Design profitability falls as consultancies take on more staff

Design consultancy profitability has slumped over the past six months due to a rise in employment costs, according to a new report.

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Source: Howard Lake

The Kingston Smith W1 Marketing Monitor shows that profitability (measured by operating profit as a percentage of gross income) dropped by 1.3 per cent over the period.

The figures are described by Kingston Smith W1 as ‘a very disappointing set of results… when most other disciplines are showing improvements’.

The slump comes as a contrast to the previous Marketing Monitor results, which saw design as the only sector in the marketing mix to see its profits rise.

Kingston Smith W1 puts this fall largely down to the increase in employment costs, which have risen by 7.3 per cent over six months.

It says, ‘As the majority of consultancies appear to have increased their overall headcount, this may be a positive indication of confidence returning to the marketplace.

‘However, as the figures suggest, the increase in headcount has not improved profitability, as it has not been matched by an increase in income.’

Kingston Smith W1 adds, ‘The design industry needs to take a good look at what they are charging clients and the costs of servicing incomes to see what improvements can be made.’

The Marketing Monitor is compiled every six months by surveying consultancies across all marketing disciplines.

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