Recent tough conditions in the design sector seem to be easing, with signs of ‘sustainable improvements’ now starting to emerge, according to a report from analysts Plimsoll Publishing.
In a survey of 1000 design groups, The Graphic Design Portfolio Analysis finds evidence of an upward trend in the industry – 110 consultancies doubled their profits between 2003 and 2004 and debt was halved by 206 companies over the same period.
According to Plimsoll Publishing senior analyst David Pattison, ‘Profits are improving, sales are up and debt issues are being resolved.’
This will come as welcome news to the industry, which has suffered falling revenues, redundancies and a decline in the frequency of long-term projects over the past three to four years.
Plimsoll’s analysis is based on the filed accounts of the top 1000 companies in the sector. While it finds the broad business climate to be improving, the detail reveals a mixed picture. There are still 195 consultancies with declining sales and 127 that are loss-making, according to the report.
The study is revised quarterly, but takes a four-year view of a company’s performance in order to assess its trajectory. ‘Over this period success and failure manifest themselves quite clearly,’ says Pattison.
He claims that those consultancies that are showing healthy vital signs are often the ones that are changing the dynamic of the way they do business. ‘[At any given time] there is a route to success and we are now seeing a number of consultancies coming through on this route,’ he explains.
Where comprehensive accounts information is available, Plimsoll rates companies on the state of their financial health. Only 122 graphic design consultancies provided sufficient detail to be rated in this edition of the report. Of these, Plimsoll places 43 per cent in its ‘strong’ category, based on turnover performance. This means that they are strengthening financially each year.
However, 36 per cent fall into the ‘danger’ category, and a further 9 per cent are rated as ‘caution’. These consultancies are thought by Plimsoll to be in a weak financial position, which could be fatal.
Average sales growth for the year remained negative across the 122 consultancies surveyed, down by 3.7 per cent. Those consultancies turning over in excess of £5.8m were the only category to show any positive sales growth, at just 0.7 per cent.
Despite the essentially flat growth of these consultancies, Pattison believes that blaming poor conditions in the industry for weak performance is no longer justifiable.
‘It is not all glamorous, but we are seeing increasingly buoyant times,’ he explains. ‘The shoots of a number of successful companies are beginning to come through. The industry [itself] is no longer an excuse for poor performance.’