Brexit: what's in store for the industry?

We asked adland to open the doors on what it is stockpiling in case of a no-deal Brexit, and, on a more serious note, how agencies are preparing from a business perspective

Hysterical hyenas, squawking parrots, slippery snakes and ever-changing chameleons: that was the depiction of the UK parliament in the latest ad for The Times and The Sunday Times

"We could all have predicted Brexit was going to be a shit show. No-one could have predicted the farcical level it has reached," Mother’s global chief executive, Michael Wall, says, summing up the attitude of many of his peers.

While Brexit has turned Westminster into a political zoo, so far the only real consequence for adland has been wavering confidence among clients and staff. But with 29 March looming ever larger on the horizon, how are agencies preparing for the big leap into the unknown?

The calm before the storm?

For most agencies, there has been little tangible change since the EU referendum in 2016. "To some extent, while the politicians duke it out, business is carrying on. We are still getting briefs and buying spaces," Total Media’s chief executive, Guy Sellers, says. 

"One or two FMCG clients have shown some concern about getting products and goods across borders, and this has had a small impact on the timing of their activity, but across the board, there has been little impact," he adds.

Wall agrees: "There have definitely been a few delays on activity, but we are healthily busy in terms of existing clients and new business approaches. Long may that continue."

With clients from Europe still giving UK agencies work – Droga5 has received recent approaches from companies in Italy, Holland, France and Germany – the agencies have been focusing on reassuring staff and clients. But they are worried about what may come next. 

There may be trouble ahead

As Havas Creative Network’s global chief executive, Chris Hirst, says: "Our industry is linked umbilically to the economy. If the UK economy does well, we do well. The biggest threat from Brexit is if there are negative economic consequences." 

Indeed, future uncertainty is the real killer and, as the political deadline approaches, there is evidence that the media’s widespread doom-mongering is affecting trading conditions and creating caution among clients. 

"Several of our clients are holding what they are calling ‘major budget reviews’ in April after D-Day," Droga5’s chief executive, Bill Scott, says. "The fact is that clients themselves genuinely don’t know how their business is going to be affected. As a result, they are holding back on briefing their agency partners fully. Everyone’s in the dark and everyone is hedging their bets." 

Lucy Jameson, Uncommon Creative Studio’s co-founder, agrees, saying Brexit may be having "absolutely zero" effect on her agency so far, but there are implications for some clients: "All the uncertainty is impacting on the ad market and that is making life tougher for ITV."

Although this slowdown of expenditure sounds immaterial, the difference between a healthy and poor economy is marginal. As Hirst says: "The economy is considered to be growing well at a 3% growth rate, but contracting at -1%." So, companies only need to hold off a little before it creates problems.

Meanwhile, group chief executive of The Creative Engagement Group, Russ Lidstone, warns that 29 March may represent only the beginning of the real negotiations: "The biggest risk is perhaps that Brexit dominates the political, legislative and economic landscape for years to come, thus creating ongoing distraction and uncertainty."

How are agencies preparing?

Scott speaks for most agencies when he says: "The most important factor for us has been to make our talent and clients feel as secure as possible. We have a watching brief to ensure minimal disruption to them. Until we know fully where we stand and what the actual legislative and trading implications are, how can we really prepare?"

Like others, The Creative Engagement Group’s senior team has been planning for various sets of circumstances. In early 2017 it created working groups to focus on areas where it saw the need for potential action: movement of people; movement of equipment; finance and currency; and talent. All have been planned on the basis of a no-deal outcome. 

"A further workstream was created around internal communications, ensuring that we regularly update our 350 employees on any developments they need to be aware of or precautionary actions we need them to take, for example renewing passports with validity of one year or less," Lidstone says. 

Unlike ad agencies, a large part of Lidstone’s business requires moving people and equipment internationally for events. So the company’s technical and procurement teams have been working with suppliers to ensure minimal disruption. "We had concerns early on that we might have to move away from UK-based suppliers to solely EU-based businesses. We’re pleased that this has not been the case. To avoid any delays at borders, we have increased our European supplier network and worked with current UK suppliers regarding their physical capacity and resources in key continental hub locations," Lidstone adds. 

