PERSPECTIVE: Like them or loathe them, billings have signalled recession

Agency reaction to billings tables has long hovered between

ambivalence and hypocrisy. They hype the figures when they're good and

hail them as an acknowledgement of advertising's influence on the

commercial world.



When they're bad, they are dismissed as an anachronism and an irrelevant

throwback to a time when the commission system ruled. Income is what

matters, they insist.



While this is true and billings are dead and buried as far as being an

accurate guide to the industry's overall health is concerned, it still

has a disconcerting way of rattling its coffin lid. So much so that the

latest AC Nielsen MMS figures showing that more than two-thirds of the

top 30 creative agencies and half the top 30 media shops have

experienced falls in billings over the year to June 2001 look like an

ominous warning from beyond the grave.



Agency chiefs may dispute some of the methodology that goes into the

compilation of the figures (see page 20). Nevertheless, they add weight

to a growing belief that recession has arrived. It may not be as long or

as painful as the one that occurred a decade ago. But recession it most

certainly is.



Consumers still show a propensity to spend and a reluctance to save; the

property market, no longer fuelled by City types with fat bonuses to

spread around, faces a slump. The danger of what has so far been a

crisis in corporate confidence spilling over into the consumer market is

now very real.



True, there are flickers of light within the gloom. Unlike last time,

the latest downturn isn't taking place against a background of high

interest rates. And the latest MMS data includes the residual of the

dotcom fallout and reflects an adjustment after what has been an

exceptionally good time for the industry. What's more, most major

agencies still do business with solid "bricks and mortar" companies

acknowledged as undervalued in terms of market capitalisation.



A rise in their share prices is in everybody's interests.



For the time being, though, agencies are in for a torrid time. Some

report clients are even trying to renegotiate fee-based assignments.

And, with TV spots now 25 per cent cheaper than a year ago, advertisers

can maintain a presence while diverting the saved money into profit.



No wonder Sir Martin Sorrell warns that the situation will get worse

before it improves or that others are following the example of his WPP

by diversifying into more recession-proof offerings such as direct

marketing and sales promotion.



Write off this year, expect no major improvement until autumn of next

year and batten down the hatches in the meantime seems to be the

advice.



That may force a few tough calls. Some fear the current downturn could

reduce the UK agency workforce by up to 15 per cent either through

redundancy or non-replacement. Meanwhile, Nabs reports a 60 per cent

leap in referrals during the past six weeks. It looks like a harsh

winter.



- Caroline Marshall is away.



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