Source: Design Council - View the entire publication here... Design Industry Insights 2010
The Design Council have recently published a booklet that is packed full of interesting statistics, facts and comments relating to the UK's design industry. The document was excellent and for our own reference we've recorded the interesting snippets below. I decided to post them in this blog as many of the people interested in James Good Limited or the UK design industry will also be interested in what follows! Everything from this point onwards has been sourced directly from the Design Council's publication. The snippets are in order but some sentences and paragraphs have been cut down to their highlights.
87% of design consultancies employ less than 10 staff.
60% of design consultancies employ four people or fewer; a further 27% have between five and nine staff.
Only 18% of design businesses think that sustainable design practice is an important factor in winning work from new clients.
Only 4% work on a client retainer basis.
The average UK designer remains male, white and 38 years old.
Almost a quarter of consultancies are less than four years old.
Only one in ten design consultancies believe they compete outside of the UK.
The design industry is becoming increasingly bottom-heavy. The number of micro design businesses and freelancers is growing at one end, while at the other, the top 5% of consultancies have annual fee incomes of more than £2m.
Only 3% of design businesses are in Wales.
Designers have always been optimistic about their future earnings.
Half of designers still expect to earn moderately more this year than last year, about 11% expect to earn a lot more.
Surprisingly, about a quarter of design groups say they don’t plan to do anything at all to improve their financial performance in the next three years.
Optimum operating margins should be between 15% and 20%, fee income per head should hit £80,000.
The average agency relies very heavily on winning new clients every year.
Designers also say that in 74% of cases it is chief executives or business owners that commission them.
Professional design representation is still a big issue. In 2009, only one in ten design consultancies and freelances were member of local or regional design networks, though even fewer said they were members of national design bodies such as the Design Business Association, the Chartered Society of Designers, D&AD or British Design Innovation.
Design consultancies and freelances say that on average 43% of their fee income came from new clients during 2008-09.
The International Competition Debate
South Korea and Singapore are becoming powerhouses of design while China’s ambitious plans for design are turning it into a major player. But the jury is still out on whether all this is really affecting British designers. Are projects being plucked from them by overseas talent? Is international growth opening doors for collaboration. Or is it simply business as usual?
90% of British design businesses say that their main competition still comes from within the UK.
Focus On Business
There is strong evidence of regular renewal of the production chain and supplier relationships. Rapid prototyping is now starting to follow print and production overseas, as it is increasingly outsourced to cheaper markets.
Where design is a standard operating process it is increasingly monitored for efficiency.
The Hard Cash Debate
According to the latest figures, the recession hasn’t stopped the design industry growing.
In the UK, 78% of consultancies earn less than £500,000 per year.
Around 60% of consultancies and freelances say they expect their fee rates to rise over the next three years.
Wally Olins, Chairman of Saffron Brand Consultants, typifies this confidence. Olins says that the recession caused slumps in every market, but in the last quarter of 2009 he saw a dramatic upturn. ‘People who’d been delaying for months and months seemed to decide that they couldn’t wait any longer,’ he says. ‘The next 12 months are going to be a consolidation period, but business is slowly coming back.’ Olins is confident that design will not just recover, but thrive. ‘Some markets will pick up faster than others, but broadly speaking it looks like we’ll be back to the same levels of growth that we saw when we first started business nine years ago.’ During this period Saffron has seen 20% growth year on year, he says.
Jim Thompson, of retail and branding group 20/20: ‘There was a huge drop in the market value of design in around 2004,’ he explains. Thompson points out that the drop in value wasn’t recession-driven. Instead it was caused partly by the diminishing life span of design projects - for example, brands once lasted a decade, but are now refreshed every few years - and partly because there is simply so much more design being offered around the globe.
For some this has been a mixed blessing. ‘The work has been exciting because clients are more willing to take risks,’ says Thompson. ‘But it also means they are paying smaller fees.’ Thompson says that 20/20 has responded to these lower rates by doing more for clients, digging deeper into their needs to get a bigger bite of their marketing budgets. This has resulted in them pushing their strategic advice as a stand alone offer, for example, or offering web design as part of communications projects. This approach does have the benefit of deepening designers’ relationships with clients.
