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Gordon's Republic

Sorrell: bounce back sooner than you think

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Writing in The Times today Sir Martin Sorrell makes his case for the economic bounce back coming sooner than other think (2009 he says) although the piece could have benefited from last minute editing regards India.

The WPP chief executive plumps for 2009 as opposed to others saying 2010 or even 2011. He says sooner because "the market is missing the extent of the fiscal stimulus that the Obama administration is expected to announce. It will be colossal – the number $500bn has started to appear in the past few days – although, for it to work, people must act together and not independently".

Looking at the emerging four Bric economies – Brazil, Russia, India and China – he says India will do best next year.

The piece was clearly written before the Mumbai terror attacks and it is difficult to tell what impact they will have on business and investment the in Indian economy as people get nervous.

The case for these Bric economies, however, is undoubtedly strong as an indebted Europe, UK and US falters leaving the way open for the four to emerge.

WPP has long invested in the emerging markets and pegged future growth prospects to them.

In the article he compares Western Europe to "an ageing company with huge healthcare and pension liabilities that are difficult to fund" and because of this he says for WPP "there is no point in continuing to invest in Western Europe unless structural changes are made".

"For example, if we win a piece of business, we have to bear the severance costs of the company that lost the contract."

His gloomy view of the UK and Europe chimes with comments he made last week when he said there would be job cuts in its more mature markets in 2009 coupled with investment in emerging countries.

Sorrell said then that WPP would invest in emerging countries such as India, China or Brazil next year, in which WPP is strong and that promise growth, while cutting elsewhere.

"We will have to invest in those markets and take out head count in more mature markets. The key thing for us is to balance revenue and cost growth in terms of headcount."

In The Times today he also says that the ailing West needs Turkey inside the EU. He says entry should be a no brainer.

"It is the gateway to the Middle East, has a young population, is highly entrepreneurial and would be a huge boost to the EU's 450 million people."

As always, Sorrell has faith in America and recalls that while people wrote off the US in the 1980s and said that Japan would take over along came Ronald Reagan and shook it all up.

"He changed the dynamics. What the world really needs right now is leadership in the Reaganite, Thatcherite, Blairite mould to lead us out of this crisis."

He also wonders like everyone else if Obama could be the man to lead the change.

"Mr Obama could be that person. I look at Barack Obama and it takes me back to when I was 18, to when John F. Kennedy was elected. Mr Obama is young, smart, a wonderful orator and represents a new hope, a new era. JFK was just the same and he changed the attitudes of my generation. That’s what the world needs now from Mr Obama."

Published Nov 28 2008, 10:44 AM by Gordon Macmillan

Filed under: Sir Martin Sorrell, WPP Group, Barack Obama, down turn

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Comments

by Eddie Bongo

November 28, 2008 4:58 PM

Long overdue from a man, along with other high ranking officers who in my beleief only advanced the onset of doom and gloom within the media industry by releasing more and more negative comments regarding its state. The views of people with industry standing such as Sorrell go a long way towards setting the feeling within the whole sector and lead companies to pressing the panick button well in advance of when it is necessary, this only adds to the trouble and speeds up the rate of decline. Confidence is key and when figure heads start breathing it back into the industry then the landscape will look a lot more rosey for many.

On the flip side, was this the reason for spouting doom and gloom. Create panick, weaken the oposition and then mop up.

by CHRIS ARNOLD

December 2, 2008 1:08 AM

Western Europe to "an ageing company with huge healthcare and pension liabilities that are difficult to fund" and because of this he says for WPP "there is no point in continuing to invest in Western Europe unless structural changes are made".

Well he's right. But I think we need to invest both in emerging markets and in emerging ideas within our home one. Ignoring the great potential back at home is missing out on a great opportunity. The UK has many areas that are out of date and old fashioned, yet there are a few of use preaching change. That change needs support or foreign companies will back those ideas instead - just as India is doing in technology over here.

Britain has some of the greatest, most innovative minds. And from them comes ideas that set the pace for the future. And with that comes new wealth.

by Gordon's Republic

December 4, 2008 12:23 PM

WPP's GroupM has reduced its forecast of headline UK internet growth dramatically from 20% to 4%

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