Brexit’s Got Talent? - a roundtable discussion

Will post-Brexit UK still appeal to the talent that agencies need to attract?

As negotiations over the UK’s departure from the European Union inch closer to officially starting, agency M&A advisers Green Square invited a selection of agency leaders with offices across Europe to lunch at The Ivy. On the menu was the question: what are the implications of Brexit on the availability and movement of industry talent and the crucial importance of agency culture to future success.

Sharing their views were Brian Elliott, founder and chief executive officer at Amsterdam Worldwide; Neil Thomson, chief financial officer at AnalogFolk; Edward Ball, managing director EMEA at Jellyfish, Patrick Hickey, chief executive officer and founder at Rothco Group; Melina Jacovou, chief executive officer at Propel and Tony Walford, co-founder and partner at Green Square.

The Drum Network’s consultant journalist Michael Feeley was also in attendance to record the discussion.

Tony Walford (TW): Now that the UK is set on the course to leave the EU within the next two years, what will be the effect on agencies and their ability to recruit the talent they need?

Melina Jacovou (MJ): I wanted to remain but, so far, the signs are positive. If you look at companies like Google at Kings Cross, who are doubling in size in the next year, or you look at Apple, who have taken on 500,000 sq ft in Battersea , they are committing to London and they are running with it. Whatever is going on in relation to the EU, the Europeans still need London.

The only challenges we might have, which no one has actually confirmed, is the Visa situation. We don’t know what’s going to happen with the single market. I think 16% of people who work here in London are Europeans so it will have an impact for sure. That said, from a business perspective, at Propel, we’ve actually had our busiest year yet since the Brexit vote.

Melina Jacavou of Propel.

Patrick Hickey (PH): At Rothco, based in Dublin, we have 30% international staff, including quite a few from Brazil. Traditionally, trying to attract people to Dublin can be hard being so close to London, which is viewed as one of the epicentres of the ad industry. Amsterdam is at the top for that. We commissioned some in-depth research 7 years ago to find out why Amsterdam was so popular with talent, and, in the end, the findings were basically that people just like it!

So far, in response to Brexit, I think Dublin and Ireland are experiencing a little bit of caution until we find out what’s happening.

TW: We could see quite a lot of acquisition activity moving to EU English speaking countries that have creative hubs, so Ireland obviously might see a bounce from that. Most acquirers we deal with have a global footprint, and places all over Europe anyway, so Brexit doesn’t matter too much to them.

Last year, we sold a French listed company, run by Germans and based in the UK, during the aftermath of the Brexit vote. Although Brexit delayed the decision for a couple of months, it ultimately made no difference. The buyers said the UK is such a big market and, as they needed the presence, it was a no brainer and they just went straight ahead. So we haven’t seen much in the way of negative impact and the exchange rate impact following the vote actually worked in the buyer’s favour.

Brian Elliot (BE): The UK is a G7 country and will be important in any circumstance and London in particular is an important city for all kinds of reasons. The real shame is that Brexit will cause years of uncertainty. The UK was in pretty good shape two years ago - it came through the recession reasonably well and unemployment was going down in certain sectors.

I come from Montreal originally and I grew up in the context of the ‘neverendum’, the ever-present referenda that was either just behind us or just ahead of us. At one point in my twenties I decided this was futile and irrelevant and I would go somewhere else in the world where we weren’t wasting time with this kind of nonsense. Actually, it killed Montreal, all the business moved to Toronto and it wasn’t because they were anti-French - it was because they were anti-uncertainty.

What will happen is that people will simply behave rationally and see the EU continue in stability, because Germany, France, the Netherlands and several other countries want it to continue, and it’s been a good success. I think the situation is unfortunate, but life will continue.

Edward Ball (EB): In terms of client confidence and our ability to service them, it doesn’t seem to have affected us at Jellyfish a huge amount, so far at least. We’ve had a brilliant start to the year and initial thoughts are positive across the group. I think where we are quite cautious is in negotiating the skills gap and ensuring long term sustainable growth - it’s still quite difficult when you are growing to find good people who are both specialists but with a good level of experience. In terms of Spain, where we’ve recently opened a new office, we now have the ability to tap into a further market and start to find and secure talent in the EU, not just the UK.

Partick Hickey of Rothco.

Neil Thomson (NT): I seem more worried about my staff leaving than they seem worried about themselves because I would say 20% of our workforce are from the EU, and I think I have maybe had one person who has come up to me and asked about it.

