Sam Tomlinson, Partner, PWC and Stephen Woodford, CEO, The Advertising Association take LBB’s Laura Swinton on a deep dive into UK advertising’s export potential
Recently, the Advertising Association and PwC published a report on UK advertising’s export success, finding an industry that has been surprisingly resilient when faced by the Covid-19 pandemic. As the country readies itself for Brexit, the report also drilled down into the roots of the UK’s success, finding that the talent pool and creative reputation were significant drivers.
You can read more about the report here and here, but LBB’s Laura Swinton spoke to PwC’s Sam Tomlinson and the AA’s Stephen Woodford to drill down into the opportunities and challenges ahead.
LBB> The report finds that while the UK’s advertising industry has been affected by Covid-19, it’s been quite resilient. What do you put this resilience down to and what can we learn from this as Covid continues?
Stephen> The UK has a long heritage as a global hub for advertising and many companies work with brands all around the world. The UK is also one of the world’s most advanced digital economies and for those companies working globally, doing business virtually was already the norm. As an industry it feels like we never stopped, but switched rapidly to virtual working, so we could continue to do what we do best, solving business problems creatively for our clients both home and abroad. UK advertising has been very much open for business, supporting and advising clients from all sectors. Now's the time for businesses to review how they adapted and rethink their offerings and strategies. The global shift online has opened up new business opportunities for many and everyone in our industry should be considering their exporting strategy as a means to generate new revenue streams.
Sam> The agility and adaptability we have seen throughout the industry in these difficult times is admirable. Many companies have been able to adjust quickly where demand has reduced and conversely, where new opportunities have emerged/demand has increased, we have seen companies pivoting their service offerings to ensure they still meet their markets' needs. We believe this shows resilience and agility within the industry.
LBB> Covid-19 also saw 22% of respondent companies increase their exports - ironic given the lockdown on international travel! Why do you think we’ve seen this jump?
Sam> 22% of surveyed companies saw an exporting revenue stream increase but it’s worth noting that 91% of surveyed companies saw their overall revenues decrease due to Covid-19. Therefore, there isn’t an overall jump in the export market. For the streams that have increased, this is down to the resilience and agility of companies which has enabled them to find new export revenue streams during Covid-19.
Stephen> UK advertising has been on a strong growth trajectory for many years, which has accelerated since 2012, perhaps a lasting legacy of the showcase the London Olympics provided for British creativity and excellence. Our recent export report (March 2020) showed UK advertising services grew by 15% to reach £7.9bn in 2018 – a record high for the industry. The growth in advertising exports between 2017 and 2018 (+15%) was higher than almost all other UK industries. For example, financial and telecommunications services grew by around 8% while engineering services fell by around 1%. When compared to 2017, advertising has gone from being the fourth largest service export to the second, overtaking telecommunications and engineering services.
We know International clients believe that UK advertising is strategic and business savvy, as well as highly creative, setting the UK apart from other markets. A client we interviewed for the report said “UK Advertising offers a go-to package. For example, Manhattan isn't at the same level. The cost of overheads etc... are very high and as a result you tend to get access to junior staff which in turn means lots of hand holding and more work at the client’s desk. When working with HeyHuman I get a more experienced team who understand business needs and speak in a common business language.”
LBB> And how confident are you in the industry’s ability to withstand both the continued pressures of Covid alongside whatever challenges come with Brexit - in a manner that’s sustainable for businesses and the workforce?
Stephen> The report shows the advertising industry is already very successful at exporting advertising and marketing services and attracting inward investment to the UK. The UK advertising industry is not just a successful exporter of services but a beacon for British creativity, innovation and skills. Since March, we have shown we can continually operate online, as well as being able to create innovative and technically driven solutions to service customers and targets. In preparation for the UK’s departure from the EU and recognising the need to diversify our export markets, the AA launched the UKAEG in partnership with the Department for International Trade (DIT) in September 2019. If not for the Covid-19 pandemic, 2020 would have seen a calendar full of outreach activity championing UK advertising exports. Even though the pandemic has created significant challenges (e.g. restrictions on overseas travel), the group has reinvented its physical activities and events to be delivered virtually – so far creating 146,000 opportunities to meet UK advertising across key markets such as China, USA, South Korea and Europe.
Although the UK is currently a leading global advertising hub, we cannot take this position for granted. Protecting this status will help drive the UK’s post-Brexit and post-Covid success. This will continue to attract important inward investment and the best international talent. To do this, we need to build on our constructive relationship with DIT and deliver the very best, high-profile marketing campaign for our industry that we can.
Sam> There will always be a demand for UK services within the advertising industry due to the UK’s creativity, talent and global reputation. The key point is that these services may change due to Covid-19 and Brexit, and it is therefore important that companies continue to show agility, listen to the market, and adapt their offerings to support the global market needs.
LBB> The ONS statistics show that the ad industry’s exports continued to grow between 2017 and 2018 - to what extent has Brexit catalysed companies to put more focus on their international exports?
Sam> Brexit will understandably put a strain on the EU trading market. UK advertising exporters to the EU will need to maintain consistently high quality to ensure the additional "Brexit hoops" are worth the effort for EU companies using their services. It should also be noted that the single largest importer of UK services is the US, so that market also remains critically important.
