What would Brexit mean for marketers?

With the EU referendum just seven weeks away, Marketing Week explores the impact Brexit could have on growth, talent, regulation and ‘Brand Britain’.

Map of Europe

Britain’s marketers, just like the country at large, are under pressure to decide how they will vote in the referendum on the UK’s membership of the EU on 23 June. A survey of 278 British senior marketers, conducted by email provider Mailjet in March, found that 31% believe leaving the EU – a process commonly referred to as Brexit – would be good for their business. Meanwhile, 42% say Brexit would not be advantageous for their company, and 27% are unsure.

The outcome of the vote could have far-reaching consequences for how marketers perform their jobs and engage with the wider world. Nationwide polls are likely to fluctuate over the next seven weeks but it is clear that the uncertainty created by the referendum is having an effect on businesses. Consumer confidence is 18 points lower than it was a year ago, according to the latest index by GfK, while a Deloitte survey reveals chief financial officers at FTSE 350 companies are delaying the recruitment of new staff and other internal investments until the vote is decided.

READ MORE: Consumer confidence stalls as Brexit concerns ‘hit home’

Who’s ‘in’ and who’s ‘out’?

Speculation is rife over what Britain might look like if it leaves the EU, and many potential consequences remain unknown. In an open letter signed by 200 entrepreneurs, Innocent Drinks founder Richard Reed warned of the “economic shock” that Brexit would cause and the loss of investment for British startups. Reed, who is also vice-chairman of the Britain Stronger in Europe campaign, secured the signature of prominent business people including Zoopla CEO Alex Chesterman, Yo! Sushi founder Simon Woodroffe and Lastminute.com co-founder Martha Lane Fox, as well as several FTSE 100 CEOs. Ocado chairman and former Marks & Spencer CEO Lord Rose chairs the campaign.

“The UK is the best place in Europe to launch and grow a business; leaving the European Union will undoubtedly undermine the ability of Britain’s entrepreneurs to start up, innovate, and grow,” said Reed.

James Murphy, founder and CEO of agency adam&eveDDB and another supporter of the campaign, similarly argued in an opinion article for Marketing Week that British creative industries benefit from EU membership via direct investment and job creation. He said: “The UK faces a choice between backing its creative sector, giving Brand Britain the boost it needs to carry on dominating the global market, and turning inward and stopping the cultural mill turning.”

READ MORE: adam&eveDDB founder James Murphy on the dangers of Brexit

“The UK is the best place in Europe to launch and grow a business; leaving the European Union will undoubtedly undermine the ability of Britain’s entrepreneurs to start up, innovate and grow“

Richard Reed, Founder, Innocent Drinks

But there are also plenty of business people who back Brexit. In March, the Vote Leave campaign published its own letter of 250 signatories that included JD Wetherspoon founder Tim Martin, luxury hotelier Sir Rocco Forte and Luke Johnson, chairman of cafe chain Patisserie Valerie. In an interview with the BBC last month, Martin argued it would be better for business “if we regain control of our own laws and economy” and that
“in many respects” EU membership had harmed his company.

They have added their voices to prominent politicians backing Brexit, such as justice secretary Michael Gove and outgoing mayor of London Boris Johnson, fighting against Conservative and Labour party leaders David Cameron and Jeremy Corbyn.

These conflicting arguments reveal the difficulty of predicting what Brexit would mean for the marketing profession, its access to talent and perceptions of Britain as a creative hub – not just in Europe but around the world.

Britain’s ‘loss of influence’

WPP CEO Sir Martin Sorrell was noticeably gloomy about the potential consequences of Brexit during Advertising Week Europe last month. He suggested that if the UK was no longer part of the EU single market, his advertising group would “lose influence“ in four of its top 10 markets, namely Germany, France, Italy and Spain. “I know clients will close plants and jobs will go,” he added.

Sorrell was expressing the fear of the ‘remain’ campaign that by trading outside of the EU bloc, Britain will face higher tariffs and trade costs and new barriers to doing business. This claim is fiercely contested by the Brexit camp, which argues that Britain’s economic strength will compel other nations to continue trading with it on favourable terms.

