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You are here: Home / TV / Will advertisers cut spend in the run up to the EU referendum?

Will advertisers cut spend in the run up to the EU referendum?

18th March 2016 by ARM Author

The EU referendum will take place on 23rd June when the British public will have their chance to vote to stay in the European Union, or to ‘Brexit’ (British exit) as it has become known in the media. There have been countless articles, speeches and analysis published around the pros and cons of staying/leaving the EU, but what does it mean for advertisers?

Various polls differ in their predictions of the results, but with the outcome of the vote on 23rd June looking uncertain, and tempers fraying on both sides of the political divide, the fear for media owners will be that advertisers could put spending on hold due to the potential economic and political changes an ‘out’ vote could cause.

In searching for a precedent, the closest we have come to a devolution decision like this is the Scottish independence referendum of September 2014; so how did that effect advertising spend? As the graph below shows, it actually coincided with an increase in spend in the lead up to, and after, the referendum, Scotland’s relatively more still, whereas the relationship between Scottish spend and the rest of the UK was previously almost identical. While this increase in spend was not significantly due to any specific sector, there are parallels between uncertainty surrounding the outcome of the results and the effect this could have on businesses.

As advertisers evaluate the market when planning their budgets, the referendum is just another variable that will affect the revenue/impact tolerant TV market this summer. On variable that might stabilise any potential apprehension-tinged dip in spend is that this June there is the European Football championship, featuring all home nations (excluding Scotland) with England and Wales competing in the same group. The Rio Olympics – although taking place in August – could also play a part post-referendum as advertisers distributing annual budgets take into account commercial impacts taking a hit from the two week extensive BBC coverage.

All Response Media Viewpoint

TV prices are set based on revenue and impacts, varying monthly depending on demand, making TV demand much more transparent than other media channels regarding which months offer the best efficiencies. Despite seeing higher year-on-year price increases than other months, June and July are still the cheapest months of the year for TV advertisers.

Early indications seem to be that the impending referendum hasn’t had a significant effect on advertisers investing so far. If the referendum does lead to advertisers cutting spends, this could drive a lower market price as demand fades, which response-focused advertisers can capitalise on. On the other hand if the rush to spend for some markets increases advertising spends, this will have the opposite effect by increasing the cost. In this scenario our goal would be to offset increased costs by focusing spends where there are opportunities to delivery efficient response for our advertisers. It is imperative to continuously monitor the market to identify opportunities to capitalise on and to distribute spend accordingly; this summer is no different but a heightened sense of uncertainty, and the potential for abnormal spending behaviour, we will be examining this situation and this summer’s pricing with great interest.

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