Sponsored advertorial - It pays to advertise, but not enough to revive Britain

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House of Commons, 25 March 2013, 6pm

For the motion

Laurence Green, founding partner, 101 London

Luke Owen, student of advertising, London College of Communication

Against the motion

Sam Blackie, Deloitte

Max Lehner, student of advertising, London College of Communication

The UK economy is in a hole. We’ve lost our triple-A credit rating, the Budget deficit is rising and growth remains stagnant – leading many commentators, including the New Statesman’s economics editor, David Blanchflower, to believe that we are in a triple-dip recession. And as the commentators often stress, we need to find a strong and effective cure for our economic woes – and we need to find it fast.

Could advertising hold the key? This might appear to be a tall order. After all, it is a particularly deep hole the Chancellor has dug for us and there is only so much that a few television and display adverts can offer. On closer inspection, however, it would seem this is a question worth asking – particularly when the results from a recent study by Deloitte are taken into account.

The research, conducted on behalf of the Advertising Association, set out to quantify and qualify the economic effects of the £16bn spent on advertising in the UK every year. Using data from 17 countries over a 14-year period, Deloitte was able to demonstrate that, for every £1 spent on advertising, £6 was generated for the economy – something that amounted to a £100bn effect on total GDP, and which led the report authors to write: “We need to think differently about advertising – as an industry, important in its own right, but also as a business activity, and a fundamental driver of UK competitiveness.”

Is this an accurate view or is it the case that the industry has fallen for its own spin? To put it to the test, the New Statesman and the Advertising Association gathered a mix of the UK’s top creative and analytical thinkers, as well as emerging talent from the London College of Communication, for a House of Commons debate: “It pays to advertise but not enough to revive Britain.”

The first person to speak was Laurence Green of the 101 London advertising agency. Arguing for the motion, he opened with a reference to some of the hugely successful advertising campaigns he has worked on, such as the Skoda “It’s a Skoda, honest” and “Cake” adverts; the Cadbury’s drumming gorilla; and the Sony ad that featured coloured balls bouncing down the streets of San Francisco to mark the arrival of its Bravia LCD range. However, while one can’t dispute the value of these advertising campaigns for the companies in question, Green felt they did little to stimulate the economy.

“We didn’t sell a car to anyone who wasn’t already in the market for a car,” he reflected. “And even though Sony had to build a new factory to cope with demand, it was the collapse of the price that was driving market growth – we were simply harvesting a share of that market.”

In Green’s view, advertising supports individual organisations, and those alone, because most companies use advertising to preserve higher pricing structures rather than create demand. Therefore, he said, the role advertising has to play in reviving the British economy is limited: “When faced with a similar tough economic environment, President Roosevelt did not build a brand, he built bridges. I suspect bridges are a better way to build Britain.”

This idea that investing in infrastruc-ture offers a viable way out of our economic mire was not disputed by the next speaker, Sam Blackie of Deloitte. He agreed that it was hugely important to get the country spending.

“There is consensus in the UK and ­Europe about needing to use economic growth and spending to get us out of this mess,” he said. “We need to grow markets to escape our malaise and advertising is fundamental to doing that.”

Blackie referred to advertising as a “Darwinian process that improves products, brings people together, matches buyers with sellers, and creates markets that otherwise wouldn’t exist”. For evidence of what this means in practice, readers should turn to the aforementioned Advertising Pays report, which demonstrates how advertising facilitates competition through price promotion, product differentiation and innovation, which in turn helps new entrants to penetrate markets. Take broadband advertising, which Deloitte estimates is responsible for 36 per cent of take-up in UK households; or the £200m savings on schoolwear that parents benefited from in 2010, “thanks to supermarkets advertising their intense price wars”.

Advertising also enables the digital economy by providing funding for free search activities, social media, instant messaging and most websites, which in turn provide £5bn in value to customers. And let us not forget the social contribution of advertising such as the government campaign “Don’t Advertise Your Stuff to Thieves”, which reduced the cost of crime by £189m.

Indeed, the findings of the Deloitte report are supported by other studies, such as a McKinsey paper, published in March 2012, which concluded that advertising is an economic growth engine that accounts for 15 per cent of GDP growth across the G20 economies; and Leo Burnett’s research into the effect of the Department for Transport’s drink-driving campaigns, which stated that over a 30-year period “this relentless pursuit of potential drink-drivers saved almost 2,000 lives, prevented more than 10,000 serious injuries, and created a value to society of £3bn”.