Advertising Association CEO Tim Lefroy, who is not taking a public stance on the referendum, argues that the ad industry “will be resilient whether we are in or out” because of Britain’s strength as an exporter of advertising services. The trade body’s latest Advertising Pays report calculates that Britain exports £4.1bn of advertising services every year and the country’s balance of payments surplus for advertising is the biggest in Europe (£1.6bn). It also notes that in the past decade, British companies have won more Cannes Lions awards than any other country in Europe.

Beyond the export question, there are various thorny regulatory issues for marketers to pick through. Britain has its own independent regulatory body in the Advertising Standards Authority, so Brexit would not alter the ethical standards that British marketers and brands already adhere to. However, in areas such as consumer protection, product law and copyright, Brexit could potentially create a two-tier system because Britain would no longer be bound by rules governing the rest of the EU.

Boris Johnson opposes leader David Cameron’s campaign to stay in the EU

New consumer legislation needed

These different regulatory systems could present further barriers to trade, and the British government will need to decide how closely to match existing EU laws in these areas with any new proposed legislation. Ian Twinn, public affairs director at advertising trade body ISBA, which is also not taking a stance on the referendum, says: “Are we going to turn around to consumers who have just voted to leave the EU and say ‘we don’t like these ridiculous consumer laws, we’re going to take your rights away’? I don’t think brands would want that either because it would reflect badly on them.”

The Direct Marketing Association (DMA) takes a similar position on the question of data regulation. Last month, 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. Chief executive at the DMA Chris Combemale believes Brexit would make no difference to data protection and privacy in Britain.

“If we opted to leave, it would enter into some form of trading relationship with the EU and data protection would form part of any such trading agreement,” he says. “Therefore, Britain would need to implement data protection legislation that was broadly equivalent with the GDPR.”

How quickly it could do so and how many of the EU’s consumer protections MPs would be willing to adopt are not simple questions to answer, however, since British ministers opposed and actively lobbied against many of the restrictions the GDPR will place on businesses.

Access to talent and funding

By heralding Britain’s withdrawal from the principle of free movement of workers, Brexit could make it more difficult for brands to recruit talent from EU countries. In a letter to staff earlier this year, Rolls-Royce CEO Torsten Müller-Ötvös warned that Brexit would affect the company’s hiring capabilities, as well as potentially driving up trade costs.

“Our employment base could also be affected, with skilled men and women from most EU countries included in the 30 nationalities currently represented at the home of Rolls-Royce here at Goodwood,” he said in the letter that was leaked to The Guardian newspaper.

Britain’s marketing, technology and creative industries are highly diverse and multinational, so curbs on EU immigration would affect many businesses’ recruitment practices. Figures from data intelligence company DueDil show that more than a fifth of British startups are led by foreign entrepreneurs, while the number of tech directors in Britain from EU countries has grown by 176% since 2010.

Leaving the EU would hurt business, say 42% of marketers

Twinn at ISBA believes brands and agencies will still be able to attract the best, most qualified people if Britain left the EU. This would involve using the work permit system currently used to determine whether non-EU migrants can work in Britain. “It would depend on what the government did post-leaving, but I can’t imagine that they would say companies can’t get the best talent globally in a global industry,” he says. “That’s already the case now with the rest of the world.”

However, as with the need for government to legislate to enable trade with Europe, the requirement for businesses to jump through immigration hoops creates inevitable delay and new administrative burdens.

Caroline Norbury, CEO at not-for-profit organisation Creative England, expresses concern about the potential talent gap, noting that finding suitable employees is one of the biggest challenges facing the UK’s fastest growing companies. “Brexit could compound this challenge by making it more difficult for talent from the continent to live and work here,” she says. “There may even be an exodus of the talent that is already here.”

Creative England, which funds films, tech startups and agencies, would lose its access to a range of EU funds in the event of Brexit. In addition, Norbury believes the creative industries could suffer from a general dearth of investment. “As the so-called gateway to Europe, we’re the number one destination for creative and digital sector inward investment in the EU and more international companies choose to base their European headquarters here than anywhere else,” she says.

“If we leave the EU, there’s a great deal of uncertainty as to whether that investment would continue and if those major international businesses would continue to base themselves on our shores.”

The future of ‘Brand Britain’

The prospect of Brexit could also redefine what it means to be British. Advocates of remaining in the EU have argued that Brexit would represent an “isolationist” or “regressive” move that would signal Britain’s withdrawal from the global stage and a rejection of modernity, detracting from one of the key marketing advantages for British brands abroad. Countless brands trade on their British heritage, so any change in perceptions of the country could have implications for their positioning overseas.

