Crises in the digital era leave city PRs in a spin

The M&A work has dried up and clients are facing new online challenges

The spinmasters are "taking over the world", according to the cover story in the latest issue of Management Today, which notes that the Prime Minister, Pearson's new chief executive John Fallon and other bosses are former PR men.

Smart public relations matter more than ever in the Twitter age, when crises can blow up and reputations can get trashed in double-quick time. BP, Goldman Sachs, News International and Starbucks are among the companies which have been pilloried on social media in recent times.

But financial PR agencies – the highly paid external spinners who advise big-name City clients – are not finding it as easy to cash in as some might assume.

The digital world requires new skills; there is pressure from clients to keep a lid on costs; and, crucially, lucrative advisory work on mergers and acquisitions has slowed to a trickle compared with the go-go years before 2007.

Getting a clear picture is difficult because most agencies are subsidiaries of big holding groups or are privately held.

Brunswick, the City's biggest PR agency, founded by Alan Parker, publishes few details as it is based in the US state of Delaware for tax purposes.

However, there are clues elsewhere. Tulchan has just reported a big drop in profit. Its founder Andrew Grant saw his pay plunge to £700,000 from £1.6m a year before. Average profit among the 10 partners, on top of their salaries, slumped to £80,000 a head from £226,000.

A change in accounting dates slightly skewed Tulchan's results. Revenues in the 11 months to March 2012 were £8.3m against £10.1m for the prior 13 months. "The M&A fees are well down," Mr Grant admitted, but regular retainer fees from clients such as Marks & Spencer and Lloyds Banking Group grew slightly.

Tulchan is far from alone. Citigate Dewe Rogerson, a subsidiary of the marketing group Huntsworth, reported a 17 per cent slide in its last quarter, which it blamed on "the continuing lack of activity in the UK financial markets".

Accounts for Finsbury also paint a subdued picture. Sales were flat at £25.1m and pre-tax profits fell 13 per cent to £6.2m. Its founder, Roland Rudd, still earned £2.7m from clients such as BSkyB, Sainsbury's and Starbucks.

Significantly, Finsbury, a subsidiary of WPP, has merged with its US sister company RLM with a view to becoming more international, after seeing several years of little growth in London.

Others are also thinking global. "We need to internationalise our business," said Mr Grant, who has spent £550,000 on launching a Singapore office.

But expansion isn't easy. Matthew Freud's Freud Communications struggled to crack America. He is still doing well, perhaps because his agency is focused on consumer and corporate rather than City PR. Annual revenues were up 8 per cent at £37.6m and have increased by more than half since 2008.

So there remains plenty of opportunity in Britain, but questions persist about whether the business model for some established financial PR agencies needs to change.

Tim Burt, a former Brunswick partner who co-founded StockWell Group in 2010, said part of the reason for launching his agency was that he could see clients' needs had changed in the wake of scandals such as BP's Gulf of Mexico oil spill.

"We didn't start out on the basis that you build a clutch of retainers and then build on very handsome returns from M&A," Mr Burt said, referring to the classic model for some of the older PR agencies.

Instead he said clients now expected agencies to be more strategic, nimble and digitally prepared. "Companies have realised their reputation has become their most valuable intangible asset, yet very few of them have communications strategies ready for a digital world in which stories can jump the tracks – whether it be an industrial accident or a rogue trader – to be an existential threat to the whole company."

There is another reason agencies need to offer more value in this climate. Companies are increasingly investing in in-house PR because reputation management is too important to the brand to out-source. A key trend since the downturn has been for some of the best talent in the agency world to move "client-side".

What is certain, according to Mr Grant, is that there is a greater need to communicate with capital markets. "The quid pro quo for capital is disclosure and transparency," he said.

The need for transparency is something that some PR firms must learn about, as Bell Pottinger knows to its cost. Critics blasted its co-founder Lord Bell for working with foreign regimes such as Egypt and Bahrain in the wake of the Arab Spring, and The Independent exposed how staff had boasted about their lobbying access in Whitehall. Some clients got the jitters and its parent company, Chime Communications, sold it in a management buy-out.

If even a PR agency can have a PR problem, it shows that every company has a reputation that needs protecting in the digital age. But it also underlines that the old ways don't always work so well now.

Alan Parker

Brunswick

Top City PR founded his agency in 1987 and rode the boom, building a global business in 21 cities. Cameron and Brown came to his wedding.

Roland Rudd

RLM Finsbury

Ex-Financial Times journalist founded Finsbury in 1994 and made a fortune when he sold to WPP in 2001. Firm recently merged with US-based RLM.

Matthew Freud

Freud Communications

Corporate and consumer, rather than City PR, he founded the agency in his early 20s in 1983. Married to Rupert Murdoch's daughter Elisabeth.

Andrew Grant

Tulchan

Former Brunswick partner who set up on his own in 2000. Has 14 FTSE 100 clients, third behind Brunswick and RLM Finsbury.

Lord Bell

Bell Pottinger Private

Veteran former Thatcher adviser who built Chime group, but did management buyout of PR agency last year after lobbying row.

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice