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UK ad industry greets Theresa May's Brexit plan with bated breath

UK ad industry greets mays Brexit plan with bated breath

Prime minister Theresa May’s much-anticipated reveal of a “bold and ambitious” Brexit from the European Union's (EU) single market has been met with reserved optimism by the country’s advertising industry.

Her admission that Britain cannot remain part of the single market in the wake of the referendum at least goes some way to quelling the tide of uncertainty it sparked. As the Institute Practitioners in Advertising (IPA) director Paul Bainsfar said: “We now know where we stand, at least in the bigger picture. We can no longer bury our heads in the sand.”

Crucially for the ad industry – which has continually voiced its concerns on the effect Brexit could have on immigration given so much talent comes to the UK from overseas – May said that there would be restrictions to EU migration.

"The message from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver,” she said, although offered no detail on what that model of 'control' would look like.

Chris Daly, chief executive of The Chartered Institute of Marketing said that with the possibility of immigration controls, talent attraction and retention will become one of the biggest issues for the industry to face.

"Nurturing creative and marketing talent should always be a priority, and although Brexit provides an added pressure, this is an area where long term strategies are more effective than knee-jerk reactions," he advised.

Among May's other priorities are ensuring tariff-free trade with the EU, bespoke trade agreements with countries outside the EU and continued "practical" sharing of intelligence and policing information.

It amounts to a stronger version of Brexit than many anticipated, one that is now very much dependent on the deal makers to ensure what May believes is the best option for the country. Having pushed for more of a compromise deal with EU leaders in the pre-talks, the prime minister has decided to respect the views of counterparts that the four freedoms of the EU are indivisible.

Her stance against the free movement of people through the UK means any deal will exclude the single market, rendering May’s hope that the country’s judges be exempt from the stewardship of the European Court of Justice – the referee of the single market – while it remain exempt from trade barriers a moot point. It’s ironic that both issues were what May warned 10 months ago could stunt the country’s economy, though this view might have dimmed given that there have been little evidence of this to date.

While there are still uncertainties, it is likely May’s negotiators will push for concessions, single market-type arrangements for certain key industries. The emerging shape of these ensuing free trade deals will be critical to many of ISBA’s members, said the trade body's director general Phil Smith.

If the needs of the industry are to be heard during these negotiations then it will need to make its voice heard in the coming months, something Matt Hancock, the Minister of State responsible for digital and culture policy, urged at an Advertising Association (AA) event last year.

Personal views aside, marketers will no doubt feel relieved there’s a firm stance on Brexit that they can now plan around, buoyed by the fact that the government is attempting to strike an exit that will try to be in the best interests of both the UK and Europe – at least in theory.

May stressed that there would not be a “blow by blow” account of negotiations – which are due to begin in March – but also assured that she would not "undermine" the EU or the single market.

This agreement should allow for the “freest possible trade in goods and services between Britain and the EU's member states” and to sign new deals with others around the world, she explained.

It’s an issue that has unsettled the industry since June, with some like WPP boss Sir Martin Sorrell worried whether the UK will maintain a strong position in Europe should the pound continue to lose its value against the Euro. Others have urged for a soft Brexit that doesn’t limit the free movement of creative talent or complicate advertising regulation.

“Today’s speech highlights the government’s determination to get Brexit right for business, and advertising must work hard to get its priorities heard; staying attractive to global talent, good trade relations with Europe and lifting unnecessary red tape,” said AA communications director, Ian Barber.

“Our value is clear and the negotiations are an opportunity to position advertising’s role as the UK’s industrial strategy evolves.”

To do that the, Brexit negotiators might have to consider a sector-by-sector approach to trade that includes consideration of the digital single market, free flow of data and issues of tariff and non-tariff barriers if the creative industries are to continue to prosper, argued its trade body.

According to the John Kampfner, chief executive of the Creative Industries Federation it is “essential that the requirements of this most dynamic of sectors is central to the negotiations in the difficult two years ahead”.

The creative industry is the fastest growing sector in the UK economy, now worth a record £84.1bn, according to official statistics, which also reveal it is worth almost £10m an hour to the country. Much of that is dependent on the EU even as the sector looks to new markets; some 42% of current creative service exports go to the EU - the largest proportion of any of the UK’s trading partners in 2014 - and 57% to Europe and these will remain important while the new deals are struck.

"Any future trade agreements for our sector will have to take into account the importance of effective intellectual property rights protection and enforcement if we are to reap the financial benefits,” opined the Creative Industries Federation.

Despite some lingering uncertainty for the industry, Tony Walford, partner at mergers and acquisitions firm Greensquare praised May for the fact that the overall message was clear as to what is being proposed, “which is good as it will put an end to the uncertainty that has dogged everyone since the vote”.

“Being open to trade agreements with the rest of the world and bringing in talent is a good thing. May has made it clear she does not want to undermine the EU and - as long as a trading agreement remains with Europe - then we could still be a gateway into that market,” he said.

From an M&A perspective, this will be key to overseas acquirers of UK companies that do not already have a footprint in Europe.

“If we do not achieve this, the acquirers that need access to the EU may look to other English speaking talent hubs - Amsterdam, Stockholm, Berlin and Lisbon,” Walford continued.

“Conversely, a key thing that could work in the favour of the UK M&A market, is that once the UK has negotiated trade deals with non-EU countries, it may make UK companies more attractive to EU acquirers as we could potentially give them access to those markets. Also, as sterling is currently weak, this means UK companies are great value for overseas acquirers right now. We are not seeing any slow-down in acquisition activity at Green Square and it will be interesting to see how the landscape pans out.”

Whatever the outcome of the negotiations, it will be some time before the real effects of May’s plan are felt. In the meantime the industry will continue to be influenced by a Brussels keen to exert more regulatory control on a rapidly expanding market. There’s the General Data Protection Regulation set for May next year, when advertisers will be forced to make fundamental changes to the way they use personal information, alongside potential changes to the Audio Visual Media Services Directive, which also threaten greater restrictions on advertising.

Having said this, in spite of the government’s best intentions, “no one knows the minutiae of what lies ahead. For the time being at least advertising itself will continue to come under scrutiny mostly from Brussels which despite Brexit will continue to influence us here for some time to come,” concluded the IPA's Bainsfair.

“In the meantime, the IPA is working with Credos, the AA’s Think Tank, on a cross-industry report and stance on the impact of Brexit on the ad industry and it will be interesting to debate these results and the full impact of today’s news with the industry at the AA’s upcoming LEAD conference. Strap yourselves in, it’s going to be quite a ride."

Reporting by Rebecca Stewart, Jen Faull and Seb Joseph.

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