Brexit’s potential impact on advertising

Unless you’ve been focused on the Presidential election, along with the host of other disturbing news trends stateside, you likely already know that on June 23rd Britons went to the vote box and decided to exit the European Union (EU).  The referendum has sparked an enormous global discussion of what effect the decision to stay or go would have on immigration, trade agreements and short and long-term economic effects on both sides of the pond. The vote—known as “Brexit” (short for “British exit”) has possible implications within the advertising and marketing community, according to Adweek.

The Wall Street Journal reports that the financial markets reacted quickly and negatively to the development. Stock markets fell around the world, and the British pound went into a tailspin, dropping by more than 11%.

Uncertainty seems to be the primary reaction. Much of the industry concern seems to focus on the subject of hiring talent easily from within fellow EU countries, as well as client relationships in Germany, France, Spain and Italy.  Both of these issues, “stay” voters maintain, will have significant bottom-line repercussions in the months to come.

“We have significant numbers of staff from other EU countries and the thing is, it’s one of the reasons U.K. agencies are able to work so well across the region,” adam&eveDDB chief executive James Murphy is quoted as saying in Adweek. “Also one of the reasons U.K. agencies pick up a lot of global ad accounts is because they’re seen as open to the world and globally, internationally minded…We work with clients in France, Germany, Italy, Spain. One of the reasons they come here is they think they are going to get brilliant creativity from people who share a European mindset, not who have a parochial or nationalistic mindset.”

The bummer will be the loss of the perception that UK agencies are “regional hubs” for Europe and a European mindset. Should that broad identity become more homegrown British instead of European, for example, clients in other EU countries may take their business elsewhere.

Recent findings suggest that leaving the EU will end up costing the UK 70 million pounds (roughly $99 million) in ad spend growth per year, Adweek reports, hitting a projected 1 billion pounds ($1.45 billion) by 2030.

Stock prices for European advertising companies were twinning the markets’ Friday dip as well. WPP’s share price fell 4.1% Friday, while France-based Publicis Groupe and Havas declined about 5% and 2.8%, respectively.

Also unclear is what will happen with ad spend.  “This is completely uncharted territory we’re in,” said Johnny Hornby, founder of agency group The & Partnership. Omnicom CEO John Wren said his company is  focused on helping clients “navigate the changes” of the vote.

“Over the course of time, we expect these uncertainties to be resolved and our agencies, clients and consumers will adapt as markets normalize,” he said Friday.

In the end, the British stiff-upper-lip resilience may be what pulls it through. Michael Bloomberg, founder of Bloomberg LP gave a buck-up message in the wake of the decision, pledging that the data and information company is committed to maintaining operations in the UK.

On the Yank side, we await the fallout. At the very worst, it could herald the arrival of a new British invasion of talent with the accompanying plummy tones to up the class and brains factor in agencies here.

Tea and scones, anyone?

Direct Choice Inc. is a full-service direct marketing agency that has worked with national and regional brands in a wide variety of vertical markets. In addition to this blog, you can also find us on Facebook, Twitter, and LinkedIn

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