Design revenues rise but staff costs hit the bottom line, report shows

Accountant KingstonSmithW1’s annual report ranks the top 30 income-producing design consutlancies in the UK.

It shows that across these consultancies, gross income has risen by 5 per cent to stand at £346 million. However, operating profits have fallen by just over 1 per cent and margins have also fallen – a trend that KingstonSmithW1 says is down to rising staff costs and other operating costs.

The 5 per cent increase in gross income is described by KingstonSmithW1 as “steady”, although it is a slower increase than in the past three years.

The top 30 design consultancies in the report are predominantly independents, with just 11 of the businesses listed owned by networks. Independent consultancies contributed £245 million of the total £346 million reported by this year’s top 30.

However, while independent consultancies have the higher gross income growth, group-owned consultancies generate a higher gross income per head – at £136,000 compared to the £90,000 recorded by independent consultancies.

KingstonSmithW1 says: “As we concluded this time last year, the impact of pressure to increase wages, as well as increases in overheads, has taken its toll on the operating results reported across the Top 30 agencies.

“While there is encouraging gross income growth, this has been countered by increases in staff and other operating costs. As the industry and the wider economy emerge from the economic woes of the past six years, there is going to be pressure on process from landlords and other suppliers. The manner in which agencies deal with these pressures will affect profitability over the next 12 months.”

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(based on figures from KingstonSmithW1)