Their decision to cease trading comes in the wake of their failure last month to capture the £70m pan-European account of Sony Electronics, which was awarded to Fallon.
The "mothballing" gives the partners the option to set up again should the economic climate improve. But Smith admitted: "I don't think there's ever been a time when there has been so little cause for optimism in the business."
Smith set up the agency in January with Rapley, the former BMP DDB deputy managing director, and Robothan-Jones, a co-founder of the product distribution company Ark. All hold equal equity in the start-up.
Its premise was to outsource most of its work and act as "quality controller" on all client needs from creative work and media buying to TV programme making and PR.
But Smith claimed the increasing tendency of recession-battered clients to be risk-averse and the difficulty in extending project-based work into permanent client relationships had forced the agency's hand.
Rapley will continue working as a consultant to BMP on its British Gas business while Robothan-Jones returns to freelance planning. Smith, a former Bartle Bogle Hegarty deputy chairman, is unsure about his future but said: "I'm talking to a lot of people."
The partners claim they could have carried on for at least another five months but had decided to quit now while they company was still solvent and owed no money.
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