The only significant issue facing the design industry in the next two years will be ‘recession, recession, recession’, according to WPP chief executive Sir Martin Sorrell.
Speaking exclusively to Design Week last Friday – the day that WPP released its preliminary results for 2008 – Sorrell sounded under pressure, the global advertising and communications giant having reported a 5.8 per cent fall in profits.
Sorrell famously described the last downturn as ‘bath-shaped’, but refused to be drawn on a metaphor for the current recession. ‘I don’t know – you will have to get one of your creative contacts to come up with a shape’, he says.
He also says that acquiring more design groups is off the agenda until the recession eases. ‘Now is probably not a good time to be buying design businesses, but it is a good time to grow organically,’ says Sorrell.
He is concerned that smaller design groups are finding trading conditions ‘very challenging’ in the recession.
Focusing on the consultancies in WPP’s portfolio, Sorrell picks out Landor, Fitch, The Brand Union, Lambie-Nairn and Dutch consultancy VBat as ‘doing pretty well’. However, he says, ‘This doesn’t mean we can’t do better.’
WPP has been cutting staffing costs in line with revenue falls over the past two quarters, partly through creating redundancies.
‘In the recent past and right up to now, I believe that WPP has been making various redundancies, particularly in the mature markets of the UK and US,’ says a spokesman for the group.
Sorrell’s long-term strategy is to increase WPP’s market share in the digital sector and to continue its expansion in emerging markets.
He claims that ‘at least’ a quarter of WPP’s design business is now digital.
The group is predicting flat operating margins for 2009 and 2010, having revised them down to 14.3 per cent and 14.8 per cent respectively.
In a statement accompanying its results report, WPP describes 2008 as ‘a year of contrasting halves’. However, it predicts a relatively rapid end to the recession, saying, ‘Although the economic gloom has heightened recently… we still believe there will be a recovery of sorts in 2010.’
WPP – An Overview:
• WPP’s UK-based businesses posted revenues of £954m in 2008 compared with £890m the previous year, a rise of 2.2%
• The group is understood to have shed more jobs in the UK and the US than in other territories over the past two quarters
• Its Asia-Pacific, Latin America, Africa and Middle East businesses together grew by 8.4% to reach £1792m
• WPP is looking to expand further into digital design and emerging markets once the recession eases