Tomorrow the British electorate descend on polling stations across the country to vote in what could result in Great Britain leaving the European Union. The campaign has been fraught with controversy, with disputed facts, celebrity endorsements, Blue on Blue, Red on Red and an extension of the voter registration deadline. We at The Sandpit wanted to understand the potential impact of a ‘Brexit’ (Britain exiting from the EU) on the UK advertising market. So we collated several reports and articles reporting on the issue for you.

The UK advertising sector is a large contributor to the UK economy with a gross annual revenue of £13.3bn, contributing over £2.9bn to the economy each year. It also employs 96,000 people (63% women), 19,000 of whom are self-employed. On current growth, inside the EU, the Advertising Association is predicting an increase in UK advertising’s contribution to national exports of 54% over the next five years. This makes the UK comfortably the largest internet advertising market in Europe and ranks third globally, behind US and China.

So advertising is a big market in the UK, but how could Brexit impact this? We decided to break this down into three main points. Regulation, Finance and Employment.

Advertising regulation

The Committee of Advertising Practices recently assessed the potential impact of Brexit on regulation in the market. They suggested that ‘it would be unlikely [for a Brexit vote] to cause immediate substantive harm to the advertising self-and-co-regulatory systems”. Adding “While it is possible that questions would be asked in due course about the justifiability of such laws they would remain in place until or unless they were repealed by Parliament”.
Britain has its own independent regulatory body, in the Advertising Standards Authority and Brexit would not alter their standards. There are broader questions around such areas as consumer protection, product law and copyright. The UK leaving the EU could create an almost two-tier system as Britain would no longer be bound by rules governing the rest of the EU.

For example in April, the EU Parliament and Council ratified the new General Data Protection Regulation (GDPR). Due to come into effect in 2018, this law will govern how businesses in the EU manage, protect and administer data in the future. For any future trade agreements between the UK and the rest of Europe, the new data protection would form part of it.

Financial implication

Last week media agency Zenith warned that leaving the European Union could cost the UK £70m in ad spend growth each year – a figure that would reach £1bn by 2030. This could have a big impact on the UK market, which has enjoyed continued periods of growth over the past few years. In fact, the market is currently expanding 1.1% for every 1% increase in GDP, according to Zenith’s Advertising Expenditure Forecasts report. Zenith suggests that the initial impact would be minimal, only because brands are considered ‘generally pragmatic’ when setting budgets. They suggested the true impact might not be realised until brands review their budgets post-referendum.

However for some advertisers, the uncertainty surrounding the referendum has already started to affect business. In the same paper, Zenith announced a fall in TV ad spend for the month of April, dropping by 7%. It was claimed that the fall in part was due to uncertainty around Brexit. Further examples of this uncertainty have been noted by the free-to-air broadcaster ITV, who recorded an advertising sales slump of 13% in April. ITV boss Adam Crozier said that ITV has experienced uncertainty in the market “since the debate over Brexit began.”

Employment and Talent

The free movement of people within the European Union has played a large part in the development of the UK advertising and creative industries. With the economic downturn of 2008, many southern Europeans set their sights on UK’s flourishing advertising and creative industry. These creative graduates were welcomed with open arms, as they brought fresh perspectives and different ideas to the then international-focused British businesses. In an interview with Adweek James Murphy, Chief Executive of adam&eveDDB a London-based communications agency said that “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”. James went continued to explain “…U.K. agencies pick up a lot of global ad accounts because they’re seen as open to the world and globally, internationally minded.” A vote to leave would be a vote to change the norm. But uncertainty surrounds the future of those Europeans currently working in the UK – neither side has addressed this issue.

We find ourselves on the precipice of great change. The results from the referendum will surely shape the future of advertising in the UK market, just as technology has. It would seem that although the market isn’t forecast to be impacted by the vote initially, it could take effect in the coming years as trade deals and legislation evolve. One thing is for sure, whichever way you vote is not  something to be taken lightly.

Author Lewis Jones

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