Warning after WPP breaks profits and revenue records

Sir Martin Sorrell's WPP, the world's biggest advertising group, yesterday smashed profits and revenue records but sounded a warning about "clouds on the horizon" next year.

Annual pre-tax profits jumped 20 per cent to hit £1bn for the first time at the group that owns ad agencies Ogilvy & Mather and JWT, media-buyers GroupM and public relations firm Burson-Marsteller. Revenues also hit a new record of £10.02bn – up 5.3 per cent on a like-for-like basis.

The WPP chief was upbeat about this year with the Olympics, Euro football championships and the US presidential elections all combining to provide a boost. Even so, Sir Martin forecast like-for-like revenue growth of 4 per cent this year – slower than 2011.

He was more concerned about next year because he fears "legislative gridlock" in America – assuming Barack Obama wins a second term with a hostile Congress – and there will be no major global sporting events. However, he was hopeful the eurozone might now "avoid catastrophe".

WPP's business in the UK was one of the outstanding performers last year, with revenues up 6.7 per cent, despite the tough economy. The group won business from clients such as Barclays, Virgin Atlantic, Vodafone and, last month, News International.

Global staff numbers rose from 105,000 to 110,000, with the UK alone adding 903 jobs. "This is yet another demonstration of the fact that growth creates jobs," said Sir Martin, who pointed out the company paid almost 12 per cent extra in UK employer income tax and national insurance. He admitted that WPP wanted to underline its contribution "because there's a lot of comment about tax and all that".

Sir Martin has come under fire for moving the company's tax base from London to Dublin in 2008. He insisted that he still intends to return to the UK – a year after he first promised to do so, in the wake of the Chancellor's promise to ease tax rules on overseas earnings.