The UK’s decision to leave the European has unleashed economic, social and political havoc. For the advertising industry, the big problem at the moment is the uncertainty, which — at least for now — seems likely to curb investment on various fronts as executives wait to see how things play out. The only certainty at this stage is the uncertainty, but already many companies are bearing the brunt as the immediacy of the markets has battered share prices. Here’s an overview of some of the latest developments and ad industry comments:
Media & Broadcasting
UK broadcaster ITV has seen $2.5 billion wiped off its value, which The Guardian says is raising city speculation the the broadcaster could become the target of a takeover. ITV saw its share price fall by more than 20 percent on Friday and at 2pm. Shares closed at around 219p before the referendum, but today the shares are priced at 159p.
Europe’s RTL Group, who have coverage right across Europe, also saw a decline, going from almost €80 to just over €74 per share, a fall of about 7.5 percent. RTL’s parent company, Bertelsmann, said in a statement:
Bertelsmann acknowledges with regret the British electorate’s decision against their country remaining in the European Union. As an international company with a strong presence in the U.K. as elsewhere, Britain’s impending exit from the EU raises political and economic uncertainties for us all. Irrespective of the Brexit decision, the U.K., as our fourth-largest market, remains very important to us.
Bertelsmann generates revenues of around EUR 1.7 billion with 5,500 employees in the UK, and will continue to invest in its businesses there. At the same time, as an international media services and education company, Bertelsmann is committed to preserving a shared European cultural space and common European standards, such as copyright laws.
Trinity Mirror has seen a decline of 11 percent since Friday:
Rupert Murdoch’s News Corp saw a smaller decline, losing just five percent of its value:
Sir Martin Sorrell, CEO of the world’s largest agency group WPP, said: “Very disappointed, but the electorate has spoken. The resulting uncertainty, which will be considerable, will obviously slow decision-making and deter activity. This is not good news, to say the least. However, we must deploy that stiff upper lip and make the best of it.
“Four of WPP’s top ten markets are in Western Continental Europe and we must build our presence there even further. It just underlines the importance of implementing our strategy: fast-growth markets (BRICs and Next 11), digital, data – and horizontality, which ironically means getting our people to work together, not apart!”
WPP’s GroupM forecast that the spending on TV and publishers is likely to fall in the UK by £220M due to Brexit. If you’re interested in more company figures, Campaign have also published commentary on Brexit from various senior agency figures.
The UK TV industry sells £376m of TV content a year to Europe and is the UK’s largest market. A Brexit has spooked industry insiders. Michael Ryan, the chairman of the Independent Film and Television Alliance, and a partner at GFM Films, said that Brexit was likely to be “devastating” for the UK’s creative sector, including the film and TV industry.
“The decision to exit the European Union is a major blow to the UK film and TV industry,” he said in a statement Friday. “Producing films and television programs is a very expensive and very risky business and certainty about the rules affecting the business is a must.”
He added: “This decision has just blown up our foundation — as of today, we no longer know how our relationships with co-producers, financiers and distributors will work, whether new taxes will be dropped on our activities in the rest of Europe or how production financing is going to be raised without any input from European funding agencies.
The uncertainty around Brexit looks likely to trundle on for at least two years, during which time companies will need to weigh up whether to invest here. That said, the decline in sterling against the dollar may also encourage US investors to gamble on a favourable outcome where the UK will continue to have access to the single market.
The UK is still a large market in its own right and is still where most of the European ad tech talent currently resides, so in the short-terms it seems likely that many companies will continue to invest here. However, that might change over time. The costs of running a European HQ from London are likely to as flights become more expensive and mobile phone bills rise. Hiring talent might also become difficult as visas are required and due to the damage to the UK’s reputation as a place that is welcome to foreigners. The cost of living is also forecast to rise which could result in employees demanding more. The possibility of tariffs are also likely to have an impact.
Reasons to Be Hopeful
Over the last few days the politicians on the Leave side have made hasty retreats from the calamitous policies they were advocating just a few days ago, so it is increasingly looking like we’re heading for Brexit-lite, if at all. How that plays out with the EU is another matter entirely.
Data rules might be more lenient and more aligned with companies from the US. While this could be advantageous for the UK’s domestic market, companies seeking to use the UK as a springboard to get into the EU might feel they should adapt to EU standards first before moving into the UK.
A common refrain from the Leave campaign is that going it alone will make the UK more agile and responsive to the UK’s business needs. Theoretically this could lead to a more entrepreneurial Britain, although success is likely to be determined by the outcome of the deal with the UK, and the extent of the economic damage that is likely to be caused in the interim.
Speaking of nimble businesses, small businesses have been using Brexit in their market. A Welsh deli has launched a ‘Brexit Breakfast’, which includes a glass of water and a piece of stale bread for ‘just £10’.