The head of the UK advertising trade body has warned that agencies increasing prices are unavoidable because of growing inflation.
The IPA added that agencies can no longer be expected to absorb “the myriad problems and costs” related to the fallout from Brexit, the pandemic and the rising level of inflation.
Paul Bainsfair, the IPA director general, commented: “No agency would take the decision to raise their fees lightly. But with inflation levels at their highest levels in 40 years – rising by 9% in the next 12 months to April 2022 and potentially hitting 10% in the last three months of this year, such decisions are, unfortunately, inevitable.”
In addition to this, agencies are facing an industry-wide talent crisis combined with increases in recruitment fees, wage pressures and increased hiring competition.
The growing cost-of-living, energy and production bills and raw material prices are also “hitting agency costs hard” with the IPA summarising that after years of responding to the procurement demands of clients, there is “little or no room to respond with cost reductions, therefore, fees will have to increase”.
The IPA urged clients to keep the value that agencies deliver “front of mind” to assuage “a potential knee-jerk reaction” of cutting adspend.
The trade body said evidence demonstrated companies that continue investment in advertising during economic downturns perform best in the long-term.
The IPA concluded that it was not for them to tell agencies what to charge or how to operate, but the organisation is there to provide “guidance” and “a collective voice”.
One example of this was the recent cross-industry Pitch Positive Pledge so clients and agencies can agree to have more “open” and “mutually beneficial” conversations as opposed to unnecessary pitching activity with its significant linked costs.
LAst year, ISBA also updated its Media Services Framework detailing how advertisers should write their media contracts, after consulting with agencies, advertisers, auditors and intermediaries.