According to Thompson ‘Good design has become part of consumers’ expectations, so demand is not going to disappear,’ he says. ‘The challenge is coming up with the ideas that help clients differentiate themselves.’
The Client Knows Best
Some clients are more inclined than ever to place design and branding specialists at the so-called top table, where their opinion counts in strategic matters.
David Mercer, BT Group’s Head of Design: ‘Design is generally being taken more seriously as a business resource by large companies - therefore what we need from consultancies is a greater degree of professionalism and sophistication in the way they operate.’
Peggy Connor, Business Director at AAR: ‘It is not about size now, and there is no guarantee that the big boys will win,’ ‘ We see work from very small consultancies that is really remarkable.’ There are two clear reasons for the slow rise of smaller consultancy and the decline of the roster. First of all, in tough times, even blue-chip clients look for opportunities to cut back on retained suppliers. And second, many clients are now far more confident in the management of their own brand and their ability to call upon and brief nimble, creative designers on a project basis.
Branding and identity are maturing disciplines.
‘When we have big identity challenges, we will call upon external consultancies, but we no longer have a roster of design groups like we did in the past,’ says Ben Spencer, Orange. ‘ By working very closely with branding consultancies, I think we have learned the dark arts of identity management.”
‘Brands that don’t recognise the particular strengths of large and small consultancies are naive. A couple of years ago, we found that the bigger branding consultancies were working out too expensive for the smaller projects, so we started working with some smaller consultancies as well, and that has been great.’
‘No matter how well I write the brief, I am really looking for something more than I was actually asking for,’ says Mercer. ‘The ability to provide that is a good measure of a really good consultant or consultancy...’
‘As far as branding and design are concerned, a lot of consultancies from different disciplines are now stealing that territory,’ says Connor. ‘And the ones that are successful are those that take the conversation to the client and say: ”we solve issues”.
‘It is who understands the client best and, in commercial terms, who makes it easiest to buy.’
For all the talk of strategic roles, many design groups - especially the smaller ones - are happy to produce creative work to order, particularly given the challenges of billing for strategic advice.
Sharon Zimmerli Barclaycard: ‘A key attribute for a design partner, is not just to fulfil the brief, but also to question it when appropriate.’ ‘Because we don’t have an internal design department and we outsource all our creative work, we see our consultancies as an extension of our team,’ she says. ‘As a client, we respect consultancies that stand up and have an opinion, even if it is different to ours.’
As design becomes a greater force for business, there is a consensus among design consultancies that their work delivers value and differentiation, giving brands a competitive edge. Agencies understand there are pros and cons of being one size or another. But realising growth requires having the will as well as the opportunity.
Interestingly, the main obstacle to growth is not getting the work or becoming established, but good old-fashioned cash-flow. We’ve been surprised at the amount of time and effort needed to get large, wealthy corporations to pay us on time.
The Big Green Design Debate
For some designers, these practices are simply becoming part of good design. ‘I think we’re getting to a time when we’re not going to be talking about sustainability any more,’ says Jason Bruges, founder of the Jason Bruges Studio. ‘It’s just going to become part of the checklist.’ Bruges says that he’s interested in ‘the overall intelligence of the design process, which means considering everything from its environmental impact through to its benefits for the client.’
But while shaping up environmental messages is one thing, reducing the overall impact of products and services is hugely complex - and not yet fully understood by designers or clients.
59% of designers say they feel well equipped to advise clients on sustainable design practices: but there are still underlying problems that need to be resolved. For example, making a green choice can have negative knock-on effects. ‘We tend to move a client away from heavy print solutions as much as possible now,’ says Neville Brody, founder of Research Studios ‘But at the same time we’re learning more and more about the energy resource drain caused by continual use of the internet - which could potentially be far more damaging than paper.’ These kinds of problems will keep coming up for designers - the challenge will be keeping themselves, and their clients, educated and moving forward with the best solutions.
6 years ago