Profits eroded by rising freelance and rent costs

Profit margins in design are being hit by increased use of freelances and rising property costs, according to the Marketing Monitor survey.

The report, produced by Willott Kingston Smith, reveals a 2 per cent decrease in operating profit per head to 7070, despite a rise in gross income and tightly-managed staffing costs.

Figures show gross income per head has risen by almost 6 per cent to 54 785. The dip in operating profit is blamed on a rise in the regular use of freelance staff or additional property costs as consultancies expand.

The thrice-yearly survey, based on the top 20 design consultancies, shows average profit margins of 12.7 per cent, which fall short of WKS’s target of between 15 and 20 per cent.

WKS warns that increased use of freelances inevitably eats into margins, but it predicts that more permanent staff will be taken on if workloads continue to go up. WKS manager Steve Waring says if income continues to rise, “profits will go up”.

He adds: “Generally, the larger consultancies are achieving the lower margins.

“The medium-sized consultancies seem to be picking up the majority of the work and are also the most profitable.”

With incomes continuing to rise, the report suggests: “Designers seem to be taking a successfully robust attitude to fee- negotiation.”

Latest articles