Clients are driving down fees quoted by designers, resulting in “pitifully low margins” for consultancies, according to the latest Design Business Association quarterly survey.
While consultancy heads are optimistic in mood, this positive outlook is not being reflected in the figures reported for the survey, conducted by David Jebb & Associates for the DBA.
“Profitability remains at the historically low level of 6.6 per cent of turnover, which is poor,” according to Jebb.
And because design groups need to generate their own funding, investment in training and information technology is being forced on to the back burner as a direct consequence. The survey showed a significant number of the 40 subscribing companies planning to scale down investment in these areas in the future.
Another finding of the survey, which charted performance ratios and trends for the three months from October to December 1995, shows the gap between the profit performance of the most profitable and least profitable companies continuing to narrow.
“This is mostly because of a continuing deterioration in the performance of the most profitable group of companies in the survey,” comments Jebb.
And as with this time last year, the perceived optimism is misplaced, with studio bosses equating a busy studio with high turnover.
“This optimism needs to be considered because it is not being matched in financial terms,” warns Jebb. “There is a very real and continuing squeeze on profits,” he adds.