The UK and one or two other European nations are facing the prospect of stagflation economists tell us. Low, or stagnant growth and high inflation. Most competitors I talk to at the moment are, like us, seeing no visible signs yet of a slowdown, but I was reminded yesterday by a wise head that in the last recession, the PR recession arrived over a year later. So the present and imminent danger in my view is that many agencies will soon have to contend with flat or declining revenues and rising costs and salaries. The danger signals are:

  • a young workforce who have never seen recession before and who are totally confident in their ability to choose or swap jobs, get promoted and win regular higher than inflation pay rises
  • Higher rents, fuel, stationary and communication costs driven by the wider economic inflationary pressures
  • The increasing impact of procurement which drives down margins on the bigger PR spends for multi-national clients
  • There are a lot of non-mission-critical, general feel-good but undefined and unquantified PR campaigns being run. They will get cut very quickly when the going gets tough
  • Over-all marketing and communication budget cuts and delays by clients in affected sectors
  • Unyielding shareholder pressure for margins for those poor souls unfortunate enough to work in a firm owned by the advertising-agency-dominated publicly listed groups

There is hope though this time that we will weather the storm better for the following reasons:

  • On the brand side of the business it is advertising that will bear the brunt this time….we have been chipping away for a while now but this slowdown/recession could finally put that tactic in it’s place
  • company’s relationships with customers and stakeholders have changed; they are two-way now, deference to authority is challenged daily and everyone feels they have the right to have their say and in that mix it is the skills of people who understand influence, relationship and engagement that firms and brands will turn to . . . . and that’s us if we play our cards right
  • Digital. Two or three years ago digital skills were seen as a nice to have. Now they could save your agency.
  • Companies and brands need to talk and engage more with stakeholders and customers in bad times…not less
  • The 2012 Olympics for those with specialisms in sport, London government and infrastructure or clients who are worldwide sponsors – the focus switches in just a couple of months
  • We are, I hope, better run as businesses now

We are, I hope, better run as businesses now

I genuinely feel that the next 12 to 18 months will be much tougher for many of us than the last four or five years and that will require a very different set of management skills. However there is a very good chance we will emerge as a stronger industry with some of our competitor disciplines put firmly in their place. Schadenfreude is a mean pleasure but somehow it helps.

[tags] PR, Recession [/tags]