WPP chief Sir Martin Sorrell warns of slump in growth after the election

Sir Martin believes outright victory for any party is unlikely

Sir Martin Sorrell: ‘If you were PM you’d be pretty pleased with George’ (AFP/Getty)

Britain’s economic recovery faces uncertainty after the general election whichever party wins, Sir Martin Sorrell, chief executive of the world’s largest ad agency, WPP, warned yesterday.

“Whoever wins has got to focus on the deficit,” he said. “We saw strong growth in the UK last year but I doubt that is going to continue after the election. If the Conservatives win, the focus will move to the referendum on Europe, which won’t be good for business. If Labour wins they will deny the key issues until something happens which they have to deal with. Labour does appear to have a platform of criticising or bashing business.”

Sir Martin believes outright victory for any party is unlikely. He said: “We may not have to wait another five years for the next election. But whatever the outcome, the United Kingdom economy may slip into the political cycle again, with austerity in the early part of the five-year cycle to deal with the continuing Budget deficit.”

He described this scenario as “Morton’s Fork” – a specious argument in which contradictory arguments lead to the same unpleasant result, named after a 15th-century archbishop of Canterbury.

Sir Martin praised the Chancellor’s handling of the economy for the Coalition: “If you were the prime minister you would be pretty pleased with George [Osborne].”

More broadly, Sir Martin said that the geopolitical situation in many parts of the world made many of his clients cautious. He added: “We have to come off the post-Lehman cheap money drug at some time, and the scale and speed of tapering remains the key issue for the continued strength of equity markets. Corporates are sitting on $7trn of net cash.

“Although consumers and corporates both seem to be increasingly cautious and risk-averse, they should continue to purchase or invest in brands in both fast and slow growth markets to stimulate top line sales growth.”

His comments came as WPP reported record pre-tax profits, up 4 per cent at £1.51bn in 2014 on revenues up 5 per cent at £11.6bn.

Sir Martin said this was a strong performance given the headwinds caused by currency shifts against the company in Russia, India, Brazil and China, and particularly the strength of the dollar against sterling. Revenues in January were up 6.7 per cent and there were signs of an improvement in the eurozone and good growth in Asia Pacific, Africa and the Middle East.

Sir Martin pointed out that WPP must wait until 2016 to benefit from the quadrennial effects of the Olympic Games, Euro football and US presidential election. “All in all, 2015 looks to be another demanding year, although a weaker UK pound against a stronger US dollar would provide a modest currency tailwind and positive impact on profits, unlike the fierce currency headwind in 2014.

“Our prime focus will remain on growing revenue and net sales faster than the industry average, driven by our leading position in new markets, in new media, in data investment management, including data analytics and the application of technology, creativity and horizontality.

“And we will concentrate on meeting our operating margin objectives by managing absolute levels of costs and increasing our flexibility in order to adapt our cost structure to significant market changes, and by ensuring that the benefits of the restructuring investments taken in 2014 continue to be realised.”