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.

Start your day with The Independent, sign up for daily news emails
News
Leah Devine is only the ninth female to have made the Young Magician of the Year final since the contest began more than 50 years
peopleMeet the 16-year-old who has set her heart on being the first female to win Young Magician of the Year
News
Jonathan Anderson was born in Northern Ireland but now based between London, where he presents a line named JW Anderson
peopleBritish designer Jonathan Anderson is putting his stamp on venerable house Loewe
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing