Close-Up: Live issue - Why are adland's staff levels growing?

Is the increase in staffing levels a reflection of an industry in robust health, Kate Nettleton asks.

Last week the IPA revealed in its latest census that the number of people working in UK agencies has risen by 1,710 to 19,077, bringing it to within touching distance of its 60s heyday, when the UK's advertising workforce totalled around 20,000.

On the surface, these figures do appear to be very promising. It is generally felt that high staffing numbers equate to an industry that is in good health. But it would appear that this is not the case. Many are now arguing that the time of strength has passed, and that the high point actually happened six months ago when the census was being compiled.

Since then, events such as the sub-prime mortgage crash in the US, plus the insecurity surrounding the Northern Rock bank, have contributed to an outbreak of pessimistic financial forecasting that is starting to have an impact on staffing numbers.

The director-general of the IPA, Hamish Pringle, says: "There's a lot of water under the bridge from the end of last year, and the subsequent events have seen a negative impact. It wouldn't be surprising if employment levels in IPA agencies come under pressure from now on."

Before these economic events surfaced, the industry underwent a period of marked growth, and, although some of this was attributable to the election of three large new agencies to the IPA membership, its members still reported a 9.2 per cent increase in employment levels in 2007, compared with 2006.

A stable economy, wealthier clients and more demanding consumers all played their parts here. But perhaps the most significant impact was borne out of the industry's obsession with "going digital".

Roger Ingham, a research consultant and the author of the IPA census, points out: "Only 1.6 per cent of the agency staff were digital creatives in 2005, and that's now gone up to 2.1 per cent. That's a growth of around 71 per cent."

Not only were agency's staffing levels on the increase in digital, the census also showed that agencies appear to have a happier and more devoted workforce, with staff turnover down 4.3 per cent.

Ewen Sturgeon, the chief executive of LBi, attributes this to the maturity of the industry: "Now that the offerings, especially in digital, have homogenised and become better understood, agencies can map out far clearer development plans, so there's less incentive to jump ship."

Ultimately, though, as agencies become more equipped to deal with digital, and financial constraints start to bite, most agree that staffing figures will plateau in the coming months.

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AGENCY CHIEF - Ewen Sturgeon, chief executive, LBi

"Last year, the economy was performing well, there was plenty of spend around and, therefore, plenty of jobs. But in terms of a longer-term trend, there's a more sophisticated consumer, who has more choice as to where they spend their money and more disposable income to spend, so there's an increasing need for products and services to differentiate themselves as brands.

"If you marry the trends together, it makes sense that the size of industry would increase.

"The rise of digital is the next big factor. Owing to the proliferation of channels in the market, there have been a lot of new skills required in the workforce to service those channels.

"That's happened in a rather inefficient manner, but, as the market matures and agencies get better at understanding channels, those roles will start to contract as agencies are able to accommodate all channels."

IPA CHIEF - Hamish Pringle, director-general, IPA

"The thing to remember is the date when the census was taken, which was September last year. The sub-prime crisis hadn't fully hit, so here we are with agency people declaring figures at the top of the market. The buoyant economy at the time does explain why we've seen an organic growth.

"Staffing up for digital was also another major reason. A lot of the conversations last year were about how to get to grips with digital and how to get people into the business to advise in that area.

"We also saw a number of acquisitions in the market at both plc and independent level, which were driven by a desire to acquire digital expertise. That job is by no means done, and there are still businesses that are having to acquire people with those skills.

"But agencies are now operating in a much tougher economic environment, and there's a close link between gross domestic product and how much clients spend on advertising, media and marketing communications."

AGENCY CHIEF - Marco Scognamiglio, chief executive, WWAV Rapp Collins

"More than ever, clients are setting agencies bigger challenges and demanding a wider range of solutions. Agencies, therefore, need a broader range of staff with broader skillsets than ever before.

"Digital is an obvious example, and the fact that everyone has attempted to strengthen their digital capabilities over the past few years must have had a positive impact on employment figures.

"What is encouraging from the census is the decrease in staff churn. We have made massive efforts on the people front, and we now have someone totally dedicated to ensuring that we can be best in class when it comes to recruitment, induction, training, development and retention.

"People are our lifeblood and quite simply if we don't recruit and retain the best people, we won't continue to deliver for clients and won't prosper as a business.

"Overall, the census is hopefully demonstrating that we in the communications industry are getting better on the people front, with a growing acceptance that training and development is no longer a luxury but an imperative."

AGENCY CHIEF - Gary Leih, chairman, Ogilvy Group UK

"The numbers are actually pretty static right now, and I don't expect numbers to go up this year.

"What is happening is a strong shift between the disciplines with a lot more action and growth in digital. It's become a fascination for clients and agencies alike, so people are being pulled into the industry who weren't there before.

"After the last dotcom meltdown, a lot of those people left the industry, but they are now returning - that's what has swelled the numbers perhaps.

"There has undoubtedly been less churn mainly because agencies are fairly stable and look after their good people as best they can.

"There was a bigger sense of optimism around last year, but recent events in the financial markets have meant there is more nervousness around now than there was in September.

"In the short term, the figures will plateau, although there will still be a need to recruit in the digital space, but the other disciplines will soften a bit."