Sir Martin Sorrell
‘Investing works. You can’t cut your way to prosperity’
IN THE countdown to the UK’s EU referendum result, WPP founder and CEO Sir Martin Sorrell was prepared to stick his neck out (“and probably get my head chopped off…”) that the Remain campaign would win the day.
“But it’s been a very difficult campaign. I think Remain… focused too much on the economy rather than the emotional issues sovereignty and immigration, which Leave has exploited mercilessly.”
As a second-generation immigrant — his grandparents came to the UK from Eastern Europe — Sorrell is a strong believer in the positive impact of immigration on innovation and entrepreneurialism: “Immigrants add to the economy. I don’t believe they detract from it. And I don’t believe isolationism works: it’s better to be inside the tent than outside it.” Britain in Europe would grow faster than Britain outside Europe, and not just in the short or medium term, he said.
Back at the Lions and today is a ground-breaking one on the Cannes stage. Sorrell is participating in one of the week’s centrepiece events, The Cannes Debate, which this year brings together the advertising industry’s Big Six at the invitation of UN Secretary-General Ban Ki-moon to pledge their collective support for sustainable development goals (see front page).
Despite strong currency headwinds and a low-growth, cost-focused advertising market, WPP turned in another record-breaking performance in 2015, posting pre-tax profits of 1.49bn, up 2.8% on 2014. So how did they do it? “With difficulty,” Sorrell admitted. “I don’t want to be negative, but it’s a world that’s not growing as fast as people would like. It’s a world where there’s very little inflation and limited pricing power for clients and therefore a focus on costs. It’s a world where there are disruptors, where there are zero-based cost budgeters, where there are activist investors. And it’s a world where the average life expectancy of a CEO is about six or seven years and a CMO three or four years, which means you almost have a political cycle, with people making decisions based on how long their view is. So yes, it’s a difficult environment.”
Citing the 2016 BrandZ report into the world top-100 most valuable brands, which WPP and the Financial Times have compiled for the last 11 years, Sorrell said it is clear that “companies that innovate and invest in brands grow their top line faster. So investing works and shows that you can’t cut your way to prosperity. What really makes the difference in the longer term is investing in innovation.”
WPP’s response has been to identify “those parts of the world geographically and functionally” that have been expanding the furthest and fastest. Geographically, the Next Eleven economies, which are “growing faster than the mature markets of the US and Western Europe”, are a focus. On the functional side, WPP’s media and digital businesses have been the strongest performers.
While Sorrell is not expecting much to change in 2016, he also sees no real cause for pessimism: “The fundamental economy is growing at about 3.0%-3.5%, which is a slight tightening from what we’ve seen, and I think it will continue at that rate. I see no reason for an upside breakout, but nor do I see any reason for a downside breakout, meaning a recession.”
And he is also prepared to stick his neck out on another political cliff-hanger — the US election. He is putting his money on Clinton: “The most powerful thing about Hilary is that she’d be the first female US president. That will get women’s votes.”