PR Industry over-Servicing Levels Reach All Time High Says PRCA Quarterly Report.

LONDON -- The Public Relations Consultants Association (PRCA) Trends Barometer Q2 - 2006, reports that although clients are still spending, consultancies are feeling the pinch with over-servicing levels reaching all-time high of 33%.

Commenting on the Barometer's findings, Richard Houghton, Chairman, PRCA, says:

"The good news is that fees are holding steady but on the flip side clients are demanding more for their money. The key for the consultancies is to ensure that budgets are transparent at the beginning of campaigns and extra work gets paid for. Ultimately good profit margins for the consultancy ensure more creative and innovative service for the client companies."

The report, based on responses to a survey about activities in April-June 2006 was completed by 48 of the PRCA's consultancy members. It shows that optimism for the industry is still high, although optimism for individual consultancies has decreased which must be viewed in line with the decline in new business prospects also evident from the report.

In addition, figures show that employment prospects in the PR industry remain on the rise with almost two-thirds of consultancies saying they intend to employ full-time staff in the next quarter. Additionally, half of consultancies said they proposed to increase their graduate recruitment.

In comparison with Q2 figures from 2005, these new figures show that despite clients increasing their budgets since first being set, the new business market is now slower and optimism is lower than it was at the same time last year.

Overview of Barometer results:

Consultancy Descriptions

--Small - fee income up to GBP 850k

--Medium - fee income between GBP 850k. and GBP 2.5m.

--Large - with fee income between GBP 2.5m. and GBP 5m.

--Very Large - fee income in excess of GBP 5m.

Client budgets

--A positive picture has continued with further increased client budgets over the second quarter of 2006.

--52% of respondents reported that budgets committed by clients had increased since being first set and 35% had remained the same.

--The number reporting a decline in budgets was down to 13% (from 14% last quarter).

--Contrary to last quarter's figures, the results for Q2, 2006 show that it was the very large consultancies who benefited, with 86% reporting that clients had increased budgets. While small consultancies reported a 31% decrease in client budgets.

New business

--Q2 new business was slower than Q1 - with 54% reporting their new business departments were busy and 23%, very busy (Q1 figures, 45% busy and 33% very busy).

Over-servicing Levels

--Levels of over-servicing are consistently increasing with another rise of 5%. 33% of consultancies reported an increase in over-servicing. This is a 7% increase on the figures at the end of 2005.

Agency optimism

--Optimism for consultancy performance has decreased by 9% from the Q1 figures with 56% consultancies optimistic about their agencies. 15% of consultancies were now less optimistic. This trend mirrors the decrease in new business prospects.

--44% of consultancies reported that they were optimistic for the prospects of the industry - this is almost double the number who had reported such at the end of 2005.

Employment Prospects

--The intention to employ full-time staff remained the same with almost two-thirds of consultancies reporting such. However, a quarter of consultancies said they would decrease their use of freelancers.

--The intention to recruit graduates made another big increase from 29% in Q1 2006 to 48% this quarter.

About the PRCA Trends Barometer:

The PRCA Trends Barometer is a quarterly survey of public relations spend and activity within the member consultancies of the Public Relations Consultants Association (PRCA). The survey covers committed client budgets, the new business environment, agency confidence and optimism and future employment trends.

These results are from the main findings of the PRCA Trends Agency Barometer covering the period from 1 April to 30 June 2006.

The report is based on returns from senior executives in 48 PRCA member agencies responding to the survey online.

The survey was undertaken in July 2006.

About the PRCA:

The Public Relations Consultants Association is the voice of public relations consultancies in the UK. The trade association was set up in 1969 and members now represent over 70 per cent of fee income for UK public relations consultancies.

It has over 125 members based at over 150 offices throughout the UK. These consultancies are of all sizes, working for clients in all business sectors. Together they employ around 5,000 people and generate more than GBP 400 million in each year in fees from clients.

For more information please visit www.prca.org.uk

For further information and for a full copy of the Q2, 2006 Report or any previous Reports contact:

Amy Fairbairn

Communications Manager, PRCA

Tel: [phone], Email: [e-mail]