 per cent.
'The reality, and this probably applies to the whole of Europe, is that the marketplace is tough - mainly because it's unpredictable,' points out Porter Novelli Europe CEO Neil Backwith. 'There's not a huge amount of confidence being shown by clients. It's a picture of change, rather than a picture of depression, and while it's not all grim, the focus is very short term. Clients want to see results now rather than next year.'
Another trend arising from slashed budgets is clients' global consolidation of PR business. Nevertheless, consolidation has not necessarily signified bad news all round. For example, while Chime Communications - headquartered in London - lost accounts with Tiscali and Computer Associates as a result of global consolidation, it won business with Rolex, Gibbs Technology and Playstation, working on European co-ordination and local implementation of media relations for the latter.
Business has also grown on the back of clients expanding geographically over the last 12 months. While Edelman describes global revenues as flat for its fiscal year, business has increased because of client expansion into new markets and sectors. The agency's clients Johnson & Johnson, Samsung and Microsoft expanded from the US into both Europe and Asia.
Elsewhere, Ogilvy won an account for impotence drug Levitra across Europe and the US at the beginning of last year, as its agency of record.
PR networks across Europe are also reporting the current economic climate has had a successful impact on them. 'The environment has proved an opportunity for PR networks,' claims Kinross & Render executive chairman Sara Render, who is also a board director of independent agency network ECCO. 'These have the international account management systems, experience and infrastructure you need to deliver pan-European programmes, but without the overheads or premium pricing of more established single-brand PR operations.'
She claims networks are getting a chance to work with brands that would have probably not looked any further than the top three owned multinationals if the economic climate had been booming.
Network Euro PR certainly witnessed growth, with a 59 per cent increase in fee income over 2001, from £5.2m to £8.3m.
While the general outlook for Europe is not particularly bright, figures brought together by various trade associations (there are no global rankings due to the Sarbanes-Oxley Act) across the Continent show not everywhere has suffered.
In Austria, according to market league tables provided by Bestseller, some agencies recorded impressive growth, for example Hochegger Communications, which saw its income increase by 72 per cent over 2001, while Trimedia Communications and Ecker & Partner saw growth in fee income of 42 and 49 per cent respectively. Hochegger MD Peter Hochegger attributes his company's growth to 'conflict management and crisis communications'.
And in the UK, while almost half of the top 50 PR agencies (23) report a drop in fee income, the 26 that did experience growth ranged from one per cent to 148 per cent.
Conversely, in Sweden, the uncertainty in the telecoms sector and the fall in demand for new economy services led to a dip in fee income. The Scandinavian country's largest agency, Kreab Sweden, reported a drop of six per cent, yet managing partner Charlotte Erkhammer points out that the company has worked increasingly on issues management, crisis and reputation management, in addition to media relations. The Swedish public affairs industry has also continued to grow as the country prepares for a referendum in September on adopting the single currency.
But it is healthcare that, once again, has proved to be the most resilient sector throughout the Continent. While the Spanish economy only grew by two per cent last year, its health service pharmaceutical bill grew by ten per cent, claims Burson-Marsteller co-chief executive Europe Carlos Lareau. In France, the healthcare sector has been largely unscathed, Switzerland reveals a similar trend, as does Italy, with Italian PR firms reporting stable growth to trade association Assorel. Meanwhile, in the UK, more than half of the top 25 healthcare PR agencies recorded fee income growth in 2002.
'Practice areas holding up well across Europe are healthcare and pharmaceutical,' admits Render, who also highlights that the public sector and food and drink sector are doing fairly well in the dominant European economies.
FMCG and consumer durables marketing PR have also proved to be fairly resilient across Europe, as consumer confidence remains surprisingly buoyant.
Several agencies, including Weber Shandwick and Trimedia, single out corporate social responsibility as an area where they expect to see growth across Europe.
Some agencies witnessed a growth in cross-border programmes. GCI Europe chairman Adrian Wheeler points to an increase in multi-country assignments for GCI, which now has 58 clients working for it in two or more countries.
This includes PC company Dell, which hired GCI to cover 12 countries last year, and increased it to 20 this year.
The tech sector, unsurprisingly, remains on a downward spiral, with fewer tech clients than a year or two ago. Eurocom PR network carried out research among senior IT executives across 12 European markets in the first quarter of this year, and reveals that while 46 per cent of respondents expected a recovery in tech markets by the end of this year, 47 per cent believe it will be 2004 before the recovery fully kicks in.
All eyes are on EU enlargement next year, when member states will grow from 15 to 25 with Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia all joining.
The enlargement could be a catalyst for growth, as accession to the single market is likely to stimulate trade across the region. There should also be a lot of work explaining what EU accession will mean, claims GCI Europe central and eastern Europe regional director Katerina Wheeler. The agency opened an office in Slovenia last year, and Wheeler believes there will be solid growth across the Balkans, where corporate and healthcare PR are doing well.
In almost every market across the Continent, there is an outlook of uncertainty, but the face of Europe is changing. The question on everyone's minds is whether these changes will result in a significant upturn in PR business throughout Europe over the next couple of years.
PUBLIC AFFAIRS BRUSSELS'S STAR IS RISING
Thanks to EU enlargement, public affairs is a promising sector, likely to spark PR opportunities both within Brussels and among old and new member states.
Fleishman-Hillard Europe president and chief operating officer Jack Modzelewski says: 'I'm confident about the public affairs arena, the question for us is how and to what extent we expand it as the EU enlarges.'
Hill & Knowlton Western European CEO Elaine Cruickshanks says the 'feel of Brussels is changing'. She plans to recruit personnel to deal with accession countries and their issues.
EU enlargement and the growing number of international companies relocating European headquarters to Brussels, are spurring continued growth for the Belgian PR market, which sits at the centre of all this activity.
President of Belgian PR association BGPRA Jean-Leopold Schuybroek says: 'While the local Belgian PR sector has suffered, the Brussels public affairs market, for most large players, has remained strong.'
Burson-Marsteller is experiencing this trend: 90 per cent of its Belgian business is now related to working on EU competition policy, market liberalisation, trade and EU-US relations.
The trend for international agencies to focus on pan-European public affairs continues. Last year, several merged their public affairs businesses, including Weber Shandwick and BSMG, who merged their PA businesses with Weber Shandwick Belgium to become Weber Shandwick Adamson (PRWeek, 13 June 2003).
According to Schuybroek, this trend has been driven by a growing sophistication in the European public affairs market.