Central and eastern Europe(CEE) and the Nordic region are both areas of considerable interest at present. It was inevitable, a year after the enlargement of the EU, that PR businesses would examine opportunities in the major accession states and further east. Perhaps less apparent was a realisation that growing numbers of clients are keen to implement pan-Nordic communications programmes.
Edelman has just opened an office in Poland headed by Barbara Kwiecien.
'It's our first foray into CEE and the new EU markets,' admits Edelman Europe president and CEO David Brain.
The Polish PR market has also bounced back following a deep slump during 2001-02. Market research carried out by the Polish PR agencies association PPRCA, in co-operation with a leading institute of economic research, showed that in 2003 the turnover of the PR market in Poland was around EUR40m, with fee income making up 40-50 per cent of this figure. The same research shows a 20 per cent increase during 2004, with further growth of 20-30 per cent projected for this year.
'We've focused on expanding into CEE,' says Porter Novelli CEO Helen Ostrowski. 'EU accession has been a great opportunity. More and more clients are starting to move their infrastructure into these countries.'
Strong economic growth of more than four per cent is driving the Polish PR boom, which is helped by an increase in foreign investment. There are also a growing number of EU-funded financial projects that contain public information elements.
Last year Hill & Knowlton acquired a majority stake in its Danish affiliate ABC and has recently won some business across the Nordic region for client Procter & Gamble.
'Denmark is interesting,' says H&K vice-president of business development and marketing EMEA Chris Burghardt. 'There's a strong belief that the Nordic region as a whole has real potential as a regional market.' Weber Shandwick Europe chairman Tim Sutton says he is also weighing up opportunities for entering the Nordic region, as well as looking at CEE.
Trimedia, meanwhile, is expected to strengthen its Swiss operation soon via an acquisition. Global CEO Michael Murphy sees public affairs as an area of strong growth in the country. 'Clearly there are a large number of international companies based in and around Geneva and there are a lot of not-for-profit organisations there as well, which create opportunities,' he says.
Swedish PR organisation Precis has surveyed its members on their market expectations quarterly for the past three years. There has been slight optimism for some time, but the last three surveys have produced more encouraging signs.
Half of all agencies increased their headcount last quarter and 57 per cent say they will hire more staff in the coming three months. All the agencies surveyed claimed they were on or above budget.
According to NIR, the Norwegian PR trade organisation, government offices and state-owned enterprises are increasing their purchase of PR services.
Demand for lobbying services grew 11 per cent last year.
'Strong currency, high oil prices and low interest rates are stimulating the Norwegian economy,' says Winther Communications managing director Ulf Winther. 'The Oslo Stock Exchange had better performance than most European bourses during the past 12 months. This led to a solid growth for agencies specialised in financial PR.'
Despite a climate of economic uncertainty in Italy, there are some hopeful signs for the year ahead. Recent research promoted by Assorel, the Italian association of full service public relations agencies, indicates that 2005 and 2006 will see an increase in PR budgets.
'Last year, in particular the second semester, has confirmed the trend of recovery and development of the investments in public relations in Italy,' says Assorel president Franco Guzzi, who is also Cohn & Wolfe's managing director there. 'Nevertheless, the economic scenario is still very unstable. Everybody has learned to operate and keep up with market discontinuity.'
There are around 80-100 full service PR consultancies in Italy, of which 46 are represented by Assorel. One major trend is the enlargement of competition with the emergence of a growing number of small or medium-sized agencies employing ten-20 staff.
Media relations remains the main business area for agencies, but is not so prominent as in the past. The food sector is the largest client category among Assorel agencies, representing over 16 per cent of business, followed by the financial/insurance sector and technology. Financial comms has returned to growth following some tough years and crisis management business is increasing significantly.
The growth of PR activity in the French market in 2004 can be estimated at five per cent, according to Wellcom director Hubert Desmarest, although fee levels stayed static due to increasing pressure on costs. The number of pitches is up and crisis management assignments are on the rise.
There is greater demand than ever from clients for evidence of return on investment and efficient measurement processes, and a payment-by-results debate is in full swing. The IT sector has also recovered from recent setbacks.
'The past four years have been dreadful for IT after the bursting of the internet bubble,' says Evelyne Martin, MD of IT specialist Yucatan.
'Many competitors have disappeared. But towards the end of last year we started seeing good business again.'
The corporate departments of the big French ad agencies still dominate the market but there are opportunities for independents and the major international PR groups. Hill & Knowlton picked up Microsoft as a client last year - H&K also has a second agency brand in France, marcoms specialist RPCA, which has a completely French management.
In November, Edelman bought French public affairs specialist SCH Consultants, which is headed by Christian Marmain and includes BT among its clients.
According to a recent survey performed by Sigmados and the national association of PR agencies, ADECEC, growth for the Spanish industry was flat between 2000 and 2003, with average fee billing per agency dropping from EUR1.4m to EUR1.37m.
Agency members of ADECEC saw their average fee billing in that same period shrink from EUR70.7m to EUR62.1m. Since then, most agencies have experienced growth, resulting in an average fee billing increase of 12 per cent for member agencies.
Despite recognition among clients of the need for corporate communication management as a global strategy, achieving growth in the agency sector remains challenging. Many clients prefer to invest in in-house PR capabilities, either hiring graduates from the 30-odd faculties with PR courses in Spain or recruiting former agency or media staff.
'The fact that the budget assigned to public relations in a company is not spent on external services but used internally has influenced directly the slight increase in level of income of external consultancy companies,' says ADECEC president Agustin de Uribe-Salazar.
Spanish PR firms generate a total of more than EUR200m in yearly fee billings, with 40 per cent of the total number of agencies having been created in the past four years. Over 60 per cent of the agencies have fewer than 15 staff.
Last year saw the establishment in Belgium of the European Public Affairs Consultancies Association, which already has over 30 members. Its creation underlined the fact that Belgium is home to two distinct PR markets - its domestic market and the sector that feeds off Brussels' position as the de facto capital of the EU.
'It was not a disastrous year for the Belgian market,' says Interel CEO Jean-Leopold Schuybroek. 'But growth was stagnant. We saw the results of a restructuring that went on in 2002 and 2003 and most companies that survived did OK in 2004. A number of the smaller players disappeared or were consolidated into larger consultancies.'
Among those to go was Decitime, one of Belgium's oldest agencies, because it was acquired by Ogilvy. It has expertise in corporate and financial PR and public affairs.
There appears to be a small trend for starting up boutique agencies specialising in pan-European corporate work out of Brussels, whose founders see the Belgian capital as a credible alternative to London for such assignments due to the strong multinational presence there. Aspect Communication Management Consultants, whose CEO James Hunt previously worked at Hill & Knowlton's Brussels office, is one example of this new breed.