Opinion: Optimism is high in flexible agencies

While the British winter drags on, the PR industry continues to display a noticeable spring in its step.

Two more positive indicators emerged this week. First, the COI – central government’s marketing arm – revealed that despite cutting its expenditure on advertising in the year to March 2007 (by four per cent), it continues to increase its PR spend (up three per cent to £24.5m a year).

Gordon Brown and his various ministers of state are clearly recognising that PR is a more cost-efficient way of getting their public messages across.

Second, the PRCA’s latest survey of spend and activity among its members, for the final quarter of 2006, again reports increased investment and optimism from consultancies. Almost three quarters of agencies now feel heightened optimism, the highest since the ‘barometer’ began in 2003.

To further endorse this confidence, senior executives in the big marcoms groups, such as WPP and Omnicom, are privately reporting that PR revenues are growing much faster than those of advertising.

Before we all crack open the Krug we should remember that this is a big increase on a relatively small base: PR agencies are often hitting double-digit sales growth on modest revenues compared with their ad agency cousins. But there are other encouraging shifts that suggest agencies are becoming more flexible. The PRCA reports less overservicing by agencies, increased use of free­lancers (36 per cent of agencies will use more this quarter) and a slight switch from retainer business to projects.

All of which helps explain why groups such as Hunts­worth – which announced a positive trading statement this week – are hitting margins of over 20 per cent.

So, despite the much-reported problems in finding and keeping good staff, these results suggest that PR agencies should be better equipped to adapt to any future downward blips in client spend – or structural shifts in the economy.

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