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Even a cursory glance at this year's league table will confirm that 2001 was painful for the UK's public relations industry. At best it was a year of nil growth, and some estimates suggest industry income may have dropped by as much as 15%.
The total income of the 145 agencies that submitted information is actually up 4.75% at pounds 576m, but this exaggerates performance. That's because some participants claim substantial growth largely as the result of acquisitions, which do not represent growth for the sector as a whole. Staff numbers are now around 7266, a 6% drop on the situation 12 months ago.
Agency heads think this recessionary period has been more painful than the last major downturn a decade ago. One reason is that the industry is much bigger, and dominated by publicly quoted groups that act quickly to cut costs and maintain margins at the first sign of trouble.
'The last time round we were a pretty realistic business, and recession wasn't such a shock to an industry that was still small and resilient,' says GCI chairman Adrian Wheeler. 'The industry takes itself too seriously. As a result, it has over-extended itself.'
All of which raises a number of important questions, such as why PR has suffered more than, say, direct marketing, and what the prospects for recovery may be.
Signs of recovery
Directors interviewed for this survey are mainly cautious about the immediate outlook, but there are signs that those elusive green shoots are starting to push through.
'Internally, we are budgeting for a zero increase in revenues in 2002,' says Incepta Group chief executive Richard Nichols. 'We think that is the prudent way to manage the business. We took action to control costs last year, so we're well positioned to take advantage of any upturn.'
'I change my mind every day about the outlook,' admits Allan Biggar, chief executive at Burson-Marsteller. 'We're predicting a flat year, but four months into it we are exceeding all our top-line and bottom-line targets.'
Almost everyone, in fact, has a view on the economy. 'Client confidence in the UK is fragile, whereas in the US it was destroyed,' says Donna Zurcher, managing director at Ogilvy PR. 'Here, I think it can be repaired fairly quickly.'
Golin/Harris, with some important account wins under its belt, including the US Cotton Council, Bass, and Getty Images, is expecting positive growth this year. Grayling reports that, untypically, it had a disappointing start to 2001, followed by a near-record second half. The first quarter of this year proved to be better than expected.
And Neil Hedges, chief executive at Fishburn Hedges, adds another optimistic note: 'In the end, last year was perfectly reasonable for us, and we think 2002 is also looking good. We are certainly ahead of budget.'
Several factors contribute to why 2001 was so difficult for many. Areas of specialisation were crucial. Stock market uncertainty meant fewer share placings, mergers and acquisitions, which was bad news for City PR firms. Public affairs, on the other hand, climbed up the agenda.
Healthcare was very healthy, but the IT sector was mixed, and dotcoms in particular were a disaster. It's also argued that US-based global corporations, in general, were quicker to cut budgets than European clients.
By their very nature, some of these sectors - the City, international - have a London bias. The Public Relations Consultants Association (PRCA) recently asked Jim Surguy, managing director of Results Business Consulting, to run a nationwide series of seminars on operating in a recession. The reaction he met in the provinces was 'what recession?'
Surguy believes that the PR sector has a number of weaknesses. Not least, it has an image crisis at the moment, fuelled by all the talk of government spin, the Countess of Wessex agency scandal, the Jo Moore affair, and so on.
'Accountability is also rising up the client agenda,' he says. 'Clients are asking why PR can't be measured when so many other marketing disciplines can,' he says.
The truth here is that a lot of work has been done jointly by the trade bodies, the PRCA and the Institute of Public Relations, to develop and promote measuring systems. PR effectiveness can be measured, but much rests on the willingness of clients or agencies to pay the cost.
A few outspoken critics also suggest that, frankly, a lot of PR work is not all that good, and the shake-out will benefit the industry.
'Given the rapid growth of PR, and the chronic shortage of people who can do it well, there has been a large percentage of so-called PR that doesn't deserve to exist,' says GCI's Wheeler. 'I think that has been blown away as money has got tighter.'
'When there's lots of business coming in, it's very tempting to lower standards and criteria because you just need people,' adds Hedges. 'Having a bit of a cutback generally is good for the industry.'
Merits and failings
Even blunter is Chris Lewis, founder of the thriving high-tech consultancy Lewis Communications. 'As someone who came in from journalism, I regard the industry with a healthy scepticism,' he says. 'At best, it's very professional, and a cost-effective way for clients to do business. But it's an industry with a long tail, and a lot of mediocre people. This 'recession' has been brilliant for PR. The good firms have continued to do well, and the poor ones have gone to the wall.'
The number of agency acquisitions has eased this year. Some communications groups have withdrawn from the market; others are setting tougher criteria.
They're said to have raised the minimum level of profitability that interests them, and to be focusing only on independent agencies that fit specific strategic needs.
But the past year has seen some major developments. Interpublic's purchase of the True North group brought the BSMG network into its fold. This was folded into Weber Shandwick, itself the product of a recent merger.
The resulting company claims to be the world's biggest PR network, although industry doubters question whether the fallout in staff and lost income that has followed has been in shareholders' best interests.
In London, the enlarged Weber Shandwick is the UK's biggest single agency, with an income of pounds 41.3m. This is down by 17%, however, on the figure for its component businesses in the previous year.
Moreover, the figure is topped by the combined income of pounds 52.3m from Bell Pottinger, Good Relations, and Chime Online - three agencies that were previously combined, but which holding company Chime Communications now prefers to list separately. Incepta Group is also a little bigger - a total of pounds 41.9m - when it adds its consumer agency, The Red Consultancy, to its Citigate interests.
Unusually, the London office of Weber Shandwick has two joint chief executives - Colin Byrne, with a background at Shandwick in corporate and public affairs, and David Brain, a consumer PR expert who has moved across from BSMG. They claim their varied experience is an asset that justifies having two bosses.
One significant change that has occurred under the Byrne-Brain axis is the way in which divisional heads are rewarded. Many agencies struggle with the problem of achieving maximum co-operation between their business units when each is a separate profit centre, and those running them are rewarded according to how well their units do.
In the new system at Weber Shandwick, 50% of the top people's bonuses …