Monthly Archives: September 2008

When is one greater than 150?

As a chartered accountant who has previously spent nine years working for PricewaterhouseCoopers I thought I would do some analysis comparing the accountancy and PR industries. The results are a bit one sided.

PR Industry

The total fee income of the PR Week Top 150 2008 is £781m. Within the Top 150 the single largest brand is the Bell Pottinger Group with fee income of £52m. However this is slightly misleading as the league table shows other brands that have common parent ownership separately. If common ownership is taken into account then the WPP plc brands (Hill and Knowlton, Finsbury, Burston Marsteller, Cohn and Wolfe, Buchanan, Ogilvy, GCI, Clarion) would represent the largest single entity with a combined fee income of £81m. Average fee income per head across the Top 150 is approximately £96,000 per employee.

Accountancy industry

All of the Big Four Accountancy firms  – PwC, Deloitte, E&Y and KPMG – have individual UK fee income that dwarfs the entire Top 150.

PwC (2007) – £1,872m
Deloitte (2008) – £1,725m
KPMG (2007) – £1,396m
E&Y (2007) – £1,226m

Total £6,219m – eight times greater than the Top 150.

Their fee income per head is also substantially better ranging from £127,000 per employee (PwC) to £152,000 (Deloitte).

But perhaps more surprising is to consider some of the mid sized accountancy firms. The figures for just three of the larger mid sized firms – Baker Tilly, BDO Stoy Hayward and Grant Thornton – combined actually exceed the Top 150 as well.

BDO (2007) – £300m
Grant Thornton (2007) – £298m
Baker Tilly – £204m

Total £802m

The average fee income per head of these three firms combined is exactly the same as the Top 150 at £96,000 per employee.

Analysis

Two results immediately jump out. Firstly UK plc obviously invests a much greater amount in the accountancy profession compared to the PR industry with the expenditure on financial advice representing many multiples of that invested in PR.

Secondly that individual brands are still seen as key in the PR industry. By contrast accountancy firms are happy to operate as what effectively amounts to hundreds of small businesses under an umbrella brand.

The first will be due to many reasons, not least the legal and regulatory need for financial advice in many situations. However that still exists to some extent with regards to communications as well, particularly in connection with public company investor relations and M&A transactions. It is also likely to be due to the measurable nature of financial advice. If I save you £1m tax or sell your company for a £1m more you can immediately see and value the impact. That age old problem of PR and measurement raising its head again. After a few years working in the PR industry here is one accountant who has no doubts about the value that good communications can add. Anyone who does should perhaps give some thought to whether Northern Rock’s demise was financial or communications led. With the benefit of hindsight which of these two areas of deficit really destroyed the trust in the brand?

I’m not sure I have an answer to the second observation of brand maintenance. Both types of firms have individual directors/partners in whom goodwill is invested and both provide added value advice. However over the years the Big Four in particular have merged/taken over other firms and have eliminated brands from their identities. Had they not done so Deloitte would by now be called Deloitte, Plender, Griffiths, Haskins, Sells, Touche, Ross, Bailey, Smart, Niven and Tohmatsu. Which would be a bit of a mouthful to say the least :) Why is the retention of identities seen as so key by the PR industry?

A £600m stamp and it’s still second class

Today’s announcement that the stamp duty threshold has been increased to £175,000 for the next year raises some interesting questions. Was it a coincidence that this announcement came on the same day as the OECD announced the UK would go into recession in the second half of the year? Let’s be generous and say that it was. However the wonders of the stamp duty system leads to this creating some interesting numerical anomalies. The stamp duty bands will now be as follows if I understand correctly:

0% – up to £175,000
1% – £175,001 – £250,000
3% – £250,001 – £500,000
4% – £500,001+

This means that if I buy a property for £175,000 I pay no stamp duty. But if I buy a property for £250,001 I pay£7,500 in stamp duty. This means I have to pay £7,500 more to buy a property that is £75,000 more expensive i.e. 10% of the extra cost of this property. Pressure had already existed on sellers just above the £250,000 level to reduced their price with the previous increases of the exemption in the last three years to £120,000 and then £125,000, but this change just made that pressure even greater.

The change may benefit housebuilders of properties between £125,000 and £175,000 as effectively the taxpayer has just subsidised the sale of those houses in that price bracket by 1% of their value, but it probably won’t help chains greatly due to the presence of the same substantial level of stamp duty on properties greater than £250,000.

