Sorrell predicts L-shaped recession until 2010
LONDON - Sir Martin Sorrell said last night he believed the current recession would be L-shaped or prolonged, rather than "bath-shaped" as he famously described a previous downturn.
The WPP chief and one of the UK's best-known business pundits was giving the annual lecture of the Stationers' and Newspaper Makers' Company in the City on the topic "Recession. Bath, shower or whirlpool -- which is it to be?".
Economists define L-shaped recessions as protracted periods of economic stagnation, such as that experienced by Japan in the 1990s.
He said: "The first half of 2009 will be very tough, and the second half relatively better...relative to the first half.
"And in 2010 we will see a recovery -- what we [WPP] called in our recent trading statement 'a recovery of sorts'."
WPP will focus on what Sir Martin called the Bric countries (Brazil, Russia, India and China) "plus the next 11" (which include Mexico and Vietnam).
"I'm a China fanatic," he said, expressing admiration for the revolution that has taken place in China since 1985.
He estimated that the share of world GNP produced by China would grow hugely, though the short-term issue was persuading the Chinese to spend more and save less.
Regions aside, WPP would focus on new media and consumer insight.
Sir Martin said: "New media is 25% of our revenues but we'd like that to be a third."
Spend on TV advertising will shrink to 20% of clients' budgets, but "to say TV is dead is clearly wrong," he argued.
However WPP in five years' time will be "more Asian, more Latin American, less focused on TV and radio and more on new media," he said.
He defended large agencies as more likely to survive in this recession. "Despite what [magazines such as] Campaign and Ad Age would love to suggest, Golaiths are picking up share while the Davids are under pressure, particularly as credit markets remain frozen."
When asked what question he would put to any of the G20 leaders attending next month's crucial summit in London, Sir Martin chose to "question" US President Barack Obama.
Sorrell said:"I would ask President Obama, if he ever imagined back when he embarked on his presidential campaign two years ago, given that the realities of power are beginning to dawn on him, that it would ever be as bad as this."
The global economy would "inflate its way" out of recession, Sir Martin said.
He added that he found the UK proposal to print more money, aka quantitative easing, a "shocking" one.
He warned that western Europe, which he defined as the UK, France, Germany, Italy and Spain, would have "a very tough time" unless the region was willing to implement structural changes.
There were other reasons to be optimistic, he said, including the rise of the green consumer: "People think it will disappear in the recession but I think the opposite. Consumers will consume more responsibly in the short to medium term."
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