KLP CEO Phil Bourne said: "I can sadly confirm that KLP's office in Edinburgh has closed as part of a reorganisation by our parent company Havas. This is due in part to a sadly depressed agency environment in Scotland."
French advertising group Havas posted £40.3m loss in the first half of 2003. It said that it had identified 50 agencies that it planned to sell or close because they were not performing.
KLP Scotland lost work on the Abbey National, now Abbey, account last summer, which went to TBWA/GGT. Wembley National Stadium also dropped the agency around the same time and did not ask KLP to repitch.
Bourne insisted the closure would not affect operations in London.
Draft's Scottish office, which traditionally handled the bulk of the SP accounts in the UK, will transfer its work to Draft London.
"Draft London is already working with several clients throughout the UK and other markets. Our next step in London is to further enhance our sales promotion capabilities," a spokesman said.
It is understood that the Edinburgh office concluded work on its accounts, which includes point-of-purchase for Burger King, at the end of December. The fast food giant said it had started the search for a new agency with an announcement expected in "due course".
Draft lost one of its key clients, VisitScotland, to BD Network last year.
Neither agency would disclose the number of redundancies being made.
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