The estimate of £600m also only represents less than 10% of the tax receipts from residential sales – a relative drop in the ocean. Delving further highlights the Treasury’s reliance on the tax generated from the higher bands. In 2006-7 (the last year I can find this analysis for) the stamp duty generated on sales of properties above £250,000 was £5.07bn of a total of £6.45bn, nearly 80% of the receipts. This compares with only £1.64bn of a total of £2.69bn in 2001-2, approx 60% of receipts.

This means that of the £3.7bn of additional receipts in 2006-7, £3.4bn came from the higher bands.

Conclusion – today’s announcement is all about trying to create a perception of action, when in reality the Government has become so reliant on this income stream that it can’t afford to reduce the amount it receives by very much so it looks for the way that will create the biggest headline for the smallest cost.

One down…but 3W to go!

Before I dive into the wonderful world of numbers I need to extend a thank you to someone. Today sees the end of something great and the beginning of something better. As has already been announced Stephen Davies, aka PRBlogger, is leaving webitpr to setup his own online communications agency 3W PR and I can honestly say I have never been so happy to see a member of the team leave. :) As Stephen himself has already said I have been excited about him doing this since he first mentioned it to me and I think it is great news for the North East business community that someone of his depth of understanding in this area is looking to invest in the Region.

Since our very flukey meeting in April 2007 we have been through a lot together. We have debated and discussed many topics both work and non work related at length. He has been a fantastic provider of insight and guidance to me and the company at large in our embracing of the Social Media News Release, our blog outreach and our general Web2.0 awareness. Including a rather amusing day making a video. He has played a key part in our recent double award winning achievements which has seen us named North East Digital Innovator of the Year and Lincolnshire’s Most Innovative Business.

We don’t see this as him leaving us though just changing the nature of our relationship. webitpr is very much a “family” and employment status is not a prerequisite for membership of that family and as his launch client, Stephen is most definitely still going to be part of it.

We wish him all the luck in the world. In a few years Stephen I am expecting the North East to be talking about you in the same breath as this guy! :)

A starter for 10

Well after much umming and aarhing I am finally writing my first blog post. I could list a batch of excuses as to why it has taken me until now to start a blog, but that seems like a glass is half empty approach to a first post. So instead I thought I’d start with what this blog is all about.

With a love of maths at school (I know what a geek!), a degree in economics and a chartered accountancy qualification it will come as no surprise that I love numbers. I have done for as long as I can remember. I love them not in a static one dimensional way, but because, like words, numbers can tell stories and paint pictures.

When I was trying to come up with a title for this blog I wanted something that had some personal element, related to numbers in some way and set the scene for the things I want to talk about. Oh and the domain had to be available too! I thought and thought without any luck. It was my incredible*** wife, Rebecca who came up with an inspired suggestion “Show me numbers”. The words come from one of my favourite TV shows, The West Wing. In the episode “Two Cathedrals” at the end of Season Two the President uses the phrase in a flashback when he is at school:

“If you want to convince me of something, show me numbers!”

The phrase highlights the (fictional – aah if only…) President’s desire for fact and measurement when making decisions rather than anecdote and opinion. This will be my aim with this blog. To try and provide analysis, quantification and evidence to base opinions on and I invite you to join the debate and provide your own evidence and show me, and the other one or two readers who may frequent this place, why apparent “fact” should be questioned.

***Just a selection of Rebecca’s many talents and qualities
– Natural leader and transformation change agent
– Fellow of the Association of Certfied Accountants.
– Creates amazing interior design schemes with a Distinction in her Interior Design degree.
– Fantastic sense of fun and humour engendering the same in our children.
– Blue sky innovative thinker with a stunning ability to spot opportunities.
– Calm in a crisis.
– Self taught in Revit CAD to professional standard.
– Inspires me to be a better man.
– Energetic and passionate in everything she does.
– Can quickly size up people and situations, identifying what’s most important
– Amazing at DIY and craftwork.
– Empowers the teams she leads.
– Makes the most amazing Christmas dinner.
– Capable of insightful financial analysis.
– Prince 2 Practitioner.
– Sings to an operatic standard and has a tone of voice you never tire of.
– Incredible eye for detail, can spot things no one else can see.
– Prodigious capacity to listen and be patient.
– Astute commercial judgement.
– The best friend anyone could ever have, would walk through fire for them.
– With an inner strength that can take your breath away.