Brexit Post Truth Advertising

Brexit one month on: The moment of truth for the UK ad industry


By Seb Joseph, News editor

July 23, 2016 | 11 min read

One month on from that epic referendum result and the immediate Armageddon many advertisers feared has yet to materialise, highlighting just how much there is to play for in the move toward Brexit.

EU flags

Brexit a month on: The moment of truth for the UK ad industry.

The panic that initially gripped the industry is subsiding and the alarm that had some twitchy clients pulling spend is giving way to pragmatism. Whether it’s the “calmness” of Publicis Groupe chief Maurice Lévy or Premier Foods' refusal to scrap its annual ad spend target, there’s a realisation four weeks on from the vote that its real tremors will be felt over many years.

To survive that uncertainty, the industry needs to clarify its purpose in the post-Brexit era to the government ahead of the negotiations to leave the European Union, according to Andy Duncan, chief executive of Camelot UK Lotteries and president of the Advertising Association.

There’s no doubt that the sector is key to the country’s financial prospects, contributing around £100bn in GDP. But as adland’s former minister Ed Vaizey puts it: “I don’t think advertising gets the credit it deserves in government because actually it doesn’t come [to ministers] with a lot of asks. I think funnily enough that’s a problem because ministers deal with industries when they’re asking for something, and advertising doesn’t ask for things.”

His replacement Matthew Hancock has already urged advertisers to challenge that notion: “I want to hear from all of you [advertisers] about what is it that matters most to you about the relationship with Europe so that we can feed that into the negotiations.”

There’s an underlying worry among advertisers that prime minister Theresa May won’t embrace them as tightly as her predecessor, though Hancock has already tried to allay any early concerns, many of which are directly tied to how the UK accesses the single market as a non-member of the EU, potential curbs on immigration and the prospect of tougher regulation.

The need for strong and confident brands

Brexit provides a “challenge and an opportunity” for brands and marketers, said Pete Markey, brand communications and marketing director at Aviva. Some of those are already coming to the boil as evidenced by the latest quarterly results for companies. The head of Opel Karl-Thomas Neumann said the vote is “not a good omen” for the car firm’s growth in the second half of the year, whereas the Financial Times faces a rosier future after digital subscriptions surged by 600 per cent over the Brexit weekend.

“The key balance is for brands to tonally match and appreciate the everyday concerns and challenges customers are facing,” opined Markey. “My sense is that brands will be looking to focus more on the emotional warmth of storytelling and heritage behind their brands to help build and strengthen confidence and trust – those brands that panic and waver will revert to heavy discounting and promotions which could potentially damage brand value.”

Separating fact from fiction has been hard for advertisers over the last month because many observers, including the International Monetary Fund, are still making predictions based on expectations of business outcomes versus foresight and a cast-iron knowledge of what’s to come.

“There are many getting caught up in the drama of Brexit, putting more attention into that than looking pragmatically at what is really going on,” said Scott Knox, managing director at the Marketing Agencies Association (MAA).

Keep calm and carry on

For all that’s changed since the vote, the UK is still a global hub for creativity. And while the pound is low, there are some agencies like WPP’s Fitch and Bulletproof capitalising on that perception by using the opportunity for cheaper exports to generate more business from foreign shores, emerging brands and established businesses across the world. It’s more opportunistic than strategic given the country could be seen as more of an investment risk now that ratings agencies have ripped into its credit score.

“Global clients are looking at this the same way they do in working in other, frankly more turbulent markets: It’s all part of a day’s work,” said Knox. “There are those however that are putting projects on hold. I have a feeling that is this being done using Brexit as an excuse, when the real reason is one of poor corporate performance leading to jittery decision-making.”

Knox refers to what was an initial flurry of advertisers pausing or pulling ad spend in the days and week after the referendum. And while some of their peers have since lambasted that perceived short-sightedness, forecasts from GroupM, the IPA Bellwether Report and Enders Analysis, to name a few, have projected downward revisions in ad spend.

Any real downward revisions will be made nearer the time when advertisers and their agencies have to commit to media owners. If the pound remains weak, obviously there will be marketers that have to divert some of their discretionary budget back to material costs. And in these periods of uncertainty brands typically go with channels they know to work best for them.