As yet, I haven’t seen any impact on our ability to recruit people. It could be because we have got a growing reputation as an agency therefore any negative macro level influences are countered by the micro level culture of the agency. You all see agencies that do well in a recession, there is something about them that gives them enough momentum to overcome bumps in the road.

MJ: I would have thought that there would be much more from the US because of the dollar situation. Is there venture capital money flying around the US?

TW: The venture capital market is still very buoyant. We haven’t seen a slowdown in cash availability so that’s been fine. I had a meeting this month with a US company in the market for a £2-3m profit business in the digital space. There aren’t that many of that size that are still independent, so I asked if they were looking at other European markets because of Brexit and their answer was “No”. Trump has effectively wiped Brexit from their memory; they have their own thing going on. It’s almost irrelevant to them.

BE: You can’t underestimate the importance of cultural factors. Americans/Canadians are more comfortable doing business in London. The legal business is largely the same, the commercial linguistics. Those things go a long way. It takes a little bit of effort but there are some incredible things happening in France in tech. In social agencies, in Germany, Berlin is just bursting, costs even less than Amsterdam and talented young people want to go there. Its £50 to go to London on EasyJet from Amsterdam and yet most North Americans go to London first. A lot of that has to do with culture and comfort and it’s the same in business. There is enough risk already going out of your own market - going to London mitigates some risk and discomfort.

Brian Elliot of Amsterdam Worldwide.

PH: Over the past two years, we’ve lost around ten creatives to Berlin. If you had asked me 6-8 years ago, it would have been lost to London. People are not seeing London as the place to be now, it’s Berlin because it is so raw.

MJ: I do loads of work with London partners and foreign direct investment channels sponsored by the mayor and the government to bring business over here. When I talk to North American businesses, it will be one in ten that consider Amsterdam purely because of costs. London is still the hub for those guys. If you are pre-IPO and you want to use it as a spot to push out to Europe, they all want to come to London first of all, they really do.

Look at the statistics from Tech UK that came out recently: in 2016, the UK secured £6.8 billion in venture capital from private equity. That’s more than France, Germany and Netherlands combined.

BE: London has always been a key city and if you look at the world you see that it isn’t country economies anymore but city economies. Dubai, Singapore, Hong Kong, whatever, they are the drivers of the huge amount of onward innovation, money, the concentration of talent and one of the big advantages London has is the market. Many companies are here in London because they want to go public or they want to raise venture capital of one kind or another and the opportunity to do that exists here.

NT: As far as AnalogFolk is concerned, yes, we have some clients that are spending less because of Brexit. You are also seeing greater uncertainty in that the commitment to a budget is less concrete. So, I do currently see negative aspects to Brexit, but I also see some positive aspects to us as an agency.

More than half of our income comes from outside the UK, through subsidiaries in the USA and Asia and clients in The Netherlands and Denmark, so the exchange rate helps. In Sweden, if you look over the last three years, we are 30% more expensive without putting our rates up. We are also benefitting from the fact that our US operation is doing very well.

As an agency, I think the impact of Brexit will be mixed. I am much more negative about how it affects the nation as a whole. The concern I have is that it’s all well and good saying ‘the UK can make more things locally” but we don’t necessarily have the capacity to do so. For example, if Dutch flowers are suddenly going to become more expensive, we as a country are more likely to go to China than we are to actually produce them ourselves, because we haven’t made that investment and it would take us about ten years to do so anyway. Also, we as Brits aren’t necessarily nationalistic in our choice of product. People will still buy the increased cost of a BMW or Audi.

Neil Thomson of AnalogFolk.

BE: I find myself in the odd position of being that guy who spent most of my 20 years in Europe attacking the European system, insisting they introduce a Thatcherite model, then the other half telling North Americans and English people to realise that, for all if its failings, the EU is a wonderful thing.

The kids we hire today think nothing of coming from Barcelona. We have a bunch of people from Spain in our office. To them it is the most natural thing. They don’t think twice about going from Barcelona to Amsterdam or Berlin and that wasn’t true 15 or 20 years ago.

One interesting consequence of Brexit, though, is that UK talent is 30-40% cheaper than what it was a year ago. If I was to acquire an agency in the UK this is probably the best moment in the last decade to do it.

