As a b2b scientific marketing agency, one of the ways that we benchmark our business performance is by tracking the guidance set out by Moore Kingston Smith (MKS) – a London-based firm of accountants that boasts a specialist agency and media practice led by the highly skilled Esther Carder, who is the expert commentator on these matters in the UK.
MKS has several ways of tracking the industry performance for marketing services in the UK – both of which tend to be retrospective. This includes:
- Auditing the financial records of independent agencies
- Polling the leaders of agencies – people like our CEO, Kath Darlington, who are leading agencies in the UK.
Earlier in January 2024, MKS issued its Annual Survey from 2023. The survey reviewed the key performance indicators (KPIs) and trends within the marketing services sector, as well as forecasting expected performance into 2024. As the current domestic and global markets are facing disruptions, the report provides a much-needed perspective on the financial prospects of the agency and media industry. The 2023 survey and forecast tracks:
- Profit margin and growth predictions
- Salary and pay rises
- Charge-out rates
- Environmental, social, and corporate governance (ESG) credentials
- Perceptions of artificial intelligence (AI)
- Client spend recovery
Paul Winterflood, Partner & Head of Media and Marketing Services M&A, reported that the MKS 2023 survey saw the financial results dividing the industry into winners and losers.
Overall, MKS believes that agency confidence was low in 2023, with agency leaders forecasting income growth at 3% (lower than inflation levels), whereas the year eventually increased quarter on quarter as optimism grew, yielding an annual revenue growth of 9.6% for the year overall.
Pay rises
Over the last six months, MKS reports that over a third of agencies have been able to provide most staff with pay rises, which was slightly higher than predicted. The next six months expects a similar percentage of agencies to give pay rises, even with the cost-of-living crises. However, agencies must ensure pay rises are immediately reflected in rate cards to ensure the profit margins are sustained.
Charge out rates
Under a third of agencies were able to increase their rate cards in the past six months, either in line with or ahead of UK inflation according to MKS. Again, a similar percentage are looking to increase their rates in line with or ahead of inflation in the next six months, diverging slightly more from the percentage giving pay rises in the next six months. But unsurprisingly, brands are trying to resist any uptakes in pricing, with over half of agencies being under pressure to hold or reduce rates.
ESG credentials
Having a good ESG strategy is now more of a must have than a good to have. Many brands, talent and suppliers regularly enquire in regard to ESG policies with it moving further up the list of factors when it comes to choosing an agency. But with over one third of agencies turning down a project as it did not meet their ESG credentials, is it worth the cost?
Opportunity (or threat) of AI
With the rise of AI in day to days lives, it’s no surprise that it’s a hot topic in the industry. MKS Two thirds of agencies responded that they see it as an opportunity for the media sector giving reasons such as images and copy generation or make teams more efficient. To note: The Scott Partnership do not use AI to create final copy, and nor should anyone in our opinion, for now, at least!
Client spend
As the UK economy stabilises, the survey predicts more bullishness into 2024, with agency leaders expecting client budgets to recover by Q2. Our perspective is that with the global macroeconomy seemingly to be out of control and with our country currently not in a strong position, this seems unlikely. Looking ahead, MKS is forecasting a 10.1% revenue growth rate from 2023 to 2024 with operating margins of 15.4%.
Here at The Scott Partnership, we have been informally using MKS data to benchmark and set our performance expectations for the business. A major difference between us and the UK market, of which MKS tracks, is that 75% of our customers are located overseas in Europe, United States and Asia, rather than in the UK. Despite that, we always try to outperform the forecasts set by MKS. Reading the details of the report, we hope that some of the ongoing challenges globally, from wars to energy prices, abate to give the UK a more level playing field to yield the performances expected of 2024. Two resources we recommend are the MKS team for the UK agency pulse and the Department for Business and Trade for providing support for UK businesses.
The Scott Partnership works with scientific businesses across the globe, supporting their entry into both local and international markets. Please get in touch to discuss your challenges and see how we can help support your business.
