The advertising industry in Poland, although it appears to be growing, is struggling with increasing difficulties. According to data provided by Dentsu Global Ad Spend Forecasts, promotional spending is increasing only minimally, and clients are cutting their advertising budgets, causing a rise in debt among advertising and marketing agencies. Companies in the creative sector owe over PLN 118.6 million, equivalent to approximately £21.5 million, but their contractors owe them nearly PLN 126 million, around £22.9 million. Forecasts for next year are not overly optimistic, suggesting only a slight increase in advertising expenditure. Post-pandemic recovery slowed the industry's growth last year, and now businesses must cope with market uncertainty related to high inflation and the conflict in Ukraine, among other factors.

In the creative industry, small advertising agencies are the most indebted

The creative industry in Poland, comprising advertising, marketing, market research, and public relations agencies, is struggling with growing debt. According to the latest data from the National Debt Register (KRD), as many as 4,103 entities in this segment have arrears, with average debt amounting to PLN 28,900, about £5,200. Advertising agencies top the list of debtors, owing contractors as much as PLN 97.8 million (around £17.7 million), and among them are also the most debtors – 3,388. Companies specializing in market and public opinion research must settle PLN 8.5 million (approximately £1.5 million), public relations agencies – PLN 6.9 million (about £1.3 million), and media houses – PLN 5.2 million (roughly £943,000).

One significant finding is that a large share of the creative industry's debt is held by small agencies, often operated as sole proprietorships. They account for a substantial portion of the debt – as much as PLN 66 million (about £12 million) in unpaid obligations, nearly half of the industry's total debt. Commercial law companies owe PLN 51.9 million (around £9.4 million).

The highest debt in the industry was recorded in September 2021, during the pandemic that froze the market. It reached PLN 160 million (about £29 million) then. Later it began to decline, but since the end of last year it has been rising again. The industry strongly feels the market uncertainty caused by both high inflation and the war in Ukraine. All these events have changed the approach to promotional spending in many companies. Decision-makers are now looking for creative solutions that do not consume large budgets but yield satisfactory results. Brands are also placing greater emphasis on communication quality to capture consumer interest and gain their loyalty. The coming months will show whether this strategy works and how it affects the condition of advertising companies.

– Adam Łącki, President of the Management Board of the National Debt Register of the Economic Information Bureau

Savings on advertising and marketing put the industry in a difficult situation

The "Corporate Expenditure Barometer" survey conducted in the second quarter of 2023 on behalf of the factoring company NFG showed that over the past 12 months, entrepreneurs most often decided to save on advertising and marketing activities – as many as 55% of respondents took such actions. Reducing spending on advertising and marketing poses a serious problem for the creative industry. Companies often impose long payment terms, forcing advertising agencies to seek external financing to maintain financial liquidity and pay subcontractors they work with.

The main goal of advertising, PR, or marketing agencies is to carry out various creative projects for clients. They usually execute them from A to Z, and receive payment after completion. When a larger batch of advertising materials must be produced, agencies often need external financial support, as client advances are still rare. One such source of financing is advance factoring. The form of security here is the future receivable. The agency receives money from the factor for project implementation and maintains financial liquidity until payment from the client. Our data shows that in the past two years, several hundred micro-enterprises, including small advertising and marketing agencies, have used this solution

– Emanuel Nowak, expert at the factoring company NFG

Where are the largest debts in the industry?

Analyzing the debt structure in the advertising industry, it can be noted that nearly one-third of the total debt falls on companies from the Masovian Voivodeship (PLN 42.4 million, about £7.7 million). The region also has the most indebted entities (5,459). Second place goes to enterprises from Silesia, which have PLN 14.1 million (around £2.6 million) in unpaid obligations, and third place belongs to entrepreneurs from Lesser Poland, where the debt totals PLN 11.4 million (approximately £2.1 million). The record-holder is a Lesser Poland advertising agency with debt exceeding PLN 3 million (about £544,000) to a leasing and insurance company.

The least indebted agencies are in Podlasie, where total debts amount to PLN 695,100 (around £126,000). Small debts also belong to companies from the Świętokrzyskie Voivodeship (PLN 1.1 million, about £200,000) and Opole Voivodeship (PLN 1.2 million, roughly £218,000).

Problematic settlements and debts in the creative industry

The multitude and diversity of creditors in the creative industry pose a serious challenge for advertising and marketing agencies. The debtor list includes securitization funds and debt collection companies that acquired debts from original creditors, totaling PLN 57.2 million (about £10.4 million). Additionally, agencies have significant arrears to banks, leasing, insurance, and factoring companies, amounting to PLN 31.3 million (around £5.7 million). Unpaid payments also concern mobile operators, Internet and TV providers, who are waiting for PLN 9.9 million (approximately £1.8 million). The industry is also struggling with internal settlements, where the debt is PLN 882,000 (about £160,000) to advertising, marketing, and event entities. This is compounded by printing and publishing companies expecting to recover PLN 1.2 million (roughly £218,000).

Unfortunately, the situation is further worsened by the fact that advertising companies themselves have amounts to recover that exceed their arrears. Clients owe them as much as PLN 125.6 million (around £22.8 million), with the main debtors being trading companies that have not settled PLN 30.4 million (about £5.5 million), construction companies with PLN 24.1 million (roughly £4.4 million) in unpaid obligations, and industrial companies with debt amounting to PLN 12.6 million (approximately £2.3 million).