Will a Brexit from the EU be bad for advertising businesses?
Talent, new business opportunities and regulation are front of mind for advertising executives worried about how a British exit from the EU could impact their businesses. But where are those brands and agencies who want to leave, and why are they being so quiet about it?
The Brexit battle is well and truly underway and yet no one really knows how it will unfold, with the future health of the nation’s economy facing years of uncertainty. An annexed UK could turbo-charge the expansion plans of many businesses, though could just as easily make growth a more complicated process to plot, according to advocates on either side.
Will a Brexit from the EU be bad for advertising businesses?
A closer look at both campaigns suggests that the ‘yes’ to the EU argument, for all its drawbacks, is certain in its reasoning whereas those pushing for the ‘no’ vote are yet to match that clarity. Indeed, The Drum’s requests to various agencies for comment on how a Brexit would impact their businesses were turned down several times, but tellingly, those willing to go on record were unanimous in their support for remaining part of the union.
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“There will of course be an adjustability period if Britain decided to leave and business as usual if the British electorate decide to stay,” says Ian Twinn, director of public affairs at ISBA. “Either way, people in agencies, media and client side will take differing views on the referendum but will appreciate this historic opportunity for the people to decide on their future.”
That uncertainty has already convinced many advertisers to postpone their investment decisions, according to WPP boss Sir Martin Sorrell, who told Bloomberg News last month (24 February) that it's a “period of instability” for clients. His counterpart at Publicis Groupe Maurice Lévy has expressed similar concerns, with both media executives all too aware of the damaging knock-on effects an exit could have on budgets as big advertisers from the telecommunications, financial and aerospace industries – which are strong in the UK – push to stay in the union in order to continue to thrive.
What businesses think of the Brexit is crucial to many referendum voters. There are strong economic arguments for why Britain should or shouldn’t remain part of the EU; trade and the free movement of labour are the key issues to businesses. However, European companies have been more vocal than their British counterparts to date, perhaps because they aren’t bound by domestic politics and don’t fear speaking out in the same way.
“For us, open borders are very important. We enjoy having free trade,” said Paul Ferraiolo, marketing director for BMW UK at a Chartered Institute of Marketing (CIM) event yesterday (2 March). “The UK will have to be selfish and make a decision for what’s best for the UK. But at BMW we feel strongly that a free market and open borders is important.”
It’s a stance shared by Regus vice-president of global marketing Rob Strachan: “Regus doesn’t have a formal position but I would suggest that being in is probably easier that being out. I said previously that people make their decision based on emotion, but I do think it will be easier if we stay in Europe.”
The complexity that comes with running a business outside of the established framework of the EU also has agency executives worried. Marketers increasingly want pan-European accounts to be run from London due to its high concentration of renowned agencies and thriving start-up scene, but if the city loses its status as an ‘open’ city then they could look elsewhere, some agencies fear. Adam&EveDDB chief executive James Murphy has previously warned of the dangers of a Brexit, while Zone’s UK chief executive Jon Davie predicts it could make it harder to attract talent.
Zone has employees from 27 different nationalities at the agency, says Davie, who led its acquisition of a German social media and content business concept Bakery at the turn of the year.
“Our ability to attract talent from across the world is important to our ability to service the needs of our clients. The work that we produce through the nature of digital transcends borders and the clients that we work for increasingly operate across those national borders so anything that tries to resurrect digital borers around geography, states or nations seems a regressive step to me,” he adds.
Independent agencies looking to be acquired in the coming years will also be awaiting the outcome with baited breath. “A significant number of acquirers [of independent agencies] come from the US and Asia into London looking for a European base because it’s the obvious place to do that from at the moment and of course that could be about to change,” cautions Keith Hunt, managing partner at Results International.
Despite the ad industry’s overwhelming support for remaining part of the EU, it would be foolish to completely disregard the reasons for leaving so far away from the referendum. One rationale for the deafening silence from those companies wanting to leave may be fear; Brinsley Dresden, head of advertising and marketing at Lewis Silkin, suggests some companies could be wary of offending their customers should they stick their head above the parapet and become vocal.
“The risk for those companies is if they come out and don’t actually change the outcome is they either end up looking a bit foolish because they’ve backed something the country has rejected, or worse, alienate some of their own customers because they’ve advocated something which they fundamentally disagree with,” adds Dresden.
Freedom from the union’s red tape could be a boon for smaller businesses, while the prospect of a weaker pound might actually boost UK business rather than inhibit it. Nick Varney, the chief executive of theme park business Merlin Entertainment, said last month (25 February) that the panic over the falling value of the pound ahead of the referendum was overblown and that the lower rate would be good for the economy.
Will brands continue to remain on the fence the closer it gets to 23 June? No, according to Dresden, who thinks it could inform the national debate if more businesses follow Ryanair’s Michael O’Leary example and choose a side. “It’s perfectly sound for businesses to say ‘we think we’ll make more money if we go down that route’. There’s no disgrace in a business transparently advocating particular views,” he adds.
The decision on whether the UK should leave the European Union is riddled with wide-ranging outcomes and there are several conflicting theories for how it could impact the country’s ad business. And as the date of the referendum gets closer, it’s hard to imagine that those companies in favour of an exit will remain quiet. Even if the country does leave, the real effects won't be felt for five to ten years, given the two-year negotiation period.