Interview: Sir Martin Sorrell

Three years hard slog to come, but it may be worse...


Concerned: WPP boss Sir Martin Sorrell says there are six key areas troubling the global markets

Concerned: WPP boss Sir Martin Sorrell says there are six key areas troubling the global markets

Assessing global markets is not that different to football, according to Sir Martin Sorrell, one of the world's most accomplished businessmen. Head of advertising giant WPP –- which last month reported a 37 per cent jump in first-half profits to £334 million - Sir Martin compares the "pecking order" of the world economies and their growth rates to football leagues: "Division One would be the BRICs (Brazil, Russia, India and China) and so-called Next 11 (or 10, if you exclude Iran) of Korea, Mexico, Indonesia, Turkey, Egypt, Nigeria, Bangladesh, Pakistan, the Philippines and Vietnam.

"Division Two is Germany and the US; and Division three, France, the UK, Spain and Italy. Japan is Division Four.

"The world is moving at different speeds and we have to understand that this is happening."

WPP, the world leader in advertising and marketing services has a market capitalisation of around £9 billion. Sir Martin, 66, is a recognised authority on the global economy for his respected reflections and predictions.

What is he most concerned about? The Middle East and North Africa (MENA). "This is a big issue, if not the biggest.

"If anything, concern about the Middle East and North Africa has been heightened. At least when it first occurred many people said the Arab Spring would be positive in the long-term: more democracy, freedom, free enterprise, growth and more employment opportunities.

"However I think the picture is clouded. People are worried about a power vacuum in Libya. They are also worried, obviously, about events in Syria and Egypt, and extremism."

In addition to MENA, Sir Martin says there are five other key areas troubling the markets: Euro contagion; the US deficit; commodity input prices and the impact on margins; Japan; and finally "the thing that seemed to have triggered all the current issues - the realisation that the stimulus which was very substantial (around $12 trillion against a world-wide GNP of $65 trillion) had to be withdrawn. That realisation in the middle of the year caused all the concern about the US deficit again."

The Middle East and north Africa is a big issue, if not the biggest

Sir Martin, who is perhaps more bullish than many, believes the West is facing a "long hard slog", perhaps lasting three years.

"I was in Switzerland recently having dinner with a banking client and his view is that it's a 10-year slog, so there are people with a gloomier view than me. Whatever it is, the position for the West - the US and Western Europe - is a difficult one."

He says George Osborne should stick to his deficit reduction plans in Britain. "It's difficult to know what the right route is but I think the government has done the right thing - although it's very painful.

If you were running a company that was in trouble, the first thing you do is try and get it into balance. Once you have done that you lay out a strategy and growth plan. That's what you do. I think the government is trying to address the first problem. The next priority is to lay out what the growth plan is."

What's more, Sir Martin acknowledges that we should "not underestimate the power of America - or Germany. Just as there has been a shift to the East world-wide, and also to the South and South-East, I think there has been a shift to the East in a European context, towards Germany, Russia and the other CIS countries."

In addition to Germany, which comprises $1.3 billion of WPP's revenues, the company is focusing on the BRICs and Next 11. These countries already comprise 28 per cent of WPP's business and Sir Martin wants to make this 35 to 40 per cent. "The worry is that they get affected too, although a country like India, where WPP has close to 10,000 people is not as reliant on exports as China is. India is more reliant on internal consumption.

"Are they important? Yes, and we have leadership positions in all those markets and we want to maintain that."

The group's largest market is the US, making up $5 billion of WPP revenues. Next is the UK with $2 billion, then Germany and China followed by France, Brazil, India, Italy and Russia.

Sir Martin has presided over WPP for more than 25 years, during which time it has grown to boast an envious client list including Colgate, Danone, Dell, Ford, HSBC, Johnson & Johnson, Kimberly-Clark, Mazda, Procter & Gamble, Shell and Vodafone.

Started from a one-room rental in London, it has expanded to over 2,000 offices in 107 countries. Not bad for a man who began his entrepreneurial life by borrowing $1 million to invest in supermarket basket manufacturer Wire & Plastic Products - the foundation on which WPP was built.

Educated at Haberdashers', Cambridge and Harvard, he landed his first job, aged 23, at Glendinning Associates in Connecticut. After further experience at Mark McCormack's International Management Group and James Gulliver Associates, in 1975 he joined the Saatchi brothers, Maurice and Charles, becoming their first finance director. Still working at Saatchi he bought Wire & Plastic Products. He began to disengage from the Saatchis, stepping down in 1986. The original premise for WPP was below-the-line services for which a fee is agreed upfront. In the two years after striking out on his own, Sir Martin completed 15 takeover bids, sending WPP's market value soaring.

This year, it has been so-far-so-good for the group, which achieved revenues of £4.7 billion for the first six months, up six per cent on the year. On a like-for-like basis, which excludes acquisitions and currency fluctuations, sales rose 6.1 per cent. Second quarter forecasts indicate similar levels of like-for-like growth.

But there is no rest for Sir Martin, who is pretty much in a different country weekly for work. On the agenda are New York, China, Greece, Africa, Singapore, Turkey, Japan, Korea - and playing cricket. He is however staying put for the Jewish holidays.

    Last updated: 10:54am, September 22 2011