Written submission from the Advertising Association (PBM0024)

About the Advertising Association

1. The Advertising Association promotes the role, rights and responsibilities of advertising and its impact on individuals, the economy and society. We bring together companies that advertise, their agencies, the media and relevant trade associations to combine strengths and seek consensus on the issues that affect them. We develop and communicate industry positions for politicians and opinion-formers, as well as publish industry research through advertising’s think-tank, Credos, including the Advertising Pays series which has quantified the advertising industry’s contribution to the economy, culture, jobs and society.
2. We welcome the opportunity to respond to the Home Affairs Select Committee call for evidence on post-Brexit migration policy. Our evidence responds to questions 1-5 of the inquiry.

Context

3. Advertising is a driver of economic growth and competition.  Every pound spent on advertising returns £6 to GDP. Advertising spend will be over £21 billion this year and this results in over £120bn to GDP, supporting 1 million jobs across the UK. This is equivalent to 3.2% of overall nationwide employment.[i]  The UK is the largest exporter of advertising services in Europe, at £5.8 billion per annum.
4. According to Deloitte research carried out on behalf of the Advertising Association, the one million jobs supported by advertising can be broken down as follows:

• 350,000 jobs in advertising and the in-house (brands) production of advertising
• 76,000 jobs in the media sectors supported by revenue from advertising
• 560,000 jobs supported by the advertising industry across the wider economy[ii]

5. The Advertising Association’s Advertising Pays 6: World Class Talent, World Class Advertising report was published in October 2017. Through unique access to LinkedIn’s member data, the report identified that 328,000 people in the UK work in the marketing and advertising sector, which aligns closely with the 350,000 calculated by Deloitte.[iii]
6. Advertising is the third largest creative industry in terms of GVA[iv], and provides vital funding for culture and the other creative industry sectors, from TV and publishing to the arts, through advertising and sponsorship. Corporate sponsorship of the arts in the UK is worth approximately £80 million a year; in addition, sponsorship of live music events, branded tours and venue naming provide a significant source of income, estimated at £33.1 million in 2012. These revenues help to keep ticket prices down, enable many free events, and increase the quality and provision of the arts. [v]

Our response

7. Our evidence responds to questions 1-5 of the inquiry. While we acknowledge that there are significant public demands for greater control over migration, an important core objective for Government in drawing up a post-Brexit immigration system should be maintaining the UK’s world-leading position in a number of sectors, including advertising and media.

8. We urge Government to develop an evidence-based policy post-Brexit, based on data submitted by stakeholders and in particular the results of the Migration Advisory Committee Commission on EEA migration.

1. OBJECTIVES

Why a flexible migration system post-Brexit matters to UK advertising

9. UK advertising is a world leader in part thanks to the wealth of talent we attract from all across the globe. International clients pick UK-based agencies, research and production companies over others because the UK offers a pool of talent which provides a wide range of skills, and perhaps most importantly, the necessary linguistic ability and cultural awareness to handle global clients. This creates a multiplier effect that enables advertising businesses, which win business on the strength of their culturally diverse teams, to generate more jobs for the UK economy.

10. There is ample evidence that the trade and immigration are inextricably linked. A 2016 discussion paper[vi] by the LSE looked at immigration, trade and productivity in services. It found evidence to support its hypothesis that immigrants could reduce costs and increase firm productivity, allowing firms to produce and export more overall. By bringing country-specific skills with them, immigrants could be a substitute for the import of intermediate services that were previously offshored by firms. And by bringing their country-specific knowledge, immigrants could in fact increase the exports of services to their country of origin.
11. We believe that a continued flow of highly skilled people is necessary for us to maintain our edge not only as one of the world’s leading exporters of advertising but also as a global hub for media and the creative industries. EU cities such as Amsterdam are already pushing to attract business and employees from the UK.
12. Free movement enables EEA migrants to come to the UK to find a job in the advertising and marketing communications sector. Creative businesses benefit from the specialist expertise and experience relating to international markets that cannot be acquired through training.
13. Failing to implement a flexible system that enables advertising and creative businesses to employ talented workers could also result in businesses or departments relocating to other regions, jeopardising the UK’s position as a leading creative and media hub.

Implications of the net migration target

14. We would argue that net migration is something that the Government has limited control over. It therefore makes little sense to prescribe an arbitrary target. Despite repeated Government attempts to reduce net migration to the “tens of thousands”, the reality is that it has made little progress. In fact, the falling trend for EU migrants coming to the UK appear to be linked directly to the result of the EU referendum back in June 2016 rather than any response to Government initiatives.

