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.

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
PROMOTED VIDEO
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
News
i100
News
peopleFox presenter gives her less than favourable view of women in politics
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
A shared vision: Cerys Matthews has been familiarising herself with Dylan Thomas’s material, for a revealing radio programme
arts + entsA singer, her uncle and a special relationship with Dylan Thomas
News
In other news ... Jon Snow performed at last year's Newsroom's Got Talent charity event
people
News
i100
Life and Style
Text messaging changes as a relationship evolves
life
News
The comedian, 42, made the controversial comment following the athlete’s sentencing to five years for the culpable homicide of Reeva Steenkamp on Tuesday
peopleComedian's quip about Reeva Steenkamp was less than well received at music magazine awards
Latest stories from i100
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

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?