Design agencies in the UK have seen a modest rebound in income, with a reported increase of 5.5% in fee income for 2024, adjusted to 3% when considering inflation. This comes after a 3.9% decline the previous year. Despite this growth, profitability remains stagnant, with operating margins holding steady at 6.9%, significantly lower than the margins for PR, media, and advertising agencies. The report by Moore Kingston Smith highlights that while retail and packaging design surged by 20%, other sectors like digital and UX/UI faced mixed results. Employment costs are a major concern for these agencies, now accounting for 66% of fee income, and likely exceeding 70% when including freelancers. Gross income per employee has dropped for the second consecutive year, plummeting from £114,112 in 2023 to £103,947 in 2024. Operating profit per employee has halved in the same period, indicating a tightening squeeze on profits. The report suggests that the rise of AI may offer potential for enhanced productivity and improved margins over time, although real efficiencies have yet to be realized. Agencies are pressured to adapt their billing strategies, moving from effort-based to value-based pricing to justify fees in a competitive landscape where clients increasingly demand lower costs due to AI efficiencies. Transitioning to this model poses challenges, as traditional procurement practices often favor established billing methods.