Nonetheless, doubts were raised about the value of relying on a sector that encourages consumerism in order to help any country recover from a debt crisis. As Luke Owen, a student at the London College of Communication, argued: “How can an industry that encourages people to spend bring us back from this [crisis], when it is this [debt] that got us here to start with?”

Owen also felt that advertising was becoming increasingly irrelevant as “people don’t watch adverts any more”. “The harder advertisers strive to get attention, the more annoying they become,” he said. “Dave Trott [founder of the Gate advertising agency] said 90 per cent of ads are invisible. Ninety per cent is far too high a fail rate for an industry capable of saving an economy.”

Max Lehner, however, wasn’t convin­ced of this argument. Also a student of advertising at the London College of Communication, he said that regardless of how ineffective some may consider ­advertising to be, in the main it still works. He referred to the case of Nike, which, in the early 1990s when everyone was cutting back on advertising spend, did the opposite.

“They did something different to what everyone else was doing. Instead of saving money, they spent even more money on building their brand. Recognition is now 900 per cent higher than when it [the campaign] began.”

But the main focus of this debate was not on how effective advertising may or may not be in terms of brand awareness. It was on whether the advertising industry could provide a much-needed boost to the UK economy. And on that issue, the house was united in favour of the motion.

It is not advertising that is going to revive the economy, it was argued, but better, stronger manufacturing – “We’ve sold our gold reserves, water companies, air-traffic control, Land Rover, Jaguar and Rolls-Royce. When we want new railways we go to Germany; when we want new power stations we go to France,” was one comment. “Our economy is at the mercy of politics” was another, highlighting the proposed merger between BAE Systems and EADS, which failed as following intervention by the German government: “No amount of advertising would have closed that deal.”

Meanwhile another guest blamed the advertising industry for not stepping up to the plate. If an advert can result in a product selling out almost immediately – such as the M&S ad for a chocolate pudding that sold out within 48 hours – then the reason why advertising is “failing to lift us out of recession is that advertisers aren’t good enough”, she said.

The debate closed with Sam Blackie attempting to rebut some of these sensible comments. “The point was made that, if no one has any money, how can they spend it? Well, if you don’t tell people about a product how are they going to buy it?” he retorted.

“We can’t advertise our way out of trouble, but equally we can’t get out of trouble if we don’t advertise.”

Persuasive as he may have been, it was not enough to turn the house, and when it came to the final vote it was overwhelmingly in favour of the motion. Advertising, it would seem, does pay – just not enough to revive our economy.

Sponsored content from Advertising Association. For further details about advertising’s economic impact please go to www.adassoc.org.uk/advertising-pays

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How the fire at Grenfell Tower exposed the ugly side of the housing boom

Nobody consciously chose to harm those at the bottom of society, but governing in the interests of the rich has done it nonetheless.

It’s impressive, in a way, how quickly we slot horrific new events into the beliefs we already hold. In the Grenfell Tower fire – a tragedy that, at the time of writing, is presumed to have cost 79 people their lives – some on the right saw a story about poorly built high-rise ­social housing. The left, however, saw it as fresh evidence of the damage that seven years of austerity had done to local councils.

The fire does feel symbolic: of the inequality at the heart of one of the richest cities in the world; of a government unable to look after its people. But reality rarely slots neatly into our prefabricated narratives and, although the details are still emerging, it already seems as if many of those assumptions were flawed. Experts’ theories about why the fire spread so fast have focused not on the poor quality of the building’s original 1967 design but on problems with the external cladding installed in a £10m refurbishment last year.

What’s more, while most councils have struggled with years of centrally imposed cuts, the Royal Borough of Kensington and Chelsea (RBKC) isn’t one of them: it is sitting on reserves worth £274m and, in 2014, found enough money to give council-tax payers a rebate of £100 per head. And yet, it seemed, it could not find the cash to pay for sprinklers or the £5,000 extra it would have cost to use a fire-resistant form of cladding. There was austerity in Kensington, but it was the product of conscious choice, not financial pressure.

Voting intention by housing type in the 2017 election

For a whole week, those who survived the fire faced a second indignity: the uncertainty regarding where they could now live. The day after the tragedy, the housing minister Alok Sharma offered his “guarantee that every single family from Grenfell House will be rehoused in the local area”. This was both morally and politically right – but whether he would have made this promise if he had been more than a couple of days into the job seemed an open question, because few in the housing sector believed it was one he could keep. The council already had more than 2,700 households waiting for accommodation (actually quite low for inner London). It was possible to give priority to survivors of the fire, but it would require pushing others yet further down the list.

