The design industry is experiencing a significant divide between successful agencies and those facing challenges, according to the 2023 annual survey by accountancy firm Moore Kingston Smith. The report highlights a widening gap between agencies achieving high profit margins and those in "worst-case" scenarios that are resorting to staff redundancies. The survey suggests a polarisation within the industry, indicating a clear distinction between successful firms and those facing financial difficulties. This can be read in an article by designweek.
The Annual Survey 2023 by accountancy firm Moore Kingston Smith provides a mixed assessment of the design industry's performance. Analysing over 250 companies, the survey reveals a varied landscape for design agencies. In 2022, the design sector experienced a post-COVID rebound with real growth in gross income and improved operating profit margins. However, adjusting for inflation shows a more modest revenue increase of around 4.25%, hinting at potential margin pressure in 2023 and 2024.
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The survey highlights a divergence in agency performance, distinguishing winners with high revenue growth and strong margins from losers experiencing net falls in real revenue and weak margins. The report anticipates further disparity, with winners maintaining high margins and losers facing bottom-line pressures that may lead to redundancies. Factors such as the cost-of-living crisis and the future impact of AI are expected to exacerbate this trend.
Despite total fee income across design agencies growing by 13.3%, the real growth, when adjusted for inflation, is around 4%. Only a third of independent design agencies achieved real growth in revenues. The report emphasises the importance of a strong grasp on costs, a compelling value proposition, and strategic client relationships for success in a high inflationary environment. Agencies with the ability to pass cost increases onto clients are poised for success, while those that can't may struggle. The advice for designers underscores the significance of a focus on high-quality, strategic work for clients in achieving future financial success.
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