Marketing Services Outlook Survey results – May 2026
2026 predictions
13.3%
average operating profit margins
5.8%
average revenue growth
-0.9%
decrease in staff numbers
Introduction
Our latest Marketing Services Outlook Survey provides an updated view of expectations across the sector, reflecting agency leaders’ expectations for 2026 and beyond. Running twice a year, this survey complements our more comprehensive Annual Survey, published each November, and offers a forward-looking view of the industry’s financial outlook.
Nearly three quarters of respondents employ 75 people or fewer, with an average agency size of 70 employees. Around seven in ten are UK-based, and two thirds generate more than half of their revenue from the UK. For this survey, we have again included a section on AI, examining how its role has evolved and become increasingly embedded within agency operations.
Our survey indicates a resilient marketing services sector, although many agencies continue to struggle to convert growth into sustained profitability. Measured expectations mean agencies are investing with caution.
Agencies appear focused on protecting margins, strengthening client relationships and improving operational efficiency, rather than pursuing aggressive expansion.
A market of measured growth
Compared with last year’s survey, the overall direction of travel remains similar, but with a more cautious tone. In last year’s survey agencies were anticipating growth in income from 2025 to 2026 of 8.1%. However, this has fallen to a more modest expectation of growth of 5.8% – even lower of course once inflation is stripped out. Almost 40% of agencies are forecasting modest increases in revenue of up to 10%. Encouragingly, a smaller group of agencies were much more optimistic and are reporting strong growth expectations. However, the 27% of agencies expecting revenue declines dragged the average down, highlighting a divide in performance across the sector.
Last year only 15% of agencies predicted income would decrease in 2026, so the fact that number has almost doubled to 27% this year is disappointing. This year’s results show a wider spread of expectations, indicating a more fragmented market outlook.
A similar, more cautious, pattern is evident in profit expectations. Late last year, agencies were anticipating that, on average, margins would increase from roughly 12% in 2025 to 14% in 2026. This year, that expectation has dipped a little with average margins for 2026 expected to be lower at 13.3%.
Influencer and experiential agencies continue to outperform many traditional marketing disciplines, driven by brands prioritising measurable audience engagement, creator-led content and live consumer experiences that generate strong return on investment and deep customer connection. All agencies in these sectors were predicting revenue and profit increases. This strong growth profile continues to make the sector particularly attractive to investors and M&A buyers.
This generally cautious outlook is being shaped by several factors. Client behaviour remains conservative, with marketing budgets still under scrutiny and spend often phased rather than committed upfront. At the same time, there has been a continued shift towards shorter-term, project-based work, as well as in-housing which reduces visibility and makes sustained growth harder to achieve. Combined with a highly competitive landscape, this is limiting agencies’ ability to accelerate.
Margins under pressure
Whilst 66% of agencies expect revenue growth, only 61% were expecting increased profits. This highlights the ongoing pressure on margins. Revenue gains are not always translating into improved profitability.
The pressure on margins reflects a combination of rising costs and constrained pricing. Salary pressures remain significant, particularly in specialist roles, while continued investment in technology and AI is adding to short-term cost bases. At the same time, many agencies are finding it difficult to fully pass these increases on to clients.
Agencies will need to maintain strong operational discipline and actively manage margins. Influencer and experiential agencies appear to be managing these pressures well and were consistently forecasting growth in profits.
What was your operating profit margin in 2025, and what do you expect it to be in 2026?
A conservative approach to hiring
Overall, staffing levels are expected to decrease by nearly 1%, compared to an increase of 2% in our previous survey last year. The data shows that just over a quarter of agencies expect headcount to increase by 1–5%, while 23% anticipate no change. Only a small proportion are planning more significant increases.
This aligns with modest revenue growth forecasts and reinforces a cautious approach to hiring.
Agencies are increasingly aligning hiring decisions closely with secured revenue rather than anticipated pipeline. Hiring is also becoming more targeted towards specialist capabilities. There is also a greater emphasis on flexibility, with many organisations relying more on freelance or project-based resource to manage demand.
At the same time, improving utilisation and productivity is a clear priority, particularly as agencies look to balance growth ambitions with cost control. Increased use of AI will no doubt also be playing its part in this forecast decline.
How do you think permanent staffing levels will compare in 2026 to 2025?
Pay and reward: balancing retention and cost
Approaches to pay over the past six months highlight the ongoing tension between retaining talent and controlling costs. Under a third of agencies (29%) have implemented general pay increases in line with or above inflation, compared to 31% who were expecting to at the back end of last year. Most are focusing on more targeted adjustments linked to roles or promotions. Some 14% reported a complete pay freeze.
This suggests a shift towards more selective and targeted reward strategies. Notably, this mirrors a pattern seen in last year’s survey, where expectations were initially conservative but were ultimately exceeded in practice.
This variation reflects differing levels of financial headroom, with some agencies able to invest more heavily in talent while others remain constrained by margin pressure and uncertain revenue.
Looking ahead, the picture becomes more cautious. Expected pay rises over the next six months are broadly in line with the past six months; however, there has been a slight shift away from inflation-linked increases towards pay freezes or below-inflation rises.
Overall, agencies are increasingly directing investment where it has the greatest impact. Balancing talent retention with profitability pressures in a constrained pricing environment is becoming increasingly critical.
Barriers to growth
Alongside cautious growth expectations, agencies continue to face a range of internal and external challenges that are shaping performance.
Internally, the ability to generate and convert new business remains a key pressure point, with around 60% of agencies indicating this is either very or fairly challenging. Retaining and growing existing clients was less of a concern.
