The latest survey from accountants Willott Kingston Smith is bound
to send a slight shiver through the PR consultancy sector, at a time
when figures for UK manufacturing output and retail sales indicate that
the economy is slowing down.
The WKS report shows that income per head among the top 20 PR agencies
dropped by 2.1 per cent between October 1997 and January 1998. Average
profit margins have also dipped from 11.5 per cent to 11.3 per cent.
These findings are in tune with the figures for the whole of 1997
published in the PR Week Top 150 survey last month. This showed that the
top 20 agencies had an average income per head of pounds 74,984 in 1997,
down 1.8 per cent on 1996. Meanwhile staffing levels among the top 20
increased by 7.9 per cent year on year.
This may sound worrying, but it’s not time for consultancy owners to
step on to the window ledge just yet. The sector is still growing
steadily, albeit more slowly than in 1996. Although the total income for
the PR Week Top 150 increased by a modest five per cent in 1997, the
underlying trend is nearer ten per cent once you exclude exceptional
Of more concern is the jump in staff numbers relative to income growth,
but this is not yet cause for undue alarm. Staffing increased faster
than income in 1997 largely because many agencies were frantically
recruiting staff to service the additional business they had piled on
1996, when the Top 150 grew by an unprecedented 21 per cent in overall
The need to recruit and retain staff remains the biggest issue facing
every consultancy at the moment. So perhaps the most encouraging aspect
of the WKS survey is that it reveals that employment costs per head have
fallen, indicating that consultancies are resisting the urge to inflate
salaries excessively in the scramble for staff.
The WKS figures also show that the average profit margin for public
relations consultancies is still higher than the 11.1 per cent average
for the sector at the height of the 1980s boom. By contrast, profit
margins in all other marketing services sectors, except media
independents, are currently more than 30 per cent below their 1985
Nevertheless most PR consultants still lag well behind other corporate
advisers, like management consultants, in fee earning power. To catch
up, the long term aim must be to lift fee levels. But PR consultants
will first have to prove the value and effectiveness of their advice
against real business objectives.