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PR’s H1 Review for 2023 with W Communications founder Warren Johnson

Every six months or so I like to catch up with the shy and reserved Warren Johnson from W Communications to talk about the financial state of UK PR.

And to my surprise- it’s that time again. The first 6 months of 2023 are basically done and dusted.

My sense is that it’s been a bit of a phoney 6 months or so - the PR sector has been expecting a downturn but beyond a significant tech sector-wide wobble at the start of the year, which has in the main come back, it’s been OK, not stellar but OK. And in many cases surprisingly OK.

But on the show today we’re going to chat about some of the recent league table results we’ve seen in PR, what constituted good numbers last year, and how the last 6 months have been. We’ll also attempt to put some predictions on what might be about to happen next.

W has a fee income of £15m, with offices in London, New York and Singapore. It employs approximately 180 people globally and 150 odd in London.

The final entry deadline for The Creative Moment Awards is Friday 30th June.

Thanks to the PRmoment Podcast sponsors, The PRCA.

Here’s a summary of what PRmoment founder Ben Smith and Warren discussed:

3 mins Warren reviews the performance of UK PR in the first half of the year. What’s up, what’s down, what’s flat?

“What was quite alarming in the international rankings was that despite the UK agencies reporting strong growth, they were falling down the international rankings”

“We (the UK) are not fully aware of our own demise at the moment and what a second-rate country we’re becoming”

“UK PR had a strong start to the year… and there is now some preemptive belt tightening client side”

"Everyone had a strong Q1 with a slight softening in Q2 as the economic outlook, which doesn't get any worse but shows no sign of recovery.”

“Overall H1 was relatively robust but we all (PR firms) had to work a bit harder than we were expecting to make those numbers”

9 mins Bearing in mind inflation how much did PR firms need to frow last year, to increase their profits?

“Our profits grow in line with our revenue…we’ve not had any challenges in our margin.”

“It’s something Graham Goodkind once told me - he said he wanted one thing as a KPI for him as a CEO and that’s a margin number”

“It’s harder to maintain that margin than it ever has been, there’s been rampant wage inflation and a requirement to offer greater benefits than there ever has been.”

“We’re big advocates of in-person collaboration so we’re doing as much as we can to encourage people into the office but that comes at a cost”

“The other big hidden cost is mental health - which increasingly seems to be sitting away from the government (as a responsibility) and on employers.”

“We just rolled out private health care for our company and extended to private mental health care - important to do but these are all costs that chip away at the margin.”

“As an industry, we are very good at being inventive…as our margin gets challenged in one area we are able to find opportunities… in certain other areas.”

“I certainly get the sense that people are pitching a lot less…pitching is probably the most inefficient thing you can ever do.”

“The less you pitch the better…that will hit your margin more than wage inflation”

13 mins What do clients want at the moment?

“It’s very rare to see a consumer PR brief with no additional service add ons”

“Clients are so busy, their headcount is down, the amount of stuff they have to do is greater - so going to a trusted one-stop shop is a great solution for them”

“We’ve grown our remit and relationship with clients post-COVID and handling a lot more budget. There’s a greater sense of trust from clients into their comms agencies”

“We are brilliantly inventive as an industry, we didn't hitch our mast to a 30-second TV spot and just bang that drum until no one watched TV any more”

“We missed the boat with web 2.0 when social first blew up but we’ve caught up quickly”

18 mins What are the biggest challenges of running a PR agency in the UK currently?

“I think the problem comes from homeworking…I don’t think we (human beings) are programmed for spending days alone at home.”

“There is a lack of human contact…we (UK workers) are less networked, less connected than we ever have been.”

“The real fear is if you’ve got Gen Z’ers coming through that don’t want to go out and meet people - they really will have their jobs threatened by AI. Why would we need someone who doesn’t want to build on any human relationships but just wants to type - AI can do that now.”

“Some of the observations we’ve had is that some of the biggest fans and advocates for working from home are often, arguably, the people who are challenged with mental health issues. It’s very difficult.”

“There are going to be challenges between the client side and the agency about how constant increases in costs are passed through or not...there will be even greater margin pressure over the next 6 months.”

“The good clients are very smart and sophisticated, the real problem is the overreach of procurement”

“Things are overly procured these days…we’ve been working on a client that we appointed in September last year and we’re still working through contracts, there’s some madness out there.”

“We’ve declined 4 or 5 pitches recently because they are entirely procurement led”

“Sometimes the amount of money the client saved - they must have spent more than that on the procurement people”

25 mins UK PR punches miles above the UK's weight globally - are we in danger of losing that advantage?

“It’s a hard pitch pitching PR as a career to kids”

“If we continue to have great people we’ll figure out ways forward, the biggest extensional threat is that’s it not as attractive a business as it used to be”

“It’s a great creative place to be and we need to go out and promote that a bit harder”

27 mins Why the macro trends of the power of earned media are still very good.

“We’re having a golden period for comms at the moment…some of the big ticket valuations in acquisitions have been astronomical… that’s a kite mark of our industry”

30 mins To what extent are brands expanding their agency support, or are they increasing the size of their in-house teams?

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