Osborne's budget policies leave the advertising industry cautiously optimistic


By Tony Connelly | Sports Marketing Reporter

July 8, 2015 | 5 min read

The blizzard of policies contained within George Osborne's budget including a new national living wage, an increase in the tax free personal allowance and a lowering of corporation tax could play into the hands of the advertising industry.

In his budget speech today, the chancellor attempted to smooth out a path for public sector spending by announcing an increase in the national minimum wage for over 25 year-olds from £7.20 per hour to £9 by 2020. Buoyed by a lowering of corporation tax to 19 per cent next year and 18 per cent in 2020, Osborne will hope that he has found a balance between business and the public that will encourage public spending. Consumers will find their budget more predictable with benefit payments being cut and offset with the increase in the living wage.

Along with the rise in tax free personal allowance to £11,000 next year, Osborne’s budget appears favourable to advertisers whose battle to encourage consumers to spend won’t be as difficult as previous years. If consumers have more money in their pockets, advertisers can turn heads easier and while it remains to be seen, business may be able to invest more with a lower corporation tax although most of this could be rerouted to offset the increase in national living wage.

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However, a lower than expected growth forecast for this year, down from the 2.5 per cent expected in March to 2.4 per cent will keep advertisers expectations tempered. This follows on from slower than expected growth in the first quarter and problems with the global economy which has resulted in slowdowns in the US and China. The Eurozone crisis and the prospect of Greece leaving the single currency will also curb advertisers’ ambitions especially outside of the UK.

The Institute of Practitioners in Advertising’s (IPA) director of finance Tom Lewis highlighted the lowering of corporation tax and the increase in personal tax allowance as “of particular interest to the ad industry”. However, he remained cautious given the current fragility of the euro and warned that the ad industry “can’t ignore the various global threats from Russia, Grexit and China's stock market". He added that “the message for our industry remains that the outlook is good and agencies should continue to look at building longer term value through talent and effectiveness strategies”.

Ian Twinn, ISBA’s director of public affairs, said he believed “the biggest impact for advertisers will be the continued emphasis on a growing economy, more people employed and a steady reduction in public spending and the taxes needed to pay for it”. Twinn also pointed out that more predictable budgets and greater job certainty would spur “encouragement to support campaigns for existing brands” while the budget and the economy would create an “opportunity for new investment in product innovation along with the ad spend to support it.”

The policy to devolve Sunday trading hours to mayors and councils is also likely to greatly benefit advertisers by increasing the possibility of boosting spending, as it did during the Olympic Games in London in 2012.

Managing director at Shoppercentric, Daniele Pinnington, said that shoppers will be happy with the policy change but added “whether it will actually increase sales depends on the willingness of UK shoppers to spend more rather than spread their spending further”. She said that “the whole sector may benefit by being able to offer a more effective alternative to online on Sundays”. This could mean an increase in shop advertising if retail consumer spending increases which in turn could give advertisers more options will possibly increasing spending.

Labour's shadow chancellor Chris Leslie told BBC News that the budget will “hit those in work, particularly those on low pay”. He discredited Osborne’s living wage announcement, saying there was “no way way that the increases in the minimum wage, much as though we welcome some of those, can keep pace with the hit that is going hurt those on the lowest pay”.

Some of the other changes in the budget which could affect advertisers include the delays in infrastructure such as the decision to hold off on electrifying train lines which could deter some businesses from investing outside of London.


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