LBB> In terms of the UK’s global reputation for creativity, the advertising industry benefits from being part of a vibrant ecosystem that includes theatre, music, film. The report even mentions ‘strong creativity is due to a combination of societal support for the arts and human talent’. We’ve seen some criticism of the government’s support of the arts and people who work in the arts throughout Covid. We have also seen a de-emphasis on arts and creativity in education. How important is it to ensure that that ecosystem survives and thrives when it comes to the UK’s global creative reputation and creative talent pool, and therefore the continued/future success of the UK’s ad industry?
Sam> The creative industry is a key source of cultural identity in the UK, and like any ecosystem with deep societal roots, the industry is integral to how the UK is perceived on a global scale. It is important that the focus placed on the creative arts doesn’t fade, to ensure we continue to attract top talent - As stated in the report, top global/domestic talent leads to top creativity which leads to global reputation which leads back to attracting top global/domestic talent.
Stephen> The creative industries are the fastest-growing sector in the UK economy, with the potential to unlock even more significant growth. Perhaps more than in any other sector, commercial businesses, publicly-funded organisations, creators and freelancers work hand-in-hand both across creative supply chains and ecosystems, in the UK and internationally to produce the creative services and products that deliver this economic, social and cultural success. This interdependence and cross-fertilisation of all parts of the creative industries is a major contributor to both the UK’s economic, cultural and societal health and to exports and making the UK a ‘soft-power superpower’!
The UK leads the world for creative education and in 2019 held the two top spots for Art and Design, with UAL placed alongside the Royal College of Art (RCA). Third-level education is addressing the important challenges of today including AI and the Data Economy, Clean Growth, and skills shortages in augmented, virtual and mixed reality. However, the international standing of British creative education is at risk and we look to the Government to renew its commitment to teaching art and design in schools.
LBB> Two of the biggest barriers to international trade with UK businesses were cost and legal issues - and with Brexit one can imagine that these could potentially become more prominent. So, what sort of support or trade deals would you like to see put in place to help minimise those issues?
Stephen> We support the Government’s aim to champion free trade and have been pleased to see the UK negotiating trade continuity agreements with existing trade partners as well as new free trade agreements. In order to maximise benefits for our own sector, we would encourage negotiations with priority markets including China, India and the Middle East.
More widely, we believe that to maximise international opportunities the Government should recognise that the EU is still the UK’s largest trading partner. The loss of access to EU markets will impact the UK’s competitive advantage as the global hub for advertising and may have a knock-on effect for the advertising supply chain and FDI. A data adequacy decision may not be achieved before the end of the transition period. This would impede the flow of personal data from EU/EEA to the UK and impact the overall competitiveness of our digital advertising sector.
LBB> It was interesting to see that the exporting study wasn’t solely limited to large companies and that smaller businesses, like Madam Films, were included in the report. When it comes to supporting the industry abroad, how can the AA and the government ensure that any strategy supports businesses of all sizes?
Stephen> We know that the UK is a global hub for advertising services and there is a demand to work with our industry. The report showed that the popularity of an export market does not vary significantly when factoring in company sizes, as broadly the same top 10 markets appear across the board. Company size is determined to have minimal bearing on the ability to export. This means that overseas customer acquisition is within reach for most UK advertising companies. The opportunity is clear and many businesses across UK advertising and marketing services can benefit as we increasingly look at how we trade with customers around the world. We are already out of the starting blocks through our industry initiative – UK Advertising Exports Group (UKAEG). Interestingly approx. 90% of our members are independent companies and SMEs, such as Madam Films. Our membership represents AdTech, creative, production and post-production companies, research, data companies and talent scouts, working together to boost the reputation of UK advertising on the global stage. Our mission at UKAEG is to support every UK advertising business that wants to grow its business globally and we do this through actionable insights and guidance.
For example, we know that the brands which invest in awareness and values in times of recession and reduced confidence gain even better returns, both during the downturn and when the economy picks up - they recover faster and emerge stronger. With this in mind, the UKAEG is investing in the brand of UK advertising, based on the fundamental truth reinforced by the Powering up UK Advertising report. The campaign, led by our Made Global film developed by UKAEG members, adam&eveDDB and The Mill tells the story of the UK’s unrivalled reputation for creativity. With the right marketing drive, we can ensure international customers turn to the UK’s creative, strategic and technological capabilities to do this in the most competitive way for their business, wherever they are in the world. The more companies that join the UKAEG community, the stronger our voice.
As an industry the continued success of UK advertising on the world stage is, above all, testament to its resilience. The UKAEG community has taken part in a number of virtual events over the summer including one with the China Advertising Association, involving more than 40 participants from UK and Chinese companies running in dual translation. New business opportunities have also opened up through our virtual trade missions to China with the Shanghai International Advertising Festival (SHIAF), we have representatives of UK Advertising presenting at CIAF in November where we will launch the Mandarin version of the ‘Made Global’ campaign.
As we look ahead to 2021, we have a number of plans in the making including coordinating and running a programme of virtual trade exchanges, at key industry events such as SXSW, SHIAF and Cannes Lions during 2021. We will also work with the Department for International Trade (DIT) to provide expert counsel on how to access logistical and infrastructure support on the ground in key markets.
Any UK advertising and marketing services company seeking to grow their international revenue streams or know a company that should be considered, please contact the UKAEG Marketing Manager, Aisling Conlon or visit our special hub for UK Advertising Exports
to learn more about how to get involved.