Brexit Would Reduce U.K. Ad Revenue Growth by $1.45B by 2030, Zenith Forecasts

Buckingham Palace - H 2012
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Buckingham Palace - H 2012

“While the immediate effect would be muted, Brexit would have a long?term cost for the U.K. ad industry" to the tune of $102 million per year, says head of forecasting Jonathan Barnard.

If Brits on June 23 vote in favor of leaving the European Union in what has been dubbed the "Brexit," it would reduce U.K. advertising revenue growth by £70 million ($102 million) each year, or $1.45 billion overall by 2030, according to a forecast from media planning firm ZenithOptimedia.

"This damage would be caused by a reduction in economic growth in the long term, not by advertisers’ short?term reaction to a vote to leave, which is likely to be minimal," the company said Wednesday.

“While the immediate effect would be muted, Brexit would have a long?term cost for the U.K. ad industry, holding back its growth by £70 million a year,” explained Jonathan Barnard, Zenith’s head of forecasting. “It would also threaten to make cross?border accounts in Europe more costly and cumbersome to operate.”

The company didn't estimate the effect on specific media categories, such as TV or newspaper ad revenue.

The forecast is based on U.K. Treasury projections, which say that a Brexit would reduce the flow of trade and investment, with the U.K.’s GDP likely to be 6.2 percent lower by 2030 if the country was outside the EU than if it stays in the EU.

"Zenith has tracked a clear relationship between economic growth and the health of the advertising industry," the media planner said. "Increased growth leads to more products from existing advertisers and more new products from start?ups, all of which need to be marketed to consumers. Over the past 35 years, the U.K. ad market has averaged 1.1 percent growth for every 1 percent increase in GDP."

Zenith emphasized that the effects of a vote for an exit from the European Union would not be felt "for at least several months" after the vote. A survey of key U.K. and European advertisers found that "they had not changed their budgets in the light of a possible Brexit, and none of them planned to make any immediate changes" in the event of a victory for the "Leave" movement.

"Brexit would be an unprecedented situation, and is unlikely to instantly change the way people shop or consume media, providing no signals for advertisers to vary their spending plans," said Zenith. "We expect that advertisers would begin revising their advertising budgets, though, once the economic consequences of a vote to leave start to become clear."

That said, ITV recently argued that the debate ahead of the June 23 referendum about Britain's possible EU exit has been affecting marketing spending decisions.