Ad agency insolvency rates stall as recession eases

The number of advertising agencies collapsing is reducing as the recession eases, reports PricewaterhouseCoopers.

The rate of insolvencies has fallen by 22 per cent in Q2, down from a peak of 68 in Q1.

In the last two years, PwC says more than 350 ad agencies have folded with smaller, independent agencies suffering most.

The ad agency sector has seen more of a collapse than its media counterparts, with a cull rate 10% higher than that of publishing and 25% more that film and TV companies.

PwC does predict that internet advertising and TV advertising will shrink 3.2 per cent and 11.5 per cent respectively over 2009/10, but the professional services company anticipates digital and mobile media will account for 78 per cent of growth in the entertainment and media sector by 2013.

It also predicts that by 2013 the market will be worth $3 billion less than at its peak in 2007.

PricewaterhouseCoopers partner David Lancefield says: “The combination of a global recession and the structural shift towards digital platforms has accelerated the decline of some traditional media. The considerable growth in digital usage and revenues will not plug the gap left behind over the next few years,” says.

Lancefield urges agencies to invest in new skills and look outside the media sector to embrace the digital future.

In June, PwC’s Global Entertainment and Media Outlook report said advertising revenues in the UK would continue to slide for the next 18 months.

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