Cheerful chief executives enjoy economic recovery

The design industry is emerging from last year’s doldrums, with margins increasing, employee earning power taking an upturn and cheerful chief executives feeling more optimistic than they did last Christmas.

The findings are from the new Design Business Association Performance Ratios, covering the first quarter of this year. It involves interviews with the chief executives of 55 consultancies.

In contrast to December’s results, which showed employees were overworked and struggling with ever-tightening margins, the report finds a 17 per cent increase in the annual gross income generated by each employee. There was also a 13 per cent increase in productivity of chargeable employees such as creatives. Administration costs as a percentage of gross income improved by 11 per cent over the last quarter.

“At the end of last year people were busy but they were not profitable,” says report author David Jebb. “Now people are still busy but they are working on more worthwhile projects. The margins are still tight, but clients are prepared to spend more on design.”

This business change appears to have heartened top management with 12 per cent of chief executives feeling “more optimistic about the general situation within the design sector than they had been three months ago”.

Medium-sized businesses are appearing to thrive most. Firms employing between 20 and 49 people did best during the period with improvements in hourly fee- income. However, administration costs for each employee remain the highest in this sector.

According to Jebb, the improvements can be seen as an accurate indicator of the UK economy as a whole.

Although economic activity is virtually static, Jebb says the increasing willingness to invest in design may be followed by a general upturn in the economy between April and June.