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Brexit: Media industry reactions; Adspend analysis

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As the London stock market plunges, the Prime Minister resigns and a nation stands divided, the media industry has reacted largely with shock at the decision to leave the EU. Here Newsline presents views and adspend forecasts from around the industry.

Jonathan Barnard, head of forecasting, Zenith

In the short term we don’t expect the Leave vote to cause much immediate damage to the UK ad market. When we polled our key clients about the referendum, they all said that they would not change their spending plans simply as a result of the vote.

However, the ad market is closely linked to the state of the economy. In the medium term economic growth will suffer from uncertainty over the legal and business environment, and in the long term from a worse trade deal with the EU, the UK’s main trading partner.

We expect Brexit to reduce growth in UK adspend by £70m a year in today’s prices, which adds up to £1bn by 2030.

Jenny Biggam co-founder, the7stars

Today’s result is a massive surprise even to those who voted for Brexit. I think it’s too early to predict the impact on the UK ad market however one thing is clear: Brexit is now no longer just a political issue it’s an economic concern.

Turmoil in the financial markets over the next few weeks is inevitable and we can’t disassociate the advertising industry from the wider economy – our clients’ share prices have been hit and that won’t be good for advertising budgets.

It’s the same for global businesses and the weakened pound. The ad market needs a stable economy because ad spend is fuelled by consumers’ spending power.

In the short term I think Euro 2016 will continue to buoy adspend. Longer term I am hoping for stability and for business and politicians to collaborate more closely to avoid recession. We need to pull together to make the best of this decision going forward.

Martin Sorrell, CEO, WPP

I am very disappointed, but the electorate has spoken. The resulting uncertainty, which will be considerable, will obviously slow decision-making and deter activity. This is not good news, to say the least.

However, we must deploy that stiff upper lip and make the best of it. Four of WPP’s top ten markets are in Western Continental Europe and we must build our presence there even further. It just underlines the importance of implementing our strategy: fast-growth markets (BRICs and Next 11), digital, data – and horizontality, which ironically means getting our people to work together, not apart!

Bob Wootton, principal, Deconstruction

I’ve been posting that I wanted the finest possible remain margin to precipitate the substantive renegotiation that we should have had a few months back.

I genuinely didn’t expect the country’s palpable anger and frustration to carry the day. But it did, giving politicians and bureaucrats – and sorry, but yes, big business too – a very bloody nose indeed.

A thoroughly nasty campaign has already been succeeded by equally nasty recriminations.

What now? The pound has already fallen but will recover, if not to its previous level for a while. Many in Europe should be very worried, Greece because a big source of bailouts is walking and others for the rise in nationalism on their patches.

Uncertainty will surely dog the UK economy as it did during the run-up to the vote. Ad budgets may not shrink but will be certainly harder to get committed. Hiring and the raising of capital will slow – the number of IPO’s, booming recently, could diminish.

The bars of South Kensignton will be slightly quieter and the arts will continue to be great as they were before and during membership.

The UK remains a remarkable, vibrant country with whom overseas partners would be stupid not to trade reasonably once the emotions have subsided.

Paul Frampton, CEO of Havas Media Group UK & Ireland

This morning the feeling was one of numb uncertainty. Yannick Bollore, Chairman and CEO of Havas was very quick to reassure that the UK would remain at the centre of European strategy. At a time of uncertainty those disrupting the model are in a strong position to take advantage of widespread inertia and turn it in to opportunity. Havas is one of those agile organisations.

Some organisations will see the result as a reason to put the brakes on and ad spend may well drop in certain sectors but we need to look at the long term – it has stayed fairly consistent and stable through challenging economic times.

The Leave vote will not change Havas’ investment in the UK. We are opening a brand new HQ in London in early 2017 in King’s Cross and have just opened new premises in Manchester. The development in King’s Cross connects us more easily to Manchester and to Europe via the Eurostar and that remains an important connection for us despite the Leave vote.

Companies like Google and Facebook have centred European operations in the UK and my gut says this won’t change but smaller US digital operations may prioritise focus on other European markets like France, Germany or Spain as a result. My instinct says we will see an acceleration of spend shifting towards digital advertising as British businesses act to ensure they have cross-border visibility and reach European and global audiences.

We must accept the majority vote and move on to find the best way to keep open borders and trade with Europe. There’s no benefit in rushing in given the process will take some time to play out and we must get it right.

Tal Smoller, European telecom & media analyst, Bloomberg Intelligence

Brexit’s most immediate and obvious implication for the media industry is a potential slowdown in advertising spending. Given our economists at Bloomberg Intelligence predict that the UK economy might be 2% smaller in the medium-term, we think it’s inevitable that advertising revenue will follow suite as consumer spending slows.

Although advertisers surveyed by Zenith prior to the leave vote had no intention of revising their 2016 ad budgets (see above), which are typically set in advance, add-on bookings had already dried out since the referendum date was announced according to comments from both ITV and GroupM.

Now that Britain has decided to leave the EU, this may worsen, and may prompt advertisers to reconsider their annual budgets. Magna Global revised its forecasts lower for 2016 TV ad spending in the UK this month to 3.7%, and this was based on the assumption that Britain would remain in the EU, again pointing to potential downward revisions to ad spend forecasts.

Longer term, Britian’s exit from the EU could potentially harm TV content production exports and staffing, reduce funding from the EU, and preclude UK-based broadcasters from the benefits of the country-of-origin principle.

Tim Elkington, chief strategy officer, IAB

Uncertainty always brings economic challenges, and the decision to leave the EU will usher in a period of considerable uncertainty as brands assess the economic impact of the decision.

The UK advertising industry is currently in good health and grew by 7.5% in 2015. The most recent comparable situation to this was the recession caused by the credit crunch in 2008, when digital advertising still grew 5.7% year on year, so while conditions may be tough in the short to medium term, there is a history of growth in challenging times.

As a trade body it’s important that we give our members all the support they need, whether its in relation to the impact of Brexit on policy and regulation or to help shape their businesses and teams in order to meet upcoming challenges.

Matthew Charlton, CEO, Brothers and Sisters

It’s easy for everyone in advertising living in London, whilst devouring the Guardian every day, to think this is a shock. In reality it shows how careful we all need to be as an industry to not live in our micro bubble, full of hipsters and craft beer drinkers.

We cannot dismiss the will of the majority of the country as idiotic because they voted for something that appears opposite to our values. We have to take heed and realise that the ways and view of people we make work for can be significantly different to the industry echo chamber.

Never has there been a bigger warning to us to stop making ads for ourselves, awarding ads that we all like, and that we need to develop a wider taste of what’s good and what works for real people who our clients pay us to connect with and understand.

Zoe Harris, group marketing director, Trinity Mirror

The combined surprise at the shock results today from the media, politicians and adland is another example of how easy it is for us all to get swept up in the London bubble. This bubble helps to prevent us from acknowledging that the rest of the country are not always in step with us, and it is they, as the majority (Modal Britain as we call them at Trinity Mirror), who are the decision makers for the country.

Whilst you ponder that, contemplate for a moment; who were the true influencers in this election and where did the influential conversations take place?

It certainly wasn’t led by the Shoreditch hipsters, establishment politicians or business leaders. And it probably wasn’t on twitter, Instagram or even Facebook. It will have been in discussions amongst people’s own tight networks of trust – at pubs, school gates and kitchen tables up and down the country.

Until we properly put ourselves in other people’s skins, as opposed to claiming that ‘we walk in their shoes’ as an industry, we are in danger of not producing the maximum connections between the brands that we work with, and the very people we are trying to reach.

This article was originally published by Newsline. 

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