Helen McRae, the chief executive of Mindshare UK, sees this shift turning on more short-term deals next year as clients seek to “maximise value potential from the market” with a closer eye on ROI from channels that deliver against the relevant metrics.

Paralysis is dangerous for any organisation and there’s a sense among more ambitious marketers that this is a chance to be bolder.

“I see the best companies firstly talking with their teams more frequently and via multiple communication channels,” said Jenny Ashmore, president of the Chartered Institute of Marketing and former senior marketer at SSE and Mars.

“Whichever way they personally voted, they [marketers] have stepped back and realised that this is a massive piece of consumer insight and sets a direction that they need to respond to. They are relishing going right back to the core assumptions of their marketing strategy and P&L structure – they have got straight into working out which drivers and assumptions have changed, plus which might change in the coming couple of years as the legal and trading aspects are negotiated.

"Likewise, some agency teams are out, on the front-foot, re-assessing how the messages connect with different audiences, and whether segmentation needs to change and evolve for the immediate and likely outcomes.”

Brexit: An opportunity and a strategic risk

One brand facing up to that moment of truth is office equipment business Brother International Europe, where European marketing and communications manager Antony Peart said it's “business as usual” post Brexit-vote.

“The agencies we work with are continuing to provide marketing support to sales offices within European countries that are vibrant markets for Brother’s range of products and services in their own right,” he continued.

“Marketing budgets have to be flexible and responsive to change, so it is natural there will be some changes in approach once the full impact of Brexit is clear. Ultimately, marketers will continue to work with the suppliers who best know their products and services, and use them to produce the best possible results.”

Aviva’s Markey continued on this point: “My sense is that brands need strong agencies now more than ever in order to hold their nerve and not head for short-term and potentially brand damaging options. Great agencies should be working with their clients to keep brands ‘on strategy’ but working with them to ensure communications and approach are tonally right post Brexit and really tap into the latest consumer thinking and mindset.”

The one clear and present danger amid all the uncertainty is the threat of a Brexit-driven recession.

Figures from Markit yesterday (22 July) revealed the economy has been pushed into its steepest downturn since the height of the financial crisis in early 2009. Chancellor Philip Hammond is poised to soften George Osborne’s austerity policy to dampen the financial blow should further evidence indicate a recession. He said: “Over the medium term we will have the opportunity with our Autumn Statement to reset fiscal policy if we deem it necessary to so in light of the data in the coming months.”

Marketers should capitalise on the lessons they learned during the previous recession, said the MAA's Knox.

“Let’s say that the worse happens and the economy drops, as marketers and as agencies we need to remember that we are a unique generation.

“We’ve been through a global downturn and are still here doing great work. In 2007/08 many older generation colleagues said we’d struggle, as this generation of leaders hadn’t worked through a recession. This time we have and we need to capitalise on the lessons we learned and drive a way through. The braver brands in 2008 to 2014 are the ones doing very well now, thank you very much. So let’s do it again if we need to."

The braver brands also need "pithy commercial strategies" to convince chief financial officers that “now is the time to invest to shape their success for the next decade,” said Richard Robinson, managing partner at marketing consultants Oystercatchers.

“The very best brands and marketers perform at their strongest in times of real change and market flux, or they demonstrate that they can shape and completely dominate the market going forward, just as Nintendo has done so brilliantly in the past fortnight. Everyone who said likes and shares weren’t as important as sales just needs to look at the explosive growth in Nintendo’s company value over the past three weeks to recognise that value comes in more ways than just a sale.”

It's a pertinent point, given just a week after the vote Nintendo warned that Brexit would force it to consider its operations in the UK. Fast forward two weeks later and the runaway success of Pokemon Go has more than doubled the video games company’s market clue to 4.5tn (£32bn) in just seven sessions.

“Brexit is heralding a time when marketers need to do what they do best and listen to their customers,” added Robinson.

“Hear their confusion, angst and in some cases fear – and deliver the calm, measured, strategically focused plans and campaigns for their brands that demonstrate true value and leadership. Customers need to feel confident that their brands have confidence in the face of Brexit, that they have a plan and they know where they’re going.”

While Brexit means Brexit and the new prime minister has made that clear, the ramifications of that decision for advertisers and the rest of the country are not so apparent. One thing that is now clear, however, is that this is a real moment of truth for brands and agencies to find confidence and excel at the fundamentals of marketing.

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