The company warned that more job losses are on the way as 393 of the 770 top agencies it surveyed saw their profit margins decimated.
Plimsoll senior analyst David Pattison, the author of the report, said: "The recession has hit the sector hard with more than half the companies analysed in our new report making less profit than they were a year before. The bill in lost profits stands at £609m.
"With demand so subdued and the resultant competition, many companies are unable to charge the price they need to make healthy profit margins. In the absence of pricing power many companies will have to make painful but necessary cutbacks in the next 12 months.
"Watch out for further job losses and closures as these companies as they look to claw themselves back to profit next year. If they fail to act quickly, they could find themselves running out of cash."
Despite this, Plimsoll said many agencies were weathering the storm more successfully.
"Amazingly, there are 201 companies that have maintained or increased their profit margins in the past year. While some made cut backs to match their lower sales expectations, others have managed the Holy Grail - they have grown their business and increased their profit margins in a recession."