LEADER: Has the time come to consolidate or die?

Are we about to see an era of consolidation in the PR consultancy sector? A report from the analyst Plimsoll suggests this may well be the case.

Danny Rogers, Editor, <em>PRWeek</em>
Danny Rogers, Editor, PRWeek

It paints a picture of an over-supplied agency sector with the top 100 UK shops increasingly dominating the market but battling one another for market share.

Certainly for several years now the UK PR consultancy business has been characterised by high growth and profitability. This has been reflected in the reports coming out of the big groups such as WPP and Omnicom, but also in the atmosphere in London restaurants.

And until now big agency bosses have sounded upbeat despite increasingly gloomy economic reports.

So shareholders and marketing group owners have continued to set high growth targets for their PR agencies. But can these targets really be achieved when sectors such as construction, retail and banking are issuing manifold profit warnings?

Can they really be achieved when consumers are seeing their household budgets squeezed by rising food and fuel costs?

At the same time the benign recent past has encouraged agencies to invest in their businesses. This has been necessary in order to attract the most talented staff, from what remains of a relatively small pool, and to gain a competitive edge in an over-supplied market.

For these reasons one suspects medium-term growth now lies in three main areas: by exploiting lucrative niches such as digital marketing, luxury goods or new types of entertainment; by expanding overseas, into less developed PR markets than the UK; and by strategic mergers with other agencies.

We have already seen many interesting moves in the first two of these areas, but so far few developments in big agency M&A.

If Plimsoll is right, this is about to change. If so, let us hope it can be done with minimum job losses and disruption to a sector that has led the marketing sphere so encouragingly since 2002.

Email: danny.rogers@haymarket.com

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