The 'phoney war' has come to the UK ad industry, a peculiar and
unreal period in which nobody is quite sure whether the apparent slump
in new-business activity is a glitch or the precursor of something much
As this week's Live Issue (p20) points out, nothing much seems to have
changed. The economy is in robust health with unemployment at its lowest
level for a quarter of a century, while interest rates have also
remained in check. Moreover, the total UK adspend is predicted to grow
steadily during the year - albeit not at the heady rates of recent
times. Classified advertising, usually the barometer of recession, is
also holding up well.
Yet there is underlying discomfort. Agency new-business directors are
suddenly discovering that their wells are running dry while chief
executives find clients increasingly reluctant to commit budgets they
happily discussed at the turn of the year. The caution among clients may
be no more than a symptom of general jitters sparked by any number of
things from the upcoming general election to the foot and mouth
Maybe the paucity of pitches is just a manifestation of the way
advertisers are now preferring to do business, eschewing 'beauty
parades' in favour of building on personal relationships.
Maybe what's happening is the market readjusting after gorging on dotcom
Nevertheless, agencies would do well to hope for the best while
preparing for the worst. National economies are mutually dependent and
multinational clients are worried about the damage a weakened US economy
could cause to European and Far Eastern markets.
If the worst happens, senior agency executives will be forced to change
mindsets as their management skills are put to the test. The past decade
saw economic growth culminating in two years of unprecedented success
brought about by the dotcom boom and a massive explosion of
free-spending consumers. A lot of agency chiefs have no experience
either of managing in a cold climate or having to adopt leaner working
methods that Madison Avenue has embraced. Clients too will demand even
more accountability, more value for money and more flexible offerings to
protect their consumer base.
If there's an upside to all this, it's that the biggest brands will
sustain their adspend, using difficult times as an opportunity to kill
off weaker rivals. And it will be the giant agency groups which will
offer them the most comfort and protection. Industry consolidation is
proceeding at speed.
A downturn could send it into overdrive.