Challenges of recruiting and keeping talent also feature less prominently which is unsurprising given the balance of hiring power has shifted back to agencies. However, managing talent costs is still fairly challenging at best for half of agencies. It’s likely that pressures here vary; while generalist salaries may be cooling, specialists, such as those with tech, data and strong commercial strategic roles will still be commanding higher salaries. The junior end of the market is also more likely to be exposed with fewer entry level opportunities.
These challenges reflect a market where competition is high and differentiation is increasingly important, particularly as clients become more selective in how and where they invest. This is contributing to reduced visibility over future revenue streams, with agencies less certain on the timing of new project inflows. At the same time, growing the client base is becoming more resource-intensive, with longer, more resource-intensive pitch processes which can impact operating margins if opportunities are not successfully converted.
Externally, the economic environment continues to dominate. Some 90% of agencies describe the economic climate as very or fairly challenging with client budgets close behind. This reflects a cycle of cautious spending, tighter procurement processes and increased scrutiny on agency performance.
At the same time, developments in technology and AI are emerging as both a challenge and an opportunity. While many agencies are embracing these changes, the pace of evolution is creating pressure to adapt quickly, often alongside existing operational demands.
Overall, the picture is one of a sector navigating multiple headwinds at once. While none are new in isolation, their combined impact is contributing to the more measured and cautious outlook seen across the survey.
Pricing: caught between cost and client resistance
Pricing remains one of the most challenging areas for agencies.
In last year’s survey 37% of agencies thought they may be able to increase their rate cards and a further 13% were fairly sure they wouldn’t be able to. It appears that, unfortunately, those hoping to increase rates were unable to do so, as in this year’s survey roughly half hadn’t managed to increase them over the past six months.
In this survey respondents have been more cautious about the prospect of increasing rates over the next 6 months with only a quarter expecting to be able to (compared to 50% last year). A further 62% are hoping to if circumstances allow; given pressures in the industry this will be challenging to achieve, particularly given 45% of agencies reported pressure from clients to hold rates at current levels with a further 18% under pressure to reduce rates.
Procurement-led approaches, greater benchmarking and ongoing budget scrutiny are all contributing to this environment. Client expectations around AI-driven efficiencies are adding further pressure on agency pricing.
The result is a delicate balancing act between maintaining commercial sustainability and preserving client relationships.
AI: widespread adoption, uneven impact
AI is now firmly embedded across the agency landscape, although levels of strategic integration vary significantly. Compared with our last survey, the role of AI has evolved significantly. Previously, 65% of agencies reported actively integrating AI, with a further 24% still experimenting, while only around 10% had made it central to their strategy. This year’s findings suggest a clear shift towards greater maturity, with 23% now placing AI at the core of their strategy and a further 30% embedding it into workflows.
Most agencies are actively engaging with AI, with 79% of all respondents using it for automating internal processes, 78% for data-driven insights, and 72% for creating content. Only 22% are still exploring its potential. When comparing disciplines such advertising, PR and design, use of AI to create content was fairly consistent between them.
The level of integration of AI varied significantly. While a growing proportion have embedded AI into their operating models, 41% still describe usage as ad hoc, driven by individuals or teams. This split highlights a clear maturity gap across the sector, with agencies progressing at different speeds.
The impact of AI is beginning to show, particularly in improving delivery efficiency (72% of all respondents) and enabling agencies to take on more work without increasing headcount (48% of all respondents). However, it is also contributing to pricing pressure, as clients increasingly expect faster delivery and lower costs.
Overall, the findings point to a sector moving beyond experimentation towards more structured adoption. While efficiency remains a core driver, as seen in last year’s results, AI is increasingly being used to support scalability and new ways of working. As a result, it represents both an opportunity and a challenge, offering growth potential while continuing to reshape client expectations. The pace of progress since the last survey suggests a significant acceleration in adoption and we are already seeing the impact of AI commercially. Agencies without a clear AI strategy risk falling behind competitors that are embedding AI more effectively into their operating models. Over time, this gap will only widen, making it increasingly difficult to catch up.
A slow shift in business models
Despite ongoing discussion around alternative pricing, just over half of agencies (53%) are still relying on traditional models such as time-based billing. However, 26% are now actively moving away from this approach, indicating that while change is underway, it is not yet widespread.
Where alternative models are being adopted, agencies are exploring a range of approaches, most commonly productised services, subscription or retainer-based models, and outcome-based pricing. This reflects a growing desire to better align pricing with value delivered. PR agencies led the charge with roughly half adopting outcome and performance-based models, while fewer design agencies and very few advertising agencies were using it.
This gradual shift reflects both structural and cultural factors. Time-based billing remains simple and widely understood, especially by many of those in procurement. Moving away from it requires confidence in pricing strategy and client alignment, which can be difficult in uncertain market conditions. Agencies may need to take a more proactive role in educating clients as to how better outcome-based models can work. This will undoubtedly mean greater collaboration between all agencies of all disciplines working on a client project.
Conclusion
Agencies continue to navigate a complex environment with multiple challenges and rapid change. There continues to be a growing divergence in performance, with some agencies continuing to thrive while others are struggling to keep up.
This has resulted in modest growth expectations, reduced margin predictions, cautious hiring plans and constrained pricing. At the same time, the rapid adoption of AI and gradual evolution of pricing models suggest that change is underway. However, for many agencies, the commercial benefits have yet to translate meaningfully into improved financial performance.
Those agencies best positioned to succeed are likely to be those that combine financial discipline with strategic adaptability – balancing cost control with innovation and maintaining strong client relationships in an increasingly competitive and price-sensitive market.
Moore Kingston Smith media M&A highlights
