Brexit: the impact on the advertising and marketing industry

This month marks one year since the UK’s referendum vote to leave the EU. The following 12 months have been a period of unprecedented uncertainty as politicians attempt to formulate a plan of exactly how Brexit will look.

 

We put out some forecasts last year of how it would affect digital, as well as the wider advertising and marketing industries. Now, we’re revisiting them to see the impact so far, what the future might hold and how good our Mystic Meg skills are.

The word of the year has without doubt been uncertainty. No person or company knows exactly how to negotiate this deal or what the best solution is. Therefore, the UK doesn’t know where exactly it will be in 2 years time when the Article 50 negotiating period expires. This naturally breeds uncertainty in swathes, which in turn means lots of companies review budgets and suspend any investment. For the most part this has rung true, although deals like Accenture’s bold and surprise purchase of creative shop Karmarama in November last year show that there is still room for investment and expansion of services, in particular for marketing agencies.

2016 – Brexit and the US Election included – also marked an outcry for authenticity. To a degree this has continued into 2017, with the election of the straight-talking Emmanuel Macron and the surprise hung parliament in the snap general election in the UK. In January we spoke about what brands can learn about being authentic from Trump’s campaign. Brands are slowly but surely learning how to deal with this, as well as managing brand safety in tandem. This comes with a combination of honest messaging and an awareness of where digital ads are being placed.

The recent snap general election result has also thrown up speculation that the UK may now seek a softer Brexit deal because of their disrupted negotiating stance. This has been seen by many experts to be potentially preferable to a hard exit as it infers remaining part of the European Single Market. EU leaders such as French President Emmanuel Macron and German Finance Minister Wolfgang Schäuble have also started publicising the idea that the UK is still welcome to renege on its triggering of Article 50 and continue to remain in the EU.

Vic Davies, the Course Leader for Marketing at Buckinghamshire New University and a former director at Mediacom feels that the effect will be varied and far-reaching, and is sceptical of there being a difference between hard and soft for agencies, saying “I don’t think this will make a difference”.

“For decades, the UK ad Industry has been seen as second only to the United States in terms of creativity and because it was the first country to separate out media. However, the arrival of digital and shifts in the sophistication of the consumer is challenging old-style advertising as the primary weapon, which means that UK creativity may no longer be ‘king of the heap’. The growth of the big media networks with HQs in London based on ‘we did it first so we know better’ meant that it was logical to base EMEA heads in London.

“Brexit may also mean that the UK will be seen as a separate market by many clients, and also one that by size is less important than the rest of Europe. So, clients may want its agency network to be managed out of Europe, not out of London.

“This may mean that London gives up its role as a hub and becomes just a spoke, particularly for European clients. This in turn may favour European networks, like Publicis and Havas, whose more converged approach may also appeal.” What this likely means is that where agencies establish their European headquarters may change, but the jobs already here are likely to stay for at least the medium term.

Davies also notes that digital disruption is also heavily in play for agencies to grapple with “both operationally in how you deal with digital in all its manifestations and how to develop and train staff, to strategically about how agencies should be organised and if they should specialise or be one-stop-shops. One can see this in the different approaches that WPP are taking from other networks like Omnicom or Publicis”.

Immigration rates will also play a large factor. The advertising industry, particularly London-based agencies, pride themselves on recruiting a diverse and international workforce. It has recently been quite publicly considered that nursing applications in the UK from EU nationals has dropped by 96%. At the same time, net migration dropped by approximately 84,000 from 2015 to 2016. The concept of Brexit alone has deterred thousands of otherwise talented and hardworking people from overseas. An actual deal and stopping freedom of movement across the EU will only exacerbate this longer-term.

 

We are yet to publicly hear agencies’ plans to respond to the above. It is quite clear though that Sir Martin Sorrell and his peers have a semi-solid response to various outcomes of the negotiations. However, it really is too soon to identify exactly how the industry will react and be affected. We can postulate the broad strokes, but the minutia of the outcome is yet to be determined.

 

Written by Andrew Thomson