Finally data is emerging that should put the fear of God into adland and the the UK a whole. Omnicom UK (below) managed organic growth of five per cent in Q3. Deduct the currency bounce as the money is converted to dollars for the US holding company and you get an horrific minus ten per cent performance.
Sure, as an independent agency we may be shielded but a terrible economy is a terrible economy for everyone.
What this means in simple terms is that all of these businesses that have to convert pounds to the dollar (euro not far behind) are either going to have try and put their prices up, like Marmite, by 18 per cent, the fall in the pound against the dollar (which has zero chance of succeeding in a market under constant cost pressure and scrutiny) or they will have no choice but to adjust their cost base by 18 per cent. Which means a lot less people doing even more.
This isn’t going to be about people losing their bonus but about people losing their jobs: significant numbers.
This is a perfect example of the perfect storm the UK has been dumped in.
Since 2008 the economy has been held together with string. Agencies have had to put dramatic cost cutting in place to lower costs and keep output the same over the last eight years. It’s been unbelievably hard on employees.
If you talk to the people that run agencies the same theme emerges. It’s never been harder. People are leaving the industry because of the sheer hours and pressure they are under. Agencies have been struggling for eight years to cope and, arguably, just about kept above water.
If the expectation from UK Brexit voters is that businesses can slash costs massively again and keep production output the same then they are sadly mistaken. It’s not possible. There is no more output. We cannot ask any more from people already hugely overworked.
Working from 8am to 10pm three or four times a week and most weekends, which is the industry norm, means people are already being broken. We cannot and surely will not ask for more.
The Government need to start listening and fast.
If you can’t put your prices up and you can’t cut any more cost out then the only other option is wage deflation or becoming an unprofitable market to invest in.
Wage deflation doesn’t work. Making people literally poorer isn’t often seen as a great motivator.
Being an unprofitable market destroys the economy.
Where is all this going? Seriously, what on earth is going on. So many people have been saying this to me since Brexit. So much utter nonsense has been spoken. Such muddled debates where worries about economics are answered with statements about immigration or sovereignty. It’s like taking a maths exam but writing answers about geography.
Listen to the people that run businesses. Listen to the people that you are asking to tolerate mass economic destruction and expecting to rebuild it afterwards.
Advertising is predominantly a London-centric industry still. If you destroy the economy in London you destroy the UK. Advertising is a big deal industry in London in terms of jobs, revenue and tax.
The reality is that three quarters of all UK Cities have yet to grow back to the same level of tax contribution they made in 2008. Three quarters! In other words they haven’t recovered from the 2008 disaster. That is a frightening reality if London too is going to be left to the dogs. My home town of Norwich generated 21 per cent less overall tax in 2014/15 than immediately before the 2008 recession. 21 per cent – stick that on a bus Boris and drive it around Norfolk.
Think tank Centre for Cities found that London generated almost as much tax as the next 37 largest cities combined in the UK.
So industry and everyone else needs to send a message very loud and clear now to the Government and quickly. We’ve run out of options, there’s no more water in the industrial well.
For people in advertising this Omnicom data is a dire warning.
Matt Charlton is CEO of Brothers and Sisters.