15. Furthermore, the pursuit of the net migration targets lead arguably was a contributing factor for high profile incidences such as Windrush scandal[vii]. Additionally, a 2014 NUS survey of international students found 50 percent of non-EU students polled thought that the UK Government was either not welcoming or not at all welcoming towards international students. Therefore, it is reasonable to conclude that the net migration target may be counterproductive by enforcing a negative image of the UK as being unwelcoming to foreigners and hinder the message that the UK is open for business.

16. We welcome the Home Office’s recent decision to remove doctors and nurses from the net migration target. This is significant as demand from the NHS accounted for 40% of Tier 2 places[viii], thus placing a squeeze on the remainder of available places. But the Tier 2 cap appears to be superfluous. If applications exceed the cap, it would suggest that there is a skills shortage and the UK is turning away qualified workers unless they are on the skill shortages list. Or if applications are below the cap then the threshold is effectively redundant.

Addressing skills shortages

17. While creative businesses benefit from the specialist expertise and experience relating to international markets that cannot be acquired through training, the UK advertising industry also supports the development of domestic talent.

18. Trade bodies and companies provide high quality training programmes for people working in and those yet to start working in advertising and marketing communications. Qualifications provided by e.g. the Institute of Practitioners in Advertising, the Market Research Society and the Marketing Academy are internationally respected. Specialist advertising apprenticeships run by the industry are now commonplace, such as the Creative Pioneers scheme.
19. The industry has programmes in co-operation with universities already, as well as programmes to attract graduates to the industry. For example, the Chartered Institute for Marketing has accredited courses, such as a 3-year marketing course at the University of Hertfordshire. Framestore and the Arts University Bournemouth have partnered to create a studio staffed by recent graduates who are trained to undertake work for the wider company.
20. The IPA AdMission microsite provides guidance to undergraduates on entry opportunities to the industry; and information on the industry’s Advertising Unlocked Open Day (29 September) and Apprenticeship programme, Creative Pioneers. In 2017/18 the IPA expects to help deliver over 500 apprenticeships in the advertising, creative and digital media sector.
21. Businesses across the wider advertising ecosystem also support the development of domestic talent in the creative industries, through for example training programmes provided by media owners.
22. Closer relationships between the industry and university/college marketing courses should be encouraged so that we foster the right skill-sets and combine practical knowledge with academic knowledge. It is well known that universities feed talent to local businesses and encouraging close ties between local advertising and media businesses will help create talent hot spots across all areas of London, and the wider UK.

Regional Variations

23. A flexible post-Brexit immigration policy, that is compatible with the Industrial Strategy, could be utilised to address regional imbalances. For example, an immigration policy could take into account the average lower salaries outside of London and the South East. This would go some way to address the regional bias and avoid prioritisation of London over an identical role in the regions.

2. BREXIT NEGOTIATIONS

24. The Government has given little indication of its preferences for EU immigration controls post-Brexit, or whether it is willing to negotiate these as part of discussions on the UK’s future relationship with the EU[ix]. In her Mansion House Speech the Prime Minister appeared to have ruled out the continuation of the freedom of people post-Brexit but at the same time also recognised the needs of the UK to attract and employ the people it needed[x].

25. It would however seem highly likely that the negotiations and legal text would link both trade and immigration. The EU through various representatives have stress the importance of citizen rights and that the four freedoms were indivisible and inextricably linked. Moreover, there would be no cherry picking for the UK[xi].

26. On this basis it appears that the opportunity currently to maintain full access to the Single Market, the best option for our industry and many other professional service providers, appears to be low. The secondary alternative is an EEA framework, whereby freedom of movement is also accepted, access to the Single Market is retained but some degree is offered through its existing safeguard measures. The third option is an FTA with the EU which allows the UK to reject freedom of movement but then the trade-off is accepting trade terms less preferential than what is afforded currently.

27. We see inherent risk to using migration as a precondition for future arrangement negotiations or insisting on the inclusion of a "sunset clause", which would effectively limit the lifespan of a new deal to five years. It would be counterproductive to bilateral relations and effectively raise tensions between trade partners. Reportedly, currently US attempts to renegotiate NAFTA under these terms have faced such opposition from Canada and Mexico.

3. MIGRATION CONTROLS WITHIN EU SINGLE MARKET

28. An EU commissioned study called Future trade relations between the EU and the UK: options after Brexit[xii] states that free movement of persons (both natural and legal persons) plays a very significant role