Weak pound will make UK marketing services more attractive to foreign clients

The impact this will have on the cost of imported goods and inflation across the wider economy has been widely reported. This could well outstrip the potential for growth and, due to increased interest rates on mortgages and the general cost of living as a result, is likely to wipe out the benefit of taxpayers retaining some extra money from their salaries. However, among all the doom and gloom, there is room for optimism within our sector.

Despite Brexit, the UK is the second biggest exporter of services in the world. The predominance of our financial services sector is undeniable, but a lesser-known fact is the UK’s marketing and creative industries contributed £116bn to the economy in 2019, making up just under 6% of the economy as a whole. Aside from its size and reach, with an estimated 300,000 businesses in the UK, the kudos and reputation of our marketing and creative industries is second to none. Across the globe, blue chip corporations, brands, media and content producers look to the UK for talent and expertise. So, the upside of the current economic situation is that the weak pound makes it comparatively cheap for overseas firms to currently buy UK marketing and creative services.

While many of our European neighbors have invested heavily to promote cities such as Amsterdam, Berlin and Paris as centers of excellence for creativity, the UK’s pedigree remains. The US market, as well as being the largest in the world for marketing, advertising and media, has always loved to work with UK businesses and talent.

Given it is now cheaper for them to attain these services, many UK agencies are making hay while the sun shines. Businesses delivering services to the US and further afield saw an unexpected bonus in terms of revenue growth following the Brexit vote due to the sudden reduction in the value of the pound, but that was nothing when compared with what we are seeing now.

Not only is the affordability of services attractive to foreign clients, but overseas acquirers are already circling UK companies as the relative price has just dropped dramatically. This is a bonus for buyers and has no downside for UK shareholders that will receive their consideration in sterling.

When it comes to winning and delivering to overseas clients, globalization and the acceptance of remote working means having boots on the ground is less important than in the past. That said, I would still argue that if specific overseas territories an agency works in are key to ongoing growth and success, then attaining a presence there could be a wise move.

I have established businesses in Europe, the Americas and Australia and know how challenging this can be, but when executed well and structured in the right way, it can fuel rapid growth unachievable within the reach of the UK market. A global footprint can also add huge value from an M&A perspective, attracting potential buyers who want to add reach as well as capabilities, revenues and profit.

Regardless of what I’ve said above, it’s very important to recognize that despite a weak pound making it cheaper for overseas firms to access UK services, certain industries will struggle and there will be casualties as a result. Most developed countries in the world are experiencing a cost of living crisis and disposable incomes can’t stretch to luxuries or frivolous purchases of the past. Sadly, in many cases, people can’t even afford the essentials of everyday life.

This will mean marketing budgets of FMCG giants getting squeezed, with knock-on impact to large-scale seasonal/tentpole campaigns. When times get tough, firms tend to shelve medium-term brand projects and focus on the short-term shifting of products – the majority of global FMCG firms report quarterly, with revenues being a key indicator of success.

Given the cost-effectiveness of digital marketing and e-commerce, coupled with the ability to measure performance in these channels, we can expect to see digital agencies – and particularly those in performance marketing – flourish and become even more attractive to acquirers. However, it’s not all about FMCG product-pushing. Other sectors, such as pharma and healthcare, are relatively bulletproof and have generally weathered previous storms. Given the long-term nature of product development in the pharma industry, it generally doesn’t cut back on innovation and marketing spend continues unabated given its products are often necessities and its target market includes healthcare providers.

Thus, UK medcomms and healthcare marketing agencies are really well placed to excel in the foreseeable future and at Green Square we have completed the sale of four medcomms/pharma specialist agencies in the last 18 months. There continues to be no shortage of acquirers globally for agencies in this sector – indeed, it is the most hotly contested field for acquirers in our experience.

That said, times are tough and may continue to be so for the foreseeable future. However, while the UK feels more like an island than ever, and the debate as to whether those in charge are equipped to manage the economy will rage, the old adage of ’keep calm and carry on’ springs to mind – but do that with a global mindset to work the current circumstances and the reduced value of sterling to your advantage.

Nick Berry is a partner at Green Square.