Similarly, in the past six months, the7stars has set up a project team called "Team Mothervuca" (with "vuca" standing for volatility, uncertainty, complexity and ambiguity). It includes representation from across the business – operations, trading, finance, insight and strategy. 

The 7stars co-founder Jenny Biggam says the team has "conducted consumer research to understand how people are feeling about leaving the EU and how they expect their spending habits to change. We discovered, for example, that leavers are still feeling good about the economy and their personal financial situation."

She adds: "We have also consulted clients to get a better understanding on the implications for their businesses, and talked to all the media owners to try to get a better steer on market forecasts. We have a guide for clients who are asking about media investment decisions in the light of Brexit."

Total Media has also been proactive. After the EU referendum, it was concerned that a company looking for a hub for its European advertising might not pick a country that is outside the EU. So after a year of discussions, it set up a joint venture with Media Plus, the media arm of Service Plan, Germany’s biggest independent agency. 

Total Media owns the majority of the joint venture office in Munich, and Media Plus has a reciprocal arrangement in London. The offices use local staff to service clients. "We were looking for friends in Europe at the same time as they were doing so in the UK," Sellers says. "The real core advantage is that we have a real genuine presence in Europe – we can say to clients that you should have confidence to keep trading with us. And because we have a bit more reach in markets, our billings have gone up. Confidence is the real advantage." 

The Havas network is watching closely where clients are spending their money. "Anecdotally, we have a feeling that clients might start to shift some of their spend to more measurable parts of the mix, for example performance marketing or customer engagement work," Hirst says. "Talking to [others] in our industry, we feel client spend softening a little. It’s not gone, it’s just less easy to see the next three or six months." 

Elvis chief executive Tanya Brookfield says: "We’ve been tracking our clients’ financial performance and any public statements to try and gauge their temperature. We’ve also been having very open conversations with them about potential reactive changes to any of their annual plans. To be honest, no-one really seems to know what the impact will be."

To help with this uncertainty, Brookfield has engaged lawyers to help navigate potential changes to contracts. "For example, we’ve started to have conversations around whether we should be contracted to bill in euros versus pounds with our bigger global clients," she says. Indeed, there are stories of clients trying to lock agencies into long contracts where the agency is forced to absorb the risk of potential currency-exchange fluctuations. 

The big talent issue

There is at least one group that the Brexit chaos appears to be benefiting, then – lawyers. Mother has also taken on the services of a law firm, Lewis Silkin, to work on perhaps the industry’s biggest concern: continued access to the best global talent. 

Wall says the agency has a history of being almost exclusively focused on talent, and estimates that 30% of the agency’s workforce is made up of non-UK nationals. He says Brexit is making a huge impact not only in terms of the administration required both by employers and employees, but also as a crippling emotional blow to staff. 

"We’ve had to invest time and money in securing the status and basis for talented people to remain here. The workload that goes into that on the part of the employer, the professional services company and the individual is mindboggling," he says. 

Wall likens the process to the race to be Sarbanes-Oxley compliant or Y2K safe. "These issues create incredible waves and moments of emotionally draining energy. We’ve gone to the extreme; we’ve done everything to safeguard our talent so they feel protected and supported. Our job is to clear the crap out of their lives so they can continue to be brilliant at their jobs," he says.

The reason Mother has acted so decisively is because Wall believes it needs to combat any negative feelings among its European staff. He explains: "They chose this country and agency to develop their career, and suddenly they feel incredibly exposed and vulnerable. Feeling that way in an industry that is confidence-based – in ideas, thinking and delivery – is very counterproductive. If you are not feeling confident, that has an impact on what you can do. The emotional side of Brexit is not to be underestimated at all." 

Other agencies are experiencing similar problems, seeing staff return to Europe, or a decrease in job applications from European candidates. As Jameson sees it: "The talent risk is the biggest risk of Brexit for adland. Are we seen as a place where the very best creative talent from around the world – and within Europe – wants to come and work? If we’re not, that’s a shame."

Scott agrees: "We can’t afford to lose out to Berlin or Amsterdam or the Nordics. For ongoing success, the UK needs to cement itself as a, if not the, creative capital of Europe for talent and ad agency clients."

The diverse nature of global talent is particularly critical for a creative industry. As Hirst says: "Our society needs immigration of all different sorts. Creativity thrives in diverse cultural environments. It is no coincidence London is a creative centre – different voices and opinions from around the world are a rich part of that." If that were to change, it could have a very negative effect on the city’s creative output.

