This year’s survey indicates that there is more optimism around and that confidence is building slowly but surely. We have 232 entries this year as against 196 last year, which is an increase of 20 per cent.
The Top 100 groups this year account for 361m in design fee income and employ 6384 people worldwide, 74 per cent of whom were based in the UK. On average the Top 100 consultancies employed 63 people and generated 57k per head.
The underlying trend this year is positive in that both fee income and the number of designers is growing. The projected fee growth for 1996 averages 16 per cent, the same as last year.
We were able to compare the results with last year for 62 of the Top 100 consultancies. Fees were up from 236m to 253m, an increase of 7 per cent, while total staff numbers were up from 3683 to 3824, an increase of 4 per cent. The market is therefore growing and consultancies are tending to become more efficient.
There is a much more international flavour to the listing this year, with 32 out of the 100 showing staff overseas. Those with more than 50 per cent of their staff overseas are shown on the table to the left.
Growth of consultancy
For the first time we decided to ask people to indicate the split of fees between design and consultancy. We noticed a clear trend towards design consultancies offering consultancy services and taking perhaps a more strategic approach. Only 15 per cent of consultancies said they generated design fee income only. On average, consultancy fee income accounts for 15-20 per cent of total fee income. This trend is likely to continue and will lead to increasing competition with management consultancies.
Inevitably, this will encourage some of the bigger consultancies to move into design through acquisition or joint venture. Ticegroup is already seeing signs of this in its mergers and acquisitions work.
Nature of the market
According to the survey, the biggest part of the market is print, which accounts for nearly a third of the total. This is followed by packaging and corporate identity. Competition in these sectors is clearly intense. The table above shows the number of consultancies offering the various specialities. It is interesting how few consultancies exceed 1m turnover through interiors, exhibitions and product design work.
It is also interesting to see the rapid growth in multimedia. Fifty two consultancies are claiming fees in this area and four were able to boast turnover in excess of 1m.
Multimedia means different things to different people, but most people recognise that they need to embrace it in some form or other. It is noticeable that there is a large gulf between the leaders and laggards in the area of multimedia.
The top ten as far as fee income growth is concerned is shown in the chart to the left. BCG is a new start-up that benefited greatly from an increase in point-of-sale design during the year and a strong sales focus.
It is good to see firms such as Tynan D’Arcy and Newell and Sorrell getting in the top ten for the second year running.
In addition, there have been some impressive increases from some of the other big players where +20 per cent increases have been achieved.
As the economy has grown, the amount being spent on design has also increased, although it is clear that there is still pressure on pricing and margins. While the groups listed below have been adept at winning this additional business, there are others which have failed to capture this opportunity.
At the other end of the spectrum, some consultancies show big reductions in design fee income, many of them doing interiors and retail work. It is interesting that many of these are quite substantial groups.
Just as we had some consistently good performers during 1994 and 1995, some of the above also performed poorly last year. Holmes & Marchant and Minale Tattersfield also featured in this group last year.
Other significant players who saw their fee income decrease included Wickens Tutt Southgate (2 per cent) and Wolff Olins (2 per cent).
You might expect to see these groups reducing the number of staff. But as the table below shows, this was not always the case.
As was the case last year, we have divided design fee income by the number of full-time employees to give us a measure of efficiency. This ignores freelances and part-time staff, but nevertheless gives us a good indication.
Overall, we are seeing a positive trend in efficiency with a 3 per cent improvement over last year. This is probably due to the natural reticence consultancies now have about adding permanent staff to the payroll, preferring to use freelance staff if possible.
The 1996 list is similar to last year’s in that it again features Siegel & Gale, PI Design Consultancy, First Impressions, Coley Porter Bell and Jones Knowles Ritchie.
These consultancies, which are achieving more than 100k fees per head, are quite likely to be very profitable and are to be congratulated on their performance.
Although there is a difference between design specialities, I would suggest that 100k is a good benchmark for consultancies to aim for!