Clerkenwell-based Web agency Wheel is to axe 70 to 80 staff, almost half of its workforce, in a desperate attempt to cut costs as revenues continue to fall short of expectations.
The decision, which comes two months after an earlier round of redundancies that saw 60 employees lose their jobs, underlines the hard times facing agencies. Just 18 months ago they were struggling to recruit sufficient staff to handle their burgeoning workloads.
Despite the earlier belt-tightening, Wheel has been forced to make further cuts in order to keep costs in line with revenues. It had become clear that the agency’s second quarter results would be poor, says chief executive Phil Redding. He attributes the downturn in revenues at Wheel to the turmoil in the wider agency market, rather than to “any single cataclysmic event” at Wheel itself.
Redding says: “Our projections were extremely accurate for the five months from September, [but] since March this year it’s been extremely difficult to predict the revenue that we can bring in. Our experience is that volatility and downward trend have accelerated over the past two months.”
It’s a downward spiral that has seen Blueberry.net go into liquidation in April, while a host of agencies including Razorfish, Agency.com, Victoria Real Grey Interactive and Oven Digital have been forced to make job cuts.
One factor is that old economy clients are cutting their digital spending in the wake of the dot-com crash, says Redding. Four major pitches involving Wheel were recently postponed or cancelled before a decision was made.
The new redundancies at Wheel, which will fall across the board, represent another painful blow to the agency’s ambitions. Formed out of the merger last year of Pres.co and Kensington-based Foresight, Wheel at one point employed 380 people and hoped to become a global full-service agency that would float within 18 months.
However, the merger was reversed in April, with the Kensington office reverting to the Foresight name, while Clerkenwell retained the Wheel identity.
Nevertheless, while conceding the opportunity to float had evaporated, Redding remains optimistic about the future: “The past two years have been about boom and bust – the market will mature and we’re confident that we will ride it out.”
Wheel’s clients include BT Cellnet, Argos, Marks & Spencer and Abbey National. The agency reported revenues for 2000 of &£14.5m with profits of &£2.2m.