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WPP chief executive Sir Martin Sorrell believes that worldwide “massive Keynsian fiscal injections, quantitative easing and cuts in interest rates” will stimulate economic recovery “of sorts” next year.
But the boss of the world's second-largest advertising business also warned that this year he will be cutting his cloth to suit the downturn: “If revenues come down by 2% — and we'll have to wait and see if we are right about that — then our headcount will have to come down by 2%.”
That means well over 2000 jobs will go out of a global workforce of 112,000. Sorrell added: “Like-for-like revenues rose by 3% in 2008 but headcount went up by 4%. We're not proud of that.”
Despite this, WPP's annual figures were better than the City had expected. Pre-tax profits rose 19% to £958 million, against an analysts' consensus forecast of £919 million.
Revenues rose 21% to £7.48 billion. Sorrell cut profit-margin targets for 2009 and 2010, but by less than many analysts had feared.
WPP has already said it is scaling back its dividends and share buyback programme. The total divi last year was up 15% at 15.47p, and Sorrell plans to keep dividend growth at this level.
Having attended a major industry conference at JPMorgan in New York yesterday “which was terribly depressing”, Sorrell said: “There are no magic solutions and no great surprises.”
His major worry is that governments that have already spent $12 trillion on fiscal stimuli will be faced with a choice of ways of reducing their huge debts when recovery comes.
“The prudent but more painful way, which you might call Thatcheresque, is to reduce government spending, increase taxes and unemployment and learn to save again,” he said.
“The other way is to inflate our way out of the problem and continue to spend and lend with significant increases in inflation and long-term interest rates.”
Sorrell doesn't like the second way, but believes it will mean that countries such as Brazil, Russia, India and China, which are capital rich and where WPP has concentrated its recent growth, will emerge more strongly from the recession than the US and western Europe.
Reader views (2)
Workers are afraid to spend due to fear of redundancies or salary cuts. Savers can not spend without eating into their capital.
How is the economy going to revive through spending?
- Dt, Northwood, UK
He is wrong.2010 is likely to be worse as unemployment bites and cash cushions run out.
- Harvey Lawrence, London UK
