Brexit Halts Some Ad Budgets: U.S. Auto, Finance, Tech, Energy Marketers Tremble
Even before U.K. citizens voted to exit the E.U. (A.K.A., “Brexit”) marketers were scared ad budgets would dry up as world markets dove as much as 12 percent on Friday — with U.S. exchanges down 3 to 4 percent. That same day, Zacks Equity Research predicted on Yahoo Finance that the main marketers impacted in the U.S. will be in auto, finance, tech and energy sectors.
The Drum reported in March that ad agencies were already bracing for Thursday’s Brexit vote.
“That uncertainty has already convinced many advertisers to postpone their investment decisions, according to WPP boss Sir Martin Sorrell, who told Bloomberg News last month [Feb. 24] that it's a ‘period of instability’ for clients,” reads the Drum article. “His counterpart at Publicis Groupe, Maurice Lévy has expressed similar concerns, with both media executives all too aware of the damaging knock-on effects an exit could have on budgets as big advertisers from the telecommunications, financial and aerospace industries — which are strong in the U.K. — push to stay in the union in order to continue to thrive.”
Plenty of U.S. companies may be considering cutting ad budgets, as Zacks Equity Research says this on Friday: “Currently, U.S.-based companies are allowed to operate anywhere in the E.U. as long as they establish a branch or subsidiary in any one of its 28 member states. As per a research report by Deloitte, London is home to 40 percent of the European headquarters of the world's 250 top companies. Brexit casts a dark shadow over the future of these companies and their trade ties.”
And perhaps their ad budgets.
Here’s the breakdown by market sector, per Zacks:
- Auto: “Ford Motor Co. … had almost 19 percent exposure in the U.K. .... Penske Automotive Group, Inc. … also generates a significant amount of revenues from [the] U.K. Thus, a potential recession in the U.K. will dent the financial results of these companies.”
- Finance: The Goldman Sachs Group, Inc. Morgan Stanley, JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corporation “generate 27 percent, 15 percent, 15 percent, 13 percent and 7 percent,” respectively, of their revenues from Europe, the Middle East and Africa. Brexit greatly impacted EMEA.
- Tech: “For the IT companies listed in the S&P 500, the U.K. accounts for approximately 4 percent of their revenues. … [eBay] generates a large chunk (approximately 16 percent) of its revenues from Britain.”
- Energy: “Apache Corp. …, which operates pipelines and facilities in the U.K. and gets about 20 percent of its revenues from the U.K. is likely to be hurt. Other energy stocks ConocoPhillips … and EOG Resources, Inc. … could also face some heat.”
Google reports British residents may not have known what they were doing.
“Google reported sharp upticks in searches not only related to the ballot measure, but also about basic questions concerning the implications of the vote,” reads an article published on Friday by the Washington Post. “At about 1 a.m. Eastern time, about eight hours after the polls closed, Google reported that searches for ‘what happens if we leave the EU’ had more than tripled.”
Here’s what the U.K.’s Elephant Digital says Brexit does to U.K. marketers:
“Marketers will already be feeling the impact of the looming vote as customers and other businesses are showing uncertainty — holding off on purchases and decisions, and delaying the recruitment of new staff and other internal investments until the vote is decided,” writes Phil Birss on June 17. “The most immediate impact for some marketers is the risk to their jobs. Some roles are funded by the E.U., and British creative industries in particular benefit from E.U. membership via direct investment and job creation. One example is Creative England, which funds films, tech startups and agencies. It would lose its access to a range of E.U. funds …
“For marketing managers,” he continues, “the management of your team in terms of recruitment may be affected. Brexit could make it more difficult for organisations [sic] to recruit talent from E.U. countries. Yet Brexit supporters argue that brands and agencies will still be able to attract the best, most qualified people if Britain left the E.U. using the work permit system currently used to determine whether non-E.U. migrants can work in Britain. 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.”
What do you think, marketers?
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