Autumn Statement 2016: What marketers need to know
Five months on from the referendum and the chancellor’s Autumn Statement has put a figure on the cost of Brexit, an additional £122bn in extra borrowing designed to ensure people have more money to pay for what they need rather than what they want.
A rise in the national living wage and an increase of the income tax threshold are clearly designed to put money in the pockets of working families. However, the question many businesses will be wondering is will the measures be enough when they are stacked against the cut in various benefit mechanisms? Welfare spending previously “spiralled out of control” according to chancellor Phillip Hammond, but has now stabilised and there will be no further savings in this parliament beyond those previously announced.
"Any rise in the pay packet is welcome news for people," said Sarah Todd chief executive at Geometry Global UK. "Surrounded by Brexit uncertainty, we all need confidence that our shopping baskets can grow not shrink."
But for all the chancellor’s talk of the resilience of the UK’s economy, there was a sense from his first flurry of fiscal policies that Brexit is going to cost the British economy more than has previously been expected. The Office for Budget Responsibility (OBR) thinks the fall in the value of the pound next year will squeeze households’ real incomes by pushing up import prices, adding almost 2% to the level of consumer prices over the next two years.
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Much has already been written about price inflation in essentials such as food and petrol should the pound remain weak and with the cut in various benefit mechanisms, people will inevitably keep seeking out value and being mindful with their weekly budgets – a trend that hasn’t fully disappeared since the 2008 recession.
“Our biggest concern is the money in the pockets of consumers,” reveals Rob Sellers, managing director of Grey Shopper, after reviewing the Autumn Statement.
His concern echoes those of other financial analysts, who fear the sucker punches of lower earnings and benefit cuts could root the poorest third of households in falling living standards.
“And if people are going to have to find more money to pay for things they need, what about things they want," continued Sellers. “The fact that the government is going to borrow a lot more money and put that money into infrastructure projects suggests they are worried about jobs. If the government is worried about jobs, then people should be worried about jobs. And if there is employment uncertainty, then big ticket, non-essential buys like electrical goods, cars and holidays may be put off. Either way, there isn’t much in the chancellor’s statement that will be filling marketers with confidence.”
One bright spot in what is a gloomy outlook for the months and years ahead is the chancellor’s commitment to innovation. With a 30% productivity gap between Britain and Germany, the government rattled off a series of innovation initiatives designed to put that deficit front and centre of its growth plans.
“In the real world, it takes a German worker four days to produce what we make in five, which means in turn that too many British workers work longer hours for lower pay than their counterparts,” said Hammond. “Raising productivity is essential for the high-wage, high-skill economy that will deliver higher living standards for working people.”
To plug this productivity gap, Hammond has formed the ‘National Productivity Investment Fund’ to spend on innovations, new technologies and infrastructure over the next five years. The politician also revealed plans to pump more money into venture capital funds to combat foreign investors hoovering up the country’s brightest entrepreneurs.
“I am taking a first step to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale by injecting an additional £400m into venture capital funds through the British Business Bank, unlocking £1bn of new finance for growing firms,” said the chancellor.
Despite this, the overall feeling towards the Autumn Statement is that it won't go far in convincing advertisers to up their ad spend.
“The general sense of uncertainty as we go into 2017 is likely to continue the existing anxiety in brand decision-making. Advertisers will be making mostly, safe bets when it comes to marketing investment," predicted David Indo, chief executive at ID Comms.
"Although many forecasts predict an increase in ad spend in 2017, the cost of Brexit might mean that growth is not quite as rosy as some were expecting even a few months ago.”