Supporters of Brexit, on the other hand, suggest that leaving the EU could breathe new life into ‘Brand Britain’. In a speech last month, justice secretary Michael Gove, who is backing the Vote Leave campaign, said Brexit would be a “galvanising, liberating, empowering moment of patriotic renewal”.

Supporters of Brexit argue leaving the EU would breathe new life into brand Britain

Figures from national tourism agency Visit Britain point to a booming tourism industry, with a record 35 million people visiting the country last year. The organisation declined to comment on the potential effect of Brexit, but revealed that 67% of visitors in 2015 were from the EU, accounting for 44% of spend. Like European workers, these tourists could be subject to new immigration and customs rules if Britain withdraws from agreements allowing freedom of movement.

During a debate at Advertising Week Europe last month, Bauer Media CEO Paul Keenan put the EU referendum in generational rather than economic terms, by suggesting that Brexit does not fit with the worldview of today’s digitally savvy millennials. “Young people are native multiculturalists and can’t imagine not being a part of that,” he said.

31% of senior British marketers believe leaving the EU would be good for their business

42% believe it would be bad (Source: Mailjet)

£4.1bn is the annual value of British exports of advertising services (Source: Advertising Association)

67% of overseas visitors to Britain in 2015 were from the EU (Source: Visit Britain)

The brands for and against leaving

“The economic shock of a vote to leave the EU would be hugely damaging to our businesses. Leaving could lead to lost investment, missed opportunities and lost jobs.”

Richard Reed, founder, Innocent Drinks

“If the UK decides to leave the EU, it would be in the economic and other interests of this country and our European neighbours to have friendly relations, strong business links including free trade and free movement of labour.”

Tim Martin, founder, JD Wetherspoon

“I’m not saying we would not survive outside the EU, but I’m asking ‘would we thrive?’ It’s not about patriotism – it’s about pragmatism. Our economy would be weaker outside Europe and our influence would be diminished.”

Lord Rose, chairman, Ocado

“If we vote to leave the EU, we will be able to trade freely with the EU and have friendly co-operation. The UK will regain legal control of things like trade, tax, economic regulation and energy.”

John Mills, founder, JML

How the campaigns match up

The fight between the two sides in the EU referendum is as much a battle of marketing as it is a clash of ideas. The two officially designated campaigns in the debate – Britain Stronger in Europe on one side, and Vote Leave on the other – are competing for airtime and the attention of the public through a range of marketing tactics, not all of which have proved successful so far.

PR is one of the most obvious communication channels, though both sides have courted controversy in their attempts to dominate the headlines. In March, Vote Leave published a list of murders and rapes committed by 50 EU criminals in Britain – a move that received widespread coverage but that was criticised by the ‘remain’ side as “scaremongering”. Similarly, the pro-EU camp has generated publicity by promoting economic warnings about the dangers of leaving, but faces claims from the Brexit side that it is running an overly negative campaign labelled ‘Project Fear’.

As the underdog side in the debate, according to the majority of polls, the Vote Leave camp has sought to use guerilla marketing tactics to spread its message. Earlier this year, the campaign received a warning letter from solicitors representing the artist Antony Gormley after it projected its message across his Angel of the North sculpture without permission.

The remain side, on the other hand, has the backing of the Government, which spent £9m on sending pro-EU leaflets to every UK household last month. This use of direct mail reflects the remain campaign’s desire to reach older voters, who polls suggest are more likely to be against the EU and more likely to vote. The Britain Stronger in Europe campaign also recently launched its ‘Talk to Gran’ campaign in which it is handing out pro-EU postcards to young people at universities and other locations and encouraging them to send them to their grandparents.

The campaign was mocked and called patronising by some commenters on social media, but Will Straw of Britain Stronger in Europe defended the attempt to cross the generational divide. “This referendum will not be won simply by winning the argument in the media, but by creating a bottom-up, word-of-mouth campaign that will reach voters of every age in all parts of our country,” he said.

Both campaigns came in for criticism at Advertising Week Europe last month. Lindsay Pattison, CEO of media agency Maxus, argued that neither side had made a significant impact on social media. “Britain Stronger in Europe has got something like 25,000 followers [on Twitter] and Vote Leave about 35,000,” she noted. “Both of those numbers are pretty pathetic.”