Is Brexit damaging the UK advertising market?

The industry seems divided on whether the vote has made a clear negative impact so far.

Is Brexit damaging the UK advertising market?

The economic fallout from the Brexit vote is likely to be measured in years, if not decades. But, like the referendum itself, there has been fierce debate about the short-term impact.

A study from the Advertising Association has found that 22% of 200 companies surveyed lost business due to the Brexit vote. James Murphy, Adam & Eve/DBB co-founder and AA chairman, told the Lead 2017 conference: "On the Friday afternoon of the vote, I got a phone call from a large North American client cancelling a contract, with the question: ‘What the hell have you guys done?’ The following Wednesday, a European client cancelled." That flurry of activity died down following the immediate aftermath of the vote, but Murphy noted that sentiment among global clients remains "quite brittle".

He added: "We were talking to a European client about centring their business in London as a hub for Europe [before the vote]. And now the client is going for a diffuse structure… which is very annoying."

Yet there are few signs to suggest the impact of the referendum has yet damaged the ad market.

Nearly a quarter (23%) of respondents in the survey said they saw Brexit as an opportunity for growth, while 8% have increased investment in the UK. In addition, recent AA figures show UK adspend grew 4.2% in the third quarter of 2016. 

Richard Oliver, UK managing director of Magna Global, believes the industry can ride out the Brexit jitters. "We predicted that elements of the ad market would soften in 2016 and so, for some advertisers and media owners, Brexit was a convenient excuse for falling spend," he says, adding that he sees no evidence the fallout of the vote is broadly harming the market.

That is also the view from the City. Ian Whittaker, media analyst at investment bank Liberum, says: "Brexit does not appear to be harming the ad market. With the exception of Next, the Christmas figures from retailers have generally surprised positively."

Sterling’s slump has had a mixed effect, making it easier for exporters and for UK companies with foreign earnings but tough for overseas businesses earning in pounds and for importers facing a spike in costs.

But there is no avoiding the fact that currency devaluation has made Britons poorer. Mark Essex,
associate director of KPMG’s strategy group, told Lead: "The workforce has taken a 19% pay cut without changing their living standards. Britain is on sale."

If there is a silver lining, it is that history shows smart companies that invest in their brand in an uncertain market will drive sales and grow faster.


MAYBE

 Alistair MacCallum
 UK chief executive, M/SIX

"Cautious optimism is still evident in most forecasts. But there are geopolitical and economic dynamics beyond just Brexit that are a threat to confidence for businesses and their customers. We must be ready to respond to shifts in behaviour quickly."

NO

 Ian Whittaker
 Media analyst, Liberum

"While there was some uncertainty immediately after the Brexit vote, the latest IPA Bellwether survey paints a cautiously optimistic picture and consensus GDP forecasts have been rising, which bodes well for advertising."

NO

 Richard Oliver
 UK managing director, Magna Global

"The budgets impacted directly by the prospect of Brexit – an event still two years hence – are very small. And there is an upside – if Brexit makes it harder for some businesses to sell some products and services, then advertising is a tool to tackle that."

MAYBE

 Deborah Mattinson
 Founding partner, BritainThinks

"Leavers’ and ‘Remainers’ disagree strongly. Adland has struggled to understand these differences and how they play out in comms strategy. In the short term, the ad market may recover, but failure to engage with all sides of divided Britain risks longer-term damage."

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