On final count 51.9% of votes were in favour of ‘Leave’ but many of the winning campaign’s voters were not expecting such an immediate impact on the British economy.
Following the results, the FTSE 100 index of Britain’s biggest companies lost £140bn as the pound hit a 31-year low. Fitch — the last of the credit agencies to give the UK’s debt a AAA rating — said the gold-plated endorsement was “untenable under the circumstances of a Brexit”, while analysts rushed to warn the UK of an impending recession. Bank stocks took a particularly heavy hit as multiple lenders’ share prices across Europe nosedived more than 15%.
“I don’t believe marketers were prepared for this eventuality whatsoever.”
John Bernard, global marketing director, Mozilla
Amid the economic woes, Mozilla’s global marketing director John Bernard admits the marketing industry had been “woefully unprepared” for a Brexit. “No one really believed this would actually happen,” he explains. “There is now a possibility that import costs and production may become more expensive, which may have a knock on effect with consumers. I don’t believe marketers were prepared for this eventuality whatsoever.”
Since the start of the year, marketing budgets have been subdued amid fears of a Brexit. For the first quarter, for example, just over a fifth of marketers (21%) recorded a rise in their marketing budgets, while 18% registered a reduction. This meant that the balance of marketers saying they would be increasing their spend was only 3%, with IPA Bellwether blaming Brexit fears for the noticeably low levels.
An opportunity for growth
This caution will “almost certainly continue” over the next two months, according to Richard Robinson, managing partner at Oystercatchers. However, with Britain’s official exit from the European Union potentially taking years to legally go through, Robinson says marketers should try to look at the positives.
“Yes, financial caution will certainly continue for the near future while the trade agreements are being worked out with the EU, but this is very different from the 2008 recession where we were unprepared, with no financial buffers,” he adds.
“The storm will almost certainly calm and there is a strong opportunity now for brands to become the calming voices.”
Richard Robinson, managing partner, Oystercatchers
They can provide reassurance to consumers that despite things changing politically “our relationship can stay the same” so there’s a real chance to build trust.”
Predictions of an “economic disaster” were “pure scaremongering” according to Markerting Week columnist Mark Ritson. He advises marketers not to panic and to continue to look for opportunities to grow their brands post-Brexit.
“There will be little to no impact on marketers or brands over the next few months. The predicted economic disaster was just scare mongering by the Remain team and, with a bit of a dip in the FTSE and the exchange rates, marketing will continue completely untouched,” he claims.
“The big implications come in 2020 when Scotland separates and Ireland unites and then country of origin effectively becomes a far bigger factor in brand equity. But that’s a long way away.”
There was a similarly defiant message from the IPA, with the body for advertising agencies stating that the result is an opportunity for marketers to up the creativity levels and prove their worth globally.
“As an industry we had hoped that the referendum would have kept us in the EU, however, we believe the UK will continue to lead the world with its creative industries and advertising in particular,” says Paul Bainsfair, IPA’s director general. “We have always been known and admired for our inventiveness and ideas. It will now be more important than ever that we continue to demonstrate these valuable traits.”
What marketers should fear
However, brands should brace for a noticeable impact on consumer spending, according to Mike Watkins, head of retailer and business insight for Nielsen UK.
He says the “inevitable impact on disposable income” will see consumers revert back to 2008 spending habits and that “over the next two years disposable income will be hit; that’s a guarantee. The brands such as Aldi, Lidl and Poundland that benefited during the recession will continue to [do so] but the more major retailers could struggle as the prices of items start to rise next year. We expect to see consumer confidence fall and wobble over the next two years.”
And with consumer confidence backed to dramatically fall, Aviva brand director Jan Gooding advises brands to showcase a greater awareness of the public’s concerns or face alienation. She says global brands must also not lose focus on what’s going on outside the UK.
She explains: “As a marketing community there is now much to reflect on in terms of how we engage people in financial and economic matters. Savings and investments are so important for everyone’s own sense security about the future.
“We will continue to think about how we can help our customers protect what matters to them and provide for the people they love – as we always have. It is important that doesn’t change. As a brand we will navigate this period of uncertainty by focusing on the needs of customers in each of the 17 markets in which we operate and protecting their interests as best we can.”
Paul Troy, CMO at Confused.com, says giant brands such as Google could also regret opening lucrative new offices in London. In February, HSBC said it could switch 1,000 banking jobs to France should Brits vote Leave and Troy says Brexit might just trigger many to look for overseas headquarters.
“Global organisations like Google may well consider Dublin or another EU base versus London, given our decision to leave.”
Paul Troy, chief marketing officer, Confused.com
Ed Smith, former marketing director of Australian telecoms company Foxtel who has recently relocated to the UK, says new job opportunities in the marketing sector will be particularly hit as many CMOs see their budgets cut.
“They’ll definitely hold off on hiring more people. Within a year we’ll probably see some relatively significant staff reductions as brands look to see where they locate headquarters, but I just think businesses are going to have to see how it plays out – if this is the beginning of the destabilising or unraveling of Europe, why would you move your headquarters from London to Europe?” he ponders. “This is going to play out slowly.”
Where the Remain campaign failed
If David Cameron’s resignation as Prime Minister is anything to go by, then it’s now safe to say the Remain campaign was a pretty substantial failure.
Although quantifying where it went wrong isn’t easy from a marketing perspective, its failure on social channels certainly didn’t help.
According to TubeMogul, which polled 39,613 British voters, just 6% stated they had seen an online video ad for ‘Vote Remain’.
But the Remain campaign’s disconnect went even deeper than a lack of clicks, according to Confused.com CMO Troy. He explains: “Remain lacked that single-minded focus on messaging.
“Boris’s last speech stuck an emotive note with his call for ‘independence day’ [urging] voters to vote for their “freedom”. Ultimately, a clear and emotive message was more powerful than a rational call for maintaining the status quo.
Ritson agrees with Troy’s bold assessment but says Remain also made a mistake by relying on veteran, and arguably unpopular, politicians such as former prime minister Tony Blair. “They pushed the economic benefits of a strong economy – something the British people don’t really connect with. It lacked on personal or emotional impact especially compared to not being able to see a GP or get your kids into the local school.”
“Remain also used a cavalcade of politicians like Cameron, Blair, Brown and Corbyn who the common man and woman abhors. The more this professional elite pushed to stay, the more people thought Leave.”
Mark Ritson, marketing professor at Melbourne Business School
With the marketing industry still split on the long-term ramifications of Brexit, one thing is clear: brands must continue to engage with consumers. Before jumping to conclusions, it might be worth sitting back and letting the dust settle, according to Malcolm Walker, CEO of frozen foods discounter Iceland.
“Everybody is surprised and everything seems a bit feral at the minute but I am confident it will all settle down soon,” he says. “The reality is the stock market and exchange rate is still better than it was in February so it is not the end of the world.”
In the wake of Brexit, media agency Zenith Optimedia has predicted UK ad spend will fall 3.9% in 2017 as brands lose their confidence.
Hostelworld CMO Otto Rosenberger, meanwhile, said a Brexit could “make creative hubs like Dublin or Berlin seem more attractive than Britain as it loses status in a single digital marketing iniatitive and frictionless access to a European market of 500 million consumers.”
Marketers, however, will now be hoping it’s the Iceland CEO who is ultimately proven right.
Additional reporting by Jonathan Bacon and Michael Barnett