Will London lose its crown?

In the long term, the fear is that London’s position as a centre for creative excellence in Europe will slip. Clients may choose to locate their headquarters elsewhere and move spend accordingly. 

This potential shift may be exacerbated by the industry’s changing client base. "If you look at the client enquiries we’re getting and where expenditure is coming from, the emphasis is shifting to tech brands," Wall says. "FMCG companies were the big ad spenders but now they are being matched and overtaken by a new wave of companies. It’s a lot easier for them to move their operations because their business is based more on services than goods."

But Wall thinks London will do well, in the short term at least, because of its well-developed creative culture, which will still attract those who want to work in a high-end creative environment. 

Sellers also argues that international business – particularly US clients – will continue to look to London as a friendly first step into Europe, because of the language and similar media and advertising cultures. 

He has asked his international clients located in the UK whether they will move to Europe. "Many say that for certain aspects of employment law, it is easier to operate out of the UK rather than, say, France. But there are one or two clients looking at Luxembourg and Holland as bases, so there’s definitely a threat. We have to prove it’s worth it to be in the UK," Sellers says. 

Possible silver linings

Amid all the doom and gloom, there could be some upsides to Brexit. Financially, the UK’s pain could
be clients’ – and therefore agencies’ – gain. The government might be forced to offer some tax incentives to attract businesses to London, Sellers suggests. While Scott points out the drop in the pound after the referendum meant that, overnight, UK agencies became 20% more price-competitive in comparison with European competitors.

Being independent of the EU also offers the UK freedom to choose to do things differently. Uncommon Creative Studio plans to launch a big environmental campaign for the WWF in the spring and thinks Brexit might be an advantage. 

"We are looking at asking people to pressure the government to make the UK one of the first countries not to contribute to climate change – to be net zero. Brexit might be helpful because we could go harder and further than we may have been able to in the EU," Jameson says. "In a couple of months time, who knows what the Brexit situation will be, but we should be pushing to be super-progressive as a country."

Indeed, this is a moment for the UK to step up and prove it deserves its position as one of the world’s creative leaders, whether within the EU or outside it. "If there ever was a time for the UK to ground
out its position as the European’s leading creative economy, this is it. Ultimately, we need to raise our game like never before," Scott says.

Whatever the final outcome of Brexit, as Brookfield says: "The upside will be to have a clear idea of what the actual impact was and, quite frankly, to move on."

The great stockpile: what's in the agencies' Brexit bunkers?

Chablis, burrata, Parma ham, BMWs and Spanish midfielders "From a personal perspective, they are a top priority right now. From a business perspective we are stockpiling European talent and European clients while we can." Bill Scott, Droga5 

Tea bags "Like any good self-respecting business, we are fuelled by tea. So we’d place an industrial order for tea bags." Michael Wall, Mother

Chocolate Hobnobs and Haribo "The fact that stockpiling is even a remotely serious consideration in the world’s sixth-largest economy during peacetime demonstrates the ridiculousness of the situation. It goes without saying, we’re stockpiling bunker-filling quantities of chocolate Hobnobs and Haribo, just in case." Russ Lidstone, The Creative Engagement Group

Baking materials including flour and sugar "One of our traditions at Mother is that we bake our own cakes and goodies for clients and meetings. There would be an insurrection if the Mother kitchen couldn’t keep on baking." Michael Wall, Mother

A crowbar "We’ve made a conscious decision not to stockpile anything but instead to dedicate 76% of our training budget to looting and rioting(!)" Tanya Brookfield, Elvis

Euros "We are sneaking off on holiday this week to Paris before it gets complicated in the summer. We might get some extra currency and keep it just in case." Lucy Jameson, Uncommon Creative Studio

Swedish art directors  Chris Hirst, Havas Creative Network

Bog roll, fresh water, essential medicines
"My wife has a friend that works in the Home Office and they have issued a list of what households should stockpile. These three items are on that list." Michael Wall, Mother

Italian red wine "A friend lives in Tuscany and has a little wine business. So we’ve stocked up on some of his wine in advance, although I have no idea whether it will become any more difficult to import." Lucy Jameson, Uncommon Creative Studio 

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