MJ: From a salary perspective, the US companies we bring over here do a salary survey and use our insights to build a P&L. Even before Brexit happened, salaries here were 30% less than in the US across the board.

EB: We pay around 25% - 30% more in the US than the UK and so far market experience would indicate that the West Coast is demanding a premium over the East Coast. When we initially set up the Baltimore office, the city was very short in the skills needed to scale, so we actually set up our own digital academy. The idea was we approached key universities and offered graduates a 3-4 year road map of what their career would look like with us, built up modules, then provided the trainees with hands-on experience. We gave them live Jellyfish owned projects to work on and by month 6 they are ready to start to support agency accounts. Due to this programme our staff retention is excellent compared to market averages. Approximately 95% of our US workforce came through our academy in the last 7 years, and due to its success, we’re actually launching the programme in the UK.

MJ: That’s a fantastic retention rate. Culture is so important. Taking the time and making the effort required to grow your own talent.

PH: That’s very true. We’re not looking at opening offices internationally because 50% of our business is international and the reason we are winning against the international competition is because we have a culture that’s real. I don’t want any of our senior people having to go and move to a different market. You need that to enable a transfer culture. One of the founders has to be somewhere else and none of us have any interest in that. We do buddy up with local agencies around the world when we have got significant projects that are going to run for a period of time we find that works out really well for us.

TW: We always say you shouldn’t do a deal if the culture isn’t right because the only thing that is going to make sure that your business is successful post-acquisition is the culture, chemistry and the strategic direction in terms of where you are going to go together.

Ed Ball of Jellyfish.

EB: In terms of the business, our concerns are much the same post-Brexit as they were pre-Brexit. The big thing for us is continuing to scale at the growth rate we have been for the last three/four years and keeping the culture intact. We work tirelessly in making sure that people are happy and that they feel a part of that journey and that’s one of things that we feel defines us as a business. At the end of last June we opened offices on the 22nd floor of The Shard, which was incredible and everybody within the business was very excited about our new location. We invested in the office to support our training proposition and the results have been great, not only from a commercial stand point but also as a milestone in our growth. We’ve now trained over 2,500 people in the last 18 months and it doesn’t seem to be slowing.

TW: OK, let’s talk a little about the US. What will be the impact of the Trump presidency?

BE: It’s interesting that in the home of capitalism, the US, there is a ton of regulation on business and there is a ton of uncertainty. You can also be sued for anything. I have a multicultural agency by design but when we set up in New York we consciously made an effort to be diverse. In fact, in order to be insured we had to give diversity lessons to all of our staff.

This never once came up when setting up business in the Netherlands, not one time. Everyone talks about the EU and their rules on bananas of whatever, but having had two business of my own and employed hundreds, probably thousands, of people over the years, I’ve never once had a rule from the EU that I needed to pay attention to, whereas when I set up in the States there was such complexity with just the tax code.

So in that way Trump is right. There is a ridiculous amount of regulation that governments had laid upon business year after year. A lot of business people will be very happy with the removal of those kinds of things if it happens. It’s amazing that creating a business in America is more complicated and expensive than Dublin, Amsterdam and London.

NT: I have been fortunate in that I have generally worked with agencies that have had momentum and been able to go beyond what is generally achieved. It comes back to founders of the business putting in the inspiration, the culture, the success and the passion, being able to keep going year after year and constantly trying to improve. For example, we have invested in data science over the past 12 months and it’s already a rapidly growing part of our business.

BE: What remains true is that human beings are emotional, they make decisions based on emotion and then they post-rationalise those decisions. At the moment, we’re seeing the exaggerated influence of data over the intangible, and yet most of the biggest companies listed on the stock exchange are based on intangible values. Companies that own brands are the most valuable.

So a brand is created through emotional connections with consumers and you can find a lot of different ways to reach those consumers. You can have a very efficient tactic digitally to intersect them when they least expect it or perhaps hopefully when they most want it. Yet it is the emotional connection that is, at the moment, undervalued in the process.

TW: It’s interesting that we’ve spent lunch talking about all these macro issues and what I am hearing is that more than ever it is about concentration on the individual member of staff and the nurturing of the agency culture.

NT: I think so because if you get that right you can deal with all of the shit that’s outside. If part of the shit is Brexit? Fine.

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Michael Feeley

Michael Feeley is The Drum Network's consultant journalist, advising and assisting member agencies on their editorial submissions and contributions to The Drum.

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