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, writes John Tylee.

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. 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.