Nor did it seem likely that the homes on offer likely to be adequate replacements for those that have been lost. “Most people made homeless in London have a very long wait in temporary accommodation,” Kate Webb, the head of policy at the housing charity Shelter, told me. “And even that is going to be outside of their area.” In the immediate future, at least, it seemed likely it would be much easier to find bed and breakfasts in Hounslow than permanent new homes in Kensington.

In the event, the naysayers, myself included, were wrong: on Wednesday afternoon, after the print copy of this article had gone to press, the Evening Standard reported that the Greenfell families would be rehoused in 68 apartments in the luxury Kensington Row development, at a cost of tens of millions of pounds. The deal, specially brokered by the Homes & Communities Agency on behalf of the government, was great news for those families. But it is striking that it took a tragedy and national scandal on the scale of Grenfell to make it happen. And those homes – which were always earmarked as social housing – are now not available to the 2,700 other families on RBKC’'s waiting list. They will not be receiving similar treatment.

It doesn’t feel like this should be difficult: Britain is rich, London richer and RBKC the richest borough of all. Yet the shortage of available homes reflects not just some kind of moral failure on the part of the council but a genuine shortage of property.

Who is building houses?

To be blunt about this: we have not been building enough for a very long time. In the decade after the 2001 census, London’s population grew from 7.3 million to 8.2 million, an increase of roughly 12 per cent. The capital’s total number of homes, however, increased by just 7 per cent. Both trends have continued since, with all sorts of entirely predictable results: higher rents, overcrowded homes, hilarious news items about renters going to see “studio flats” that turned out to be a bed in a shed with a tree growing through the wall.

London’s housing crisis is the biggest and most visible in the country yet it is far from unique. In Oxford, Cambridge, Bristol – in almost any city with a decent jobs market – housing costs have soared in recent years. In other parts of the UK, house prices are lower; but so, unfortunately, are wages. The result is a collapse in property ownership among the under-40s – and, one is tempted to suggest, flatlining national productivity and unexpected enthusiasm for Jeremy Corbyn’s Labour Party.

We know how to fix this (in that we know how to build more homes) but we haven’t, for two main reasons. One is that we have inadvertently constructed a housing market in which nobody has both the interest and the capacity to build more. Private developers bid for land based on the price they believe they will be able to sell new homes there for. As a result, if prices fall, they stop building: look at a graph of housing supply over the past 50 years, and it is abundantly clear that the private sector will never give us the homes we need.

This would be fine if other organisations were allowed to build but they are not. Housing associations are restricted by government finance rules. Councils were explicitly banned from fully replacing homes sold under Right to Buy; today, they lack the money and, after decades of disempowerment, the expertise, too. The 2004 Barker review argued that the UK needed to be building 250,000 new homes every year just to keep up with demand. It feels telling that the last year we managed to do this was 1979.

Total government grant to local councils

The other reason we haven’t built enough homes is that we place such tight restrictions on what we can build. Land-use restrictions such as on the green belts prevent our cities from growing outwards; rules on tall buildings prevent them from growing upwards. These are often legal, but are rigidly enforced by public demand.

Last year, for instance, the Friends of Richmond Park, residents of the west London suburbs, fought a noisy campaign to stop tall buildings from being built 14 miles away in Stratford, in the East End of London, because they would ruin their protected view of St Paul’s Cathedral. The buildings wouldn’t prevent west Londoners from seeing St Paul’s, you understand: the buildings could simply be seen behind it. All these restrictions, all these campaigns, are there to protect something good. Between them, they add up to a shortage of housing that is blighting lives.

It is hard not to notice the parallels between the Grenfell Tower fire and the broader housing crisis. RBKC bosses chose to promote electorally motivating tax cuts for the borough’s largely rich residents over fire safety in its social homes. As a nation, we have consistently chosen to protect the views and house prices of those who have housing over the needs of those who don’t. Nobody consciously chose to harm those at the bottom of society but governing in the interests of the rich has done it nonetheless.

The survivors of the Grenfell Tower disaster were left homeless by the tragedy, and it looked for several days like that they would have nowhere else to go. Both of these things may well have been avoidable. But austerity is not just a policy: it’s a state of mind. 

George Eaton: The Grenfell Tower fire has turned a spotlight on austerity's limits

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

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