DBA warns of ongoing margins squeeze at design groups

Design consultancies are facing a continued squeeze on their margins as charge-out rates fail to keep up with inflation, according to the Design Business Association’s annual member survey.

The amount that consultancies charge clients took a small dip over the year, and average salaries have also been in slight decline. Pay fell most significantly at the level of principal or proprietor, where cuts appear to have been taken to prop up businesses during periods of poor cash flow or low revenue, the survey states. The amount paid to back office staff has jumped by 10 per cent.

‘There is a continuing disparity between charge-out rates and salaries,’ says DBA chief executive Deborah Dawton. ‘Consultancies tend to give higher salaries than they can afford and don’t realise the effect on charge-out rates.’

The DBA is developing the on-line system Performance Tracker, which allows design groups to measure their quarterly business performance against the industry average. Scheduled to launch early next year, the service will gather financial information from DBA members, says Dawton.

The DBA Charge-Out Rate and Salary Levels 2006 survey also shows that 77 per cent of consultancies anticipate an increase in fees and 57 per cent expect staff numbers to rise this year. Although similar optimism last year failed to materialise, Dawton expects some recovery this year.