CLOSE-UP: LIVE ISSUE/ECONOMIC SLOWDOWN - Shops take stock as the fear of a recession grows. New business is harder to find when the US economy flatlines, John Tylee writes

It's spring and confidence within agency new-business departments

is melting like April snow. 'It's dire,' is the common response of top

20 shops, when new-business directors are asked to discuss their sparse

list of client prospects.

Elsewhere, the foreboding is equally strong. 'In the 20 years I've been

involved in new business I've never seen it so quiet,' Ann Harris, the

former Publicis and HHCL & Partners new-business director turned

consultant, claims.

Meanwhile, John Ward, the former Bates UK vice-chairman who now runs his

own planning consultancy, contrasts a previous feast with the current


'I was doing almost one new- business assignment a week for most of last

year,' he says. 'Two weeks ago I did a new-business prep for a small

agency. It was the first work of its kind I've been offered since


David Wethey, the managing director of Agency Assessments International,

is picking up on worries about the dearth of new business from 'almost

every agency in town'. What's more, the shortage has been as sudden as

it has been dramatic. 'I would say it's happened as recently as the last

five or six weeks.'

And Martin Jones, the owner of the AAR, jokes that he's thinking of

setting up a helpline for beleaguered new-business directors bearing the

simple message: 'You're not alone.'

Connect all these experiences together and they add up to a pervasive

nervousness and reluctance to commit budgets among advertisers of all


Perhaps it's merely a pre-election blip, jitters over the foot and mouth

epidemic, or the sign of an ad market returning to normality after being

distorted by dotcoms.

The Advertising Association certainly thinks so, forecasting an adspend

growth of 1.5 per cent in real terms this year. Not great -but only when

compared with recent very high-growth periods. Will there be a


'We certainly aren't predicting one,' Andrew Brown, the AA's

director-general, says.

What's clear, though, is that if the events of recent weeks are the

harbinger of another early 90s-style slump, the ramifications are

far-reaching. Working practices may have to change, new promotional

avenues offered to clients and industry consolidation extended even

further as the strongest brands cluster within the biggest networks. One

senior industry figure warns that 'we could be looking at lay-offs if

this continues'.

The driver of the world's advertising business, the US economy, has

levelled out to a plateau. This is the main source of the problem

because it is breeding caution among clients. They fear that America's

sneezing bout today will cause Britain and other major markets, such as

France and Germany, to catch a cold tomorrow.

'The UK economy is fundamentally good,' Michael Baulk, the head of

BBDO's European network, says. 'But no economy stands alone and we can

expect to feel a backdraft from Europe.'

The trouble is that recession becomes a self-fulfilling prophecy. Wethey

believes some clients may be getting unnecessarily spook-ed about the

effects of a US slowdown where, unlike in the UK, share ownership is

widespread among consumers and consumer confidence is more volatile.

Some involved in the UK industry at senior level fear the implications

have not been grasped. 'Agencies are wrong if they think everything is

going to be OK because we're heading for a recession of some sort,' Ward


Much of that complacency has undoubtedly been fuelled by high-spending,

but transitory, dotcom clients. But it will make the new reality harder

to bear - especially as the spate of agency acquisitions in recent times

has left a number of senior executives reaching the end of their

earn-out periods, with little or no new business to bump up their


'When the dotcom business arrived we regarded the income as 'bonus'

money because we didn't know what would happen to that business. But

we've all become reliant on it,' Helen Weisinger, new-business director

of Delaney Lund Knox Warren & Partners, says.

Some believe that a downturn in the UK will force agencies to mirror

their US counterparts, who freelance more of their creative work.

The same may go for other non-revenue producing disciplines such as


At the same time, agency-hunting clients will expect to receive a more

multi-faceted service. Wethey says: 'Direct marketing is becoming

increasingly more attractive and we've had more requests from clients to

find PR agencies in the last six months than we've ever had before.'

Some agencies see the current predicament as an opportunity to catch

their breath and take stock. 'A lot of new business was shouting at us

last year but we had no time to listen,' one new-business director


'Now we have to go about forging relationships we failed to establish

last year.'

Not everybody is blaming recession fears alone for the new-business

slump. Judy Mitcham, M&C Saatchi's new-business director, believes a lot

of big and prestigious accounts are not moving at present because so

many have done so in the recent past.

Neil Kennedy, the former Bates senior executive who is now a consultant,

says the trend is for fewer pitches, especially in the retail sector,

because many clients would rather appoint on the strength of the

chemistry and previous working relationships.

Despite that, Baulk has alerted his managing directors and general

managers to be prepared for a slowdown. 'We're not on a red light but an

amber one, meaning we should proceed with caution,' he warns.

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