The UK’s creative agencies are facing mounting challenges as their clients, big and small, slash marketing budgets and freeze current spend, according to insights from fintech business lender MarketFinance.
Three quarters (72%) of the UK’s businesses reported that they would freeze marketing spend as they seek to plug gaps in their cash flow owing to financial difficulties from the impact of COVID-19.
With revenues drying up, agency bosses are at a loss on what steps to take next to balance their books. Four out of five businesses reported that revenues have fallen, on average, by 53% since the onset of lockdown measures (compared to this time in 2019).
The government-backed Coronavirus Business Interruption Loan Scheme (CBILS) which offers finance facilities to businesses of up to £5m over 6 years (interest-free for the first year) appeals to half (52%). The remaining half (48%) are fearful they would not be successful for the scheme because they have existing business loans and servicing an additional debt would cripple them. Additional concerns over their cash flow and business models mean they are reluctant to apply.
This leaves the industry in a precarious position with 85% of creative agencies indicating that they will run out of money by June 2020. It comes as no surprise that three quarters (73%) support the government’s plans to cover the wages of employees who will need to be furloughed (the Coronavirus Job Retention Scheme). The future of the industry remains uncertain with falling revenues and uncertainty about how long before the business environment returns to normal. Three quarters (75%) of agency bosses believing that it will be at least a year before business normalises.
Anil Stocker, CEO at MarketFinance, commented:
“Agency bosses have been hit hard but they need to press on and put measures in place to ensure they survive this crisis. The Coronavirus Job Retention Scheme will help to protect talent but they shouldn’t shy away from the CBILS. This scheme covers a range of finance options, not just business loans. We found that a third of creative agencies are unaware of invoice finance as means to remedy cash flow problems and three quarters of firms have never used it. Invoice finance is available under CBILS”.
Nick Armitage, managing partner at creative agency Nonsense London commented:
“A number of our clients have paused projects until there is a little more certainty on what lies ahead with this crisis. Others have temporarily reduced the size of their own teams through the government furlough scheme which in turn has reduced the number of projects that we’re used to seeing come through. That said, there is still a huge opportunity for brands to connect with their customers digitally in more personal and creative ways. We’ve quickly helped our clients pivot through free crisis strategy workshops and an increased focus on video content built up of UGC, animation, archival and stock footage. Everyone is in the same boat so the rules have completely changed. We have to find the advantages and opportunities in this terrible crisis and keep moving.”
Anil Stocker, CEO at MarketFinance, added:
“We weren’t surprised to find that these businesses were more likely to turn to their friends and family ahead of their accountants and bank mangers for advice on what to do next. They find the notion for meeting these advisers quite intimidating. Not all experiences are like this, but we hear it often from creative agencies. This said, it might be comforting to lean on those close to you but, there is no substitute for professional advice. Especially, during a crisis.”