'Geopolitical risks' shaking advertisers, says Sir Martin Sorrell

Advertising is seen as a bellwether of the economy

Gideon Spanier
Friday 31 October 2014 23:59
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WPP’s founder Sir Martin Sorrell warned yesterday that the Ebola epidemic, the rise of Isis and unrest in Hong Kong are “grinding down” confidence among major advertisers.

The world’s biggest advertising group saw a slowdown in revenue growth between July and September. “If you look at the geopolitical risks, they have become more complex,” the chief executive said, pointing also to continued “fragility” in the eurozone.

“All that adds up to a lot of uncertainty, which makes clients cautious. These uncertainties grind people down.”

Advertising is seen as a bellwether of the economy and Sir Martin pointed to weaker results in the past three months from companies such as Procter & Gamble and Unilever.

“They haven’t made it with the top line, they’ve made it by cutting costs,” he said, referring to pressure on sales.

He reiterated fears about a UK referendum on leaving the European Union in 2017, saying it is “troublesome” and the risk has moved up the agenda after the Scottish independence vote.

“We’re better inside the tent than without,” he said. WPP’s net sales rose by 3 per cent to £2.76bn in the three months to September against 4.1 per cent in the first half of the year.

Sir Martin expects a further slowdown in the last quarter, which will be “somewhat softer”, and maintained “caution” about hiring among his 122,000-strong staff, with redundancy costs rising.

But the WPP boss said it remains on track to hit full-year profit targets. The UK remained “very strong” despite slowing. WPP shares were virtually unchanged, missing out on a wider rally.

WPP, whose agencies include Ogilvy & Mather and J Walter Thompson, led the industry with client wins, picking up £1bn worth of new billing in the last quarter, including Burger King and Tiffany.

While WPP and rival Publicis saw a slowdown in the last quarter, America’s Omnicom and Interpublic accelerated.

However, analysts at Jefferies said WPP’s organic revenue growth, which includes some client costs, still “led the pack” on 7.6 per cent.

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