Battle intensifies for agency new biz as budgets drop

Agencies are boosting their marketing investment as the hunt for new business escalates and opportunities increase, but most are fighting for smaller briefs as budgets are cut and clients grapple with the ongoing economic uncertainty and the rise of AI.

So says The New Business Barometer, claimed to be the most comprehensive study of agency new business, backed by the IPA, PRCA, and the Alliance of Independent Agencies.

Published by specialist new business consultancy jfdi and strategic insight agency Opinium, the report draws on responses from 254 agency business development practitioners nationwide, across 18 disciplines.

It shows that large agencies report a 58% increase in their marketing budgets to £257,000, while medium agencies have invested +36% at £140,000. However, small agency investment is down by 19%.

Meanwhile, new business opportunities are also up, large agencies report +40% year on year, with 82 opportunities in 2025 compared to 48 in 2023, while medium agencies saw a 27% year on year rise, with 57 opportunities in 2025 up from 35 in 2023.

The report also reveals that commercial impact is overtaking creativity and matching chemistry as the real pitch driver.

Clients now demand proof of relevance, capability, and tangible results and agencies are responding. For top pitch winners, the key has been relevant expertise (77%, +5pp), and good client chemistry (72%, -2pp), while the fastest-growing factor is now meeting commercial objectives (61%, +7pp).

Even so, overall, budgets are down around 30% on 2024. Large agencies report a 30% drop, medium 26%, small 29%. Agencies are taking practical steps to manage cost of sale amid a long-term trend of lower pitch conversion.

In particular, agencies are now refining strategies to play to their strengths, focusing resources where they deliver the biggest impact.

In fact, some 71% of large agencies use intermediaries as a top prospecting strategy, while medium agencies focus primarily on management networks (80%), followed by marketing sales engagement (67%). Small agencies use personal networks (76%), client referrals (57%), and marketing as sales engagement (55%).

jfdi chief executive Camilla Honey said: “This year’s Barometer marks a turning point. Creativity and chemistry still matter but are no longer enough. Agencies are assessed far more rigorously on relevance and commercial impact.

“New business is less about volume and visibility, and more about strategic precision: choosing the right opportunities, building credible proof, and protecting profit.”

The impact of economic uncertainty is also rising; concerns over the outlook jumped 12pp to 39% the second-highest reason for losing a pitch. Client behaviour remains a top challenge: budget withdrawals top the list at 44% (-1pp), followed by rarely receiving detailed feedback at 30% (-5pp). Economic headwinds and client behaviour are set to shape agency new business this year.

Across the board, agencies say keeping projects profitable is their biggest challenge: 58% of small, 59% of medium, and 64% of large agencies report it is more difficult than last year. Across all sizes, this challenge now outranks creating opportunities, investing in new business, or converting pitches.

Pricing is under growing scrutiny, and in a competitive market, often traded just to win.

In addition. filling the pipeline is becoming harder: 63% of small agencies, 43% of medium, and 39% of large say creating opportunities is more difficult than last year.

And, across sizes, over half of agencies now prioritise generating opportunities over converting pitches or growing clients although the pursuit of more opportunities is in itself putting more pressure on the pipeline.

Finally, like it or loathe it, AI is now firmly on the new business agenda, even though it is early days. Agencies are experimenting, testing tools, and hunting for advantage, without a playbook.

ChatGPT (72%) continues to dominate the market, followed by Gemini (34%), Perplexity (22%), and CoPilot (18%), alongside tools like Firefly, Claude, Google Labs, Midjourney, Runway, Surfe, Dripify, and proprietary platforms.

The report shows small agencies use AI for speed, research, and pitch prep; medium agencies focus on processes and proprietary tools; large agencies scale research, qualify opportunities, and automate pitches with their own platforms.

Yet one in four agencies has yet to join the race, leaving room for latecomers to catch up.

BBD Perfect Storm founder Jason Foo, who recently took up the additional role of chairman of St Lukes, said: “Growth today isn’t about doing more of the same. It’s about being braver, acting smarter and doing more joined-up work.

“As client expectations continue to rise, new business has become both a strategic discipline and a creative craft. The New Business Barometer gives our industry a genuinely useful mirror: where we’re strong, where we need to sharpen, and where the biggest opportunities lie.”