NEWS10 June 2022

IPA warns of agency fee increases

Media News UK

UK – Advertising agencies will inevitably have to increase their prices due to the fallout from rising inflation, said Paul Bainsfair, director-general at the Institute of Practitioners in Advertising (IPA).

Inflation conceptual picture

In a statement, Bainsfair said that agencies had weathered Brexit and Covid-19, but that when coupled with rising inflation, agencies were no longer able to absorb costs.

Bainsfair warned that the economic situation had therefore made agency fee rises increasingly necessary.

“No agency would take the decision to raise their fees lightly,” he said.

“But with inflation levels at their highest level in 40 years, rising by 9% in the 12 months to April 2022 and potentially hitting 10% in the last three months of this year, such decisions are, unfortunately, inevitable.”

Bainsfair also said that a sector-wide skills shortage was having an impact, as it had led to increases in recruitment fees, wage pressure due to competition to recruit talent, and individuals seeking pay rises to offset the cost-of-living crisis.

Energy costs were also spiralling, as were raw material costs, both of which were also hitting agencies hard and forcing fee increases.

Bainsfair also warned companies not to make cuts to advertising, citing widespread evidence that companies which continue to invest in advertising during a downturn fare better in the long term.

“Agencies are not just creative machines but are also effective commercial powerhouses with expert understanding of consumers, including when and where is best to engage with them,” he said.

“Most crucially, they provide demonstrable evidence of the power and return on investment of their marketing communications activity in driving long-term brand growth for their clients.”