DBA finds falling profits for consultancies

The Design Business Association’s Charge-out Rates and Salary Review 2012 has found that profits are falling for consultancies.

DBA
DBA

On average charge-out rates have decreased while salaries have increased by more than inflation.

Despite the UK technically moving out of recession, a stormy economic climate means that design businesses are finding it difficult to increase charge-out rates, and have instead reduced them.

Meanwhile these same consultancies are responding to pressure to increase salaries, which have risen beyond inflation for the second year running, according to results. 

Overall, direct salaries have increased by 7 per cent and charge-out rates have decreased by 3.8 per cent.

London-based designers’ direct salaries have increased by 4 per cent while charge-out rates have dropped by 4.5 per cent.

It’s a different picture outside of London, where designers direct salaries have risen by 18 per cent while charge-out rates increased by 3.3 per cent.

‘Indirect staff salaries’ – which means anyone who is not client facing  – have reduced and ‘utilisation rates’ – which is the percentage of direct staff time billed to clients – has risen from 63 to 71 per cent.

Despite a drop in fees and a rise in salaries consultancies are confident they can achieve income growth over the next 12 months – according to the report published for DBA members, hours before the Chancellor’s Autumn Statement, which Design Week will analyse today.

Of all respondents 67 per cent of designers surveyed expect to be able to increase their fees in 2013, while 16 per cent expect fee income to fall, but only 4 per cent foresee needing to reduce staff headcount.

In fact, 56 per cent will look to increase their headcount – which will put resources under strain – but this can opportune increased utilisation rates.

The majority of respondents plan on awarding inflation-tracked pay rises but directors would fund this, and say they would not award themselves any increase.

On the strength of its report, which was compiled with accountants Kingston Smith W1, the DBA advises that ‘the key for agencies is to ensure they keep a real eye on their staff costs and make sure any recruitment of new staff will be covered by increased income if they are to improve margins.

‘However, given the demanding and changing landscape of marketing services and the increased demand for digital services it is also likely that some strategic investment in staff with particular skills may be required.’

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