Advertising & media

1 July, 2016

The current situation:

The UK advertising market is flying. In recent years, total advertising spend has risen approximately 5% per year and online advertising has surged a whopping 59%. Prior to the Brexit announcement the Advertising Association was forecasting that total ad spending in the UK would exceed £20bn in 2016. The question now for the advertising and media industry, as with the rest of the country, is what will be the effect of Brexit?

 

What might change?

There shouldn’t be too much change in the short term. The UK has not yet triggered Article 50 and even when it does, exit negotiations will take at least two years. During this time we will continue to be a member of the EU but we will not be able to participate in shaping future EU-wide laws or deals.

Advertising regulation in the UK is based on a well-established system of self-imposed controls implemented via Committee of Advertising Practice (CAP), Broadcast Committee of Advertising Practice (BCAP) and the Advertising Standards Authority (ASA). As a result of this, it is unlikely that advertising regulation will be materially impacted by Brexit (at least in the short term). However, areas like consumer protection, data protection and intellectual property could be impacted. If the UK is no longer bound by these rules, we could see a two tier system with separate UK and EU regulations.

However, the key concern for the UK advertising industry will be the continuing uncertainty. History has shown that where there is uncertainty, businesses become conservative, fewer jobs are created and people stop spending, resulting in advertisers reducing their advertising budgets. But with uncertainty also comes opportunity and some businesses will be seizing this moment to increase market share and up their ad spend. Furthermore, where traditionally marketing and advertising budgets were often the first to go, the advent of data analytics has made the industry a lot more accountable and helped companies, more than ever, to see marketing as a revenue generator rather than just a cost.

In the longer term, the key concerns for the advertising and media industries are likely to be two-fold: attracting and retaining talent; and international trade and the UK’s place on the world stage.

 

What impact could this have on businesses?

For many years, London has been attracting top class talent. Ad executives, programmers, developers, project leaders and production technicians from across the EU and beyond, have been settling in the UK and helping to make it an industry leader at the forefront of the digital media boom and the wider advertising sector. Post Brexit, the UK will need to take steps to secure continued investment in the advertising and media industries to compensate for the loss of EU funding and it will need to ensure that any border controls do not restrict the movement of talent or stop the UK from being an attractive proposition for those coming from overseas.

Another risk for the UK post-Brexit is losing its position as a leading headquarters for international businesses looking for a base in Europe if it becomes more complex and costly to do business with the EU. If UK regulations move too far from the European standard, it may make the use of standard contracts for the whole of Europe more difficult and businesses may find that they require separate approvals when trading in the UK as opposed to mainland Europe. It’s important to acknowledge however that the advertising and media sector is very much a global industry so is likely to weather the Brexit storm better than some others, given the creative, digital and adaptive nature of the industry.

 

What you need to be thinking about now:

Brexit is not going to be quick process and the steps which should be taken to address the post-Brexit fallout are likely to depend on whether the UK decides (and is allowed) to remain part of the European Free Trade Association (EFTA) or the European Economic Area (EEA), what trade deals it can agree with the remaining EU countries and whether, as a default, the trade rules of the World Trade Organisation (WTO) will apply. However, from a practical perspective there are steps which businesses can take now to ensure that they can react quickly as these issues are clarified. Key commercial contracts with an EU or international element should be reviewed to determine what effect Brexit will have on those agreements. Other issues which should also be considered include: will trading costs increase and can those costs be passed on to clients? Is there a risk that workers from the EU could leave the business? What will be the commercial impact of ongoing currency fluctuations? Do any territorial scopes and non-compete restrictions need to be redefined?

If you have a query about any aspect of this blog or the advertising and media sector, please contact Nigel Stanford at nigel.stanford@crippspg.co.uk or call on 01892 506 227