Whilst the current crisis is unlikely to be the sole cause of declining profitability, what we seem to be seeing is agencies panicking, increasing their output and stretching their services. 61% of agencies are producing more work and offering extra services, but 36% are seeing lower profit margins (Source: Reflect, Recharge, Move On: Creative Agencies In 2021).
Unfortunately, this reaction can lead to scope creep, which stops agencies from increasing their profit margins.