LUV is in the air, says Sage of Soho

Robert Lea
30 Oct 2009

It's the LUV economy, stupid.

Sir Martin Sorrell, the Sage of Soho and one of the most important marketing men in the world, is calling a three-speed global economic recovery.

The man who has coined phrases in previous downturns like the bath-shaped recession — and even baths with corrugated bottoms — is dubbing the upturn in recent months, the LUV-shaped economy.

“The recovery we are seeing is L-shaped in the UK and western Europe, U-shaped in the US and V-shaped in Asia and Bric,” said Sorrell speaking from Shanghai in China, one of the so-called Bric economies — the world's biggest emerging markets that also include Brazil, Russia and India.

Like many of Sorrell's bon mots, the phrase is likely to gain common currency though the boss of WPP admits it is not he who minted it; Reuters blogger Stella Dawson was last month talking of a “summer of luv” recovery.

The recovery, however, is yet to kick in at Sorrell's empire, which spans the JWT and Ogilvy & Mather advertising agencies, the Hill & Knowlton and Finsbury public relations shops and the TNS market research firm, and includes global giants such as Ford and Procter & Gamble on its client list. WPP today reported a like-for-like fall in revenues in the third quarter of 8.7%, extending the group's like-for-like drop in the year-to-date to 8.4%. WPP had previously reported a fall of 6% in the first quarter of the year and a dive of 10% in the second quarter.

Further less-bad figures in the current, final quarter of the year should put WPP in line to chime with City forecasts of a 8% fall for the whole of 2009.

That compares to Sorrell's forecasts this time last year that 2009 would see flat like-for-likes. He says he is not making any formal forecasts yet for 2010. “We haven't looked at the budgets yet. What we are saying is that we think it'll probably be even-stevens with some months showing positive growth and some months showing negative,” he said.

“Yes the ship is turning but it is far too early to declare victory. We will only be satisfied when we are seeing positive like-for-like year-on-year trends.

“The point at the moment is that we are still seeing negative trends.”

The recession has cost 11,000 WPP staff their jobs this year so far, around 10% of the group's worldwide headcount.

“There is little doubt that consumer and corporate confidence has recovered somewhat from the panic levels of the fourth quarter of 2008 and first quarter of 2009,” said Sorrell.

“Confidence, however, remains fragile amongst consumers, because of the shadow of high unemployment levels.

“Whilst the hearts of chief executive and chief marketing officers are stronger and their minds clearer, increased confidence is still not transferring to their cheque-writing hands.

“Our sequential quarterly improvement should continue into the fourth quarter of 2009 and into 2010, for the same reasons, although the real test may come when governments and independent central banks decide to reduce or withdraw fiscal and monetary support to avoid higher interest rates and inflation.”