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Corporate 50 2011 Back to Reports & survey Listing

Green shoots appear

With public sector communications cut to the bone, undercutting in the industry rife and budgets flatlining, times are still 
tough in the corporate world. But green shoots are now poking through. Jon Creamer reports


"Tough but improving" seems to be the general take on the sector from those who responded to this year's Corporate 50 survey.

Few corporate communications companies are reporting that they've had an easy year but many are saying that the future’s starting to look perhaps a shade rosier.

And the stats from this year's survey do show some encouraging signs, most notably in terms of turnover. The average corporate communications company turnover has increased to £4.9m, according to this year's figures, up from £3.9m last time with 61% of respondents saying that their turnover increased from the previous year. It may not be a figure that proves the health of the industry but it does at least show that there is life out there.

"The past year was very tough and most clients uncertain of their own jobs stopped spending," says Cheerful Scout's md, Gary Fitzpatrick. But "the end of the year started to see a definite increase in business."

"There have been 'green shoots', as some of the bigger global projects have started to come back as PLCs can't go on not communicating to their various stakeholders," echoes Jacaranda's founder and md Katy Eyre. Jack Morton's head of moving image, Adam Norris similarly describes the business climate as "tough but improving. Clients have been overwhelmingly focused on cost rather than value or quality, but that is starting to change. I think the bigger clients have realised that their communications really do need to stand out if they are going to thrive in this economic climate. It is no longer enough just to cut back and hope to weather the storm."

But even though it seems that clients are ramping up commissioning again, that doesn't mean that life has got much easier for corporates. Turnover may be up but the story told by the survey's average profit figure isn't quite such a happy one. Profits are down on last year's figure, at an average of £218k compared to last year's £251k (the profit average was £271k the year before that). 
So while corporate communications companies do seem to be getting more work through the door, they seem to be doing that work on ever-slimmer margins.

And that's borne out by the average budget figures that the survey has returned. While many costs have risen, the average budget for a film or video project has pretty much stood still at £29k (last year's average was £28.8k) and the long-term trend is still one of budgets continuing to fall. To give the figures some depressing historical perspective, the average budget we recorded for a film or video project in 2008 was £32.6k and £39k back in 2004.

The concern from many respondents is that clients are more and more likely to commission on the basis of cost alone, and that can hit quality. "In this climate, persuading clients to endorse creative solutions to their communication aims and objectives becomes much more difficult," remarks Grosvenor TV. "In the competitive tendering process, price is all important and the kind of creativity we have seen over previous years will greatly reduce." Many feel that the power of the procurement department, and the rise of e-auctions where there is no consideration but price, mean it's increasingly difficult for companies to sell themselves on the quality of their work.

A parallel complaint is that with clients more likely to choose on price, and work scarce during a recession, many companies are prepared to quote ridiculous prices just to keep the work rolling in.

"Some of our competitors are buying work - undercutting just to keep the cash rolling in," says On Screen Productions. 'It's a short term solution to a longer term problem. They won't survive and the market is being skewed." World Wide Pictures' md Chris Courtenay Taylor similarly reports that a major challenge is “sticking to a sustainable costing structure. There are lots of companies/one man bands that are offering a cost structure to "get the job at whatever cost! This damages the industry."
It can also damage the reputation of corporate communications companies as a whole when an under quoted job falls down. “People are selling on price with little integrity in their delivery," says Top Banana md, Nick Terry. "We have picked up two clients recently where they were promised the earth but were let down. This business only works on trust, a significant few making false claims can adversely affect the legitimate ones."

But undercutting in tough times is perhaps something of an inevitability, particularly now that the public sector has so dramatically reduced its  commissioning of corporate communications. When we published last year's survey, the general election was still a couple of months away. This time, the coalition’s cuts to public sector communications are a bleak reality. The COI's head of live events, Simon Hughes, stated at a recent IVCA event that the COI's turnover was dropping from £500m to £150m for the coming financial year.

But although those cuts hadn't actually kicked in at the time of the last survey, they were far from unexpected. Corporate communications companies had long been aware that the axe was about to fall, whatever flavour of government actually ended up in Downing Street. So while the cuts in COI spending have been damaging, most corporates had already made attempts to refocus their energies elsewhere. The cuts have been deep, but their effects were already felt by corporates way before now.

But back to that sense of cautious optimism. Next month is the start of a new financial year, after all. "Many big businesses have gone through the pain of cuts and are coming out the other end with business on a more even keel," says Barford Productions' md Tim Mein. "April will be a critical month - will there be budgets for corporate films?" It will probably still be a mixed picture. "The water is going to be cold, but parts of it will be very refreshing," reckons Crown Business Communications md, Nicky Havelaar. "If you know what you should be doing, you should survive or, better still, succeed."



AVERAGE PRODUCTION COMPANY
The average corporate communications company now has a turnover of £4.9m and makes an annual profit of £218k. The companies in the survey do 80% of their work in the corporate communications sector with broadcast work and commercials making up most of the other 20%. The average company employs 33 permanent staff. The average budget it received for a film/video project was £29k, £30.3k for a new media project and £71.5k for a live event project. 26% of respondents had a retainer contract. 61% of respondents said their turnover had increased from the previous year while only 22.5% said that budgets had increased with 37.5% saying they had fallen.


Many thanks to Rushes’ Barry Corcoran and Michelle Apeagyei for this year’s Corporate 50 cover illustration


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