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Terrorist bombs
rattle London's media
Yet few expect a lasting
impact on the ad economy
By Heidi Dawley
This morning London seems oddly subdued. The
roads are crowded with cars and the streets with people. But there's a
quiet pervading the morning rush hour as people reflect on the bombs that
exploded yesterday at this time, killing at least 50 and injuring more
than 700.
Coming as it did just 24 hours after the city won its Olympic bid
and at the start of the much-anticipated G8 summit, the terrorist attack
has abruptly altered the mood of the nation. London is a less certain
place.
Yesterday morning newspapers were celebrating the Olympics
win with jubilant headlines. Hours later they seemed eerily out of place.
Rather than the 2012 Summer Games, Londoners were talking about 9/11, the
Madrid bombings and a deeply troubled world.
Today, against the mounting death toll, Londoners, British
authorities and industry leaders, including those in media, are assessing
the bombings' impact.
The immediate sense is that Brits will recover in short order,
that businesses will spring back, and that ad spending will not be dampened.
“Business has shown time and time again that it bounces back
quickly after events like this,” says Audrey Nelson, a spokesperson for
the Confederation of British Industry (CBI), a trade group that tracks the
economy.
The big impact of any terrorist attack is always psychological, and
Europeans are far more used to them than Americans, with London notably
living through decades of IRA violence.
Looking at the financial markets yesterday would seem to support
Nelson's point. After plummeting initially, the markets recovered in the
afternoon in what developed into a relatively normal trading day.
Yet there is some cause for worry. Britain's economy is suffering
something of a soft underbelly, even though employment rates are good and
inflation looks to be in control.
“While the economic situation is not desperate, manufacturing is
teetering on the verge of recession, the retail sector is under
considerable pressure, and the housing market is stagnant,” observes CBI
chief economic advisor Ian McCafferty.
Which way might it go from here?
“There is a range of opinion about whether the British economy is
heading for a prolonged slowdown or whether this is just a welcome
correction after a period of sustained growth,” says Adam Smith, head of
knowledge management at ZenithOptimedia in London.
While the terrorist attack may cause short-term disruption to
advertising schedules as television stations bump ads for editorial and
some advertisers withdraw ads that could look insensitive at a sensitive
time, it is likely that it will be the underlying economic factors already
in play that continue to determine the state of the ad economy.
“What effect do these sorts of things have on the advertising
economy? None," says Smith. "There is usually a temporary
disruption. But generally you won’t be able to measure the effects as it
gets lost under the general prevailing economic trend.”
Smith says this was born out by the Madrid bombings and even to a
large extent, by 9/11.
Looking at figures for the Spanish economy and advertising spending
for 2004, the year in which Madrid suffered a similar terrorist attack,
bears this out. Spanish GDP grew 2.7 percent in 2004, up from 2.5 percent
in 2003. And advertising spending grew by 10.4 percent in 2004, up from
3.1 percent in 2003.
But while that may sound encouraging for Brits, it's not entirely
so. The prevailing trend in Britain’s ad economy is far less buoyant.
On Monday, even before the bombs, ZenithOptimedia had
downgraded its forecasts for this year.
“We now think that advertising expenditure will track
economic growth, rather than exceed it,” says Smith, who acknowledges
that ZenithOptimedia tends to be on the pessimistic side of forecasters.
The forecasters cut the 2005 forecast to an expected growth
in advertising revenue of 2.9 percent this year, compared to the 4.9
percent they forecast back in April.
Next year the forecast is scaled down to 4 percent from 4.5
percent and 2007 to 3.8 percent from 4.4 percent.
The forecasters had already built a slowdown in TV ad revenue
growth into their forecasts for a variety of reasons, including the fact
that there were no major sports competitions.
But the slowdown has been more extreme than expected in the first
part of 2005, thanks to a drop in retail advertising. Retail advertising
is down as a result of the slowdown of retail spending by consumers. In
June, retail sales volumes suffered the sharpest fall for 22 years,
according to the CBI.
With this in mind, London media people will have to wait to see if
the impact of yesterday’s events play a part in knocking an already
shaky consumer confidence.
If it does, it could spell further reduced ad spending
forecast of the likes of ZenithOptimedia's Monday report.
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July 8, 2005
©
2005
Media Life
-Heidi Dawley, an
American living in London, covers European media for Media Life.
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