Danny Rogers
Apr 2, 2020

Sorrell: Spending through a recession is 'nonsense'

The S4 Capital chief remains bullish about a Q4 recovery.

Sir Martin Sorrell: Brands will 'let rip' in Q4
Sir Martin Sorrell: Brands will 'let rip' in Q4

Sir Martin Sorrell, former chief executive of WPP and currently boss of S4 Capital (S4C), is now bullish that marketing services will enjoy a healthy rebound in the final quarter of this year, although he argues the old adage of brands ‘spending their way through a recession’ no longer applies.

He sees all parts of marketing services, including public relations and comms, taking a significant hit in the short term, with the possible exception of socially benefical or purpose-driven programmes.

Sorrell told PRWeek “I think Q2, which starts today, will be terrible. Q3 will be slightly better but we’ll see a sharp recovery in Q4; brands will let rip. This will be a V-shaped recession.”

But Sorrell, 75, said those arguing brands should spend their way through a recession were talking ‘nonsense’ this time. “What we will see is an acceleration of what packaged goods firms were already doing. They will cut budgets and shift to digital. We realise that people are at home talking to each other via digital technology. They are also using home deliveries as never before.

“Yes we saw clients briefly put big ecommerce projects on ice, but they were deemed mission critical, so they have already come back.”

Sorrell’s confidence in the relatively quick recovery comes after many decades of experience running marketing services businesses and signs that European and US governments are starting to get the pandemic under control with more efficient health systems. He is also encouraged that the financial markets appear to be recovering their confidence a little.

But Sorrell still recognises COVID-19 as an almost unprecedented global crisis.

“This is not 2008, it’s not 9/11, it’s not the 1991/92 downturn. It’s not even the 1970s oil crisis—this feels like wartime.”

Sorrell said brands were quite right to “really batten down the hatches” at the beginning of Q2. And he said that S4C was controlling hiring and expenditure.

“We are very busy. But liquidity is the key for Q2. There has been very little reduction in our content practice, which is 70% of our business.

“Longer term, we will see existing trends accelerate. Consumers are becoming more tech-proficient, media owners will accelerate their shift to digital, and enterprises that were hesitant to disrupt the status quo will now forge ahead with digital disruption.”

However, Sorrell sees some worrying "grey swans" on the horizon, such as China potentially suffering a collapse in demand from other affected markets like the US and other Western countries, and even tech behemoths such as Facebook and Amazon seeing a downturn because of the crisis’ impact on SMEs, from which they draw a large chunk of their revenues.

On a personal level, the famously globe-trotting Sorrell said he has not travelled anywhere for a couple of weeks and is now engaged with new types of online seminars with thought-leadership institutions such as Bloomberg, The Business Council and Harvard Business School.

Sorrell added: "Actually working from home is more efficent. It has its draw backs and is pretty exhausting, but we save time by cutting out travelling, lunches and breakfasts."


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