Creative Agency Secrets

I went with Caroline Lashley to the Bank of England’s quarterly inflation report briefing….. great venue the Bank – I browsed round the museum while I was waiting. It’s free and has some great curios from the past.

What made me smile was the leaflet they gave me about the Bank

“The Bank issues banknotes. Gaining and maintaining public confidence in the banknotes is vital to the economy. A safe and stable financial system is also essential to the economy. The Bank assesses the risks to the stability of the financial system and works to strengthen the way it operates.”

Now, if you saw the Dispatches programme last night, you just might cynically smile and point out that the Bank’s assessment of the stability of the financial system was a tad lacking over the recent past…!

The report is a glossy report full of good graphs and diagrams presented by two economists from the Bank and a guest – this time Bridget Rosewell from GLA Economics.
The rest of this post is a summary of the report – as interpreted by me (in italics) in relation to creative agencies working from the UK.
Forecast – business activity growth will be less than 2% for the first half of 2008 but by end ’09 it will be back to 2.5%.

Your revenue growth may weaken because brand spending will shrink (or not grow) and if you are counting on increasing your revenues this year, it’s going to be tough.

The pound has lost value internationally by about 6% since September 07

If you export or sell abroad this is good because your prices will appear relatively cheaper.

Lending to corporate has significantly tightened since November and is increasingly constrained.

Watch out if your business needs to borrow money – you may find it hard to find a bank willing to lend to you and the price (fees plus interest plus collateral) you pay may be expensive.

Property prices fell 4% in both November and December.

If you can buy your own offices, this may be a good time to buy. Remember putting a business asset into a Self-Invested Pension plan can be a nice tax situation for business owners.

Recruitment difficulties are reported as reducing. i.e. it is easier to find skilled staff for vacancies.

It should become easier to find staff – but be sure you have the revenue stream to pay them secured before hiring.

Future investment intentions are falling more in service industry businesses than manufacturing.

Investments can include plant, machinery, technology, computers – do your clients sell these things – they may suffer falling order books and this may knock onto your work too.

Output growth in services forecast to fall by -1% and in construction by -0.5% over 2008.

If you have clients in services or construction – they are unlikely to be growing their work with you.

Oil prices will continue high but not rising further. Food prices and raw material prices have risen.

Retailers for foods and restaurants will be putting up their prices to maintain their margins.

Pay settlements in 2008 – 60% of survey respondents expect them to stay the same as in 2007.

Don’t offer pay rises to your staff above inflation.

The situation for London - by Bridget Rosewell
London is growing in output and employment more than the rest of the UK. But it is a more volatile economy and so if there’s a downturn (cf dot.com bust) it is worse in London. Shoppers are expected to continue to visit London and there are no signs of a retail slow-down yet. Future new orders are falling but business activity and employment is steady. The cost and availability of business finance will tighten – this could be a once-in-25-years size event. Personal disposable income is falling in London and so consumer spending may fall.

If you have clients in business services, financial services and IT expect lower growth in their businesses and a knock-on to your work with them. And watch consumer price index (CPI) figures for changes in the rate. NB this is not the same as retail price inflation (RPI).

There was a question from a man from the Chartered Institute of Personnel who said they completed a survey recently of their members and found that the ‘intention of making redundancies’ rate is rising…… could be the start of a slow-down / recession.

Those of us old enough to have been working in the last recession will remember that marketing budgets were among the first to be cut. But this time it’ll probably mean a move to better ‘value’ spend i.e. web, digital rather than OTL and direct.