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Surviving Certain Uncertainty

Surviving Certain Uncertainty
Tom George, MEC London and IPA Media Futures Group Chair, gives his Q2 2016 Bellwether Report verdict and what it means for the industry.

In what has been an unprecedented few weeks in British politics, perhaps it is too early to give a considered view on the likely longer-term impact on advertising expenditure. As we have seen, markets don’t like uncertainty particularly when the Brexit outcome was unforeseen in many quarters. Sharp falls have been seen in the strength of sterling, the FTSE 100 took a nosedive (although has since rallied back) and share prices in many media companies saw sharp falls (with ITV alone seeing a 21% drop following the referendum announcement).

Examining the Q2 2016 Bellwether Report, none of the uncertainty seems to have been reflected in the top line numbers and the survey reports a record growth period of fifteen successive quarters, albeit referencing an increased degree of pessimism in industry financial prospects as a whole. As far as the main media and the internet are concerned, confidence increased versus the first quarter publication with net balances of 9.3% (a two-year high) and 10.9% respectively.

Perhaps the easiest retort to this is referenced in my first paragraph – no one really expected the outcome.  So has sentiment changed since June 24th and if so what impact has this had?

I think it would be naïve to argue that advertising is immune to uncertainty. Indeed, companies’ ability to switch it on and off almost at will can make it one of the most volatile forms of investment. The evidence for the second half of this year does indicate a slow-down in investment as advertisers react to uncertainty. At GroupM, we revised downwards our advertising growth forecast from 7.4% to 6.3% in June mainly on the back of some economic indicators rather than the referendum. If we accept that pressure for the rest of the year is downward and model some pessimistic falls across TV, print, cinema and radio, we still believe that the year will still enjoy 5% growth – hardly a cause for panic. Digital spend still continues at a pace and perhaps the demand price deflation of TV will tempt some advertisers to take advantage in what remains their key medium.

As mentioned, the outlook beyond 2016 is more difficult to predict as we all wait to see what the real effects of June 23rd bring. Doom-mongering of a 2008 crash seem remarkably unfounded and let’s not forget, there is no actual recession in the UK.

Last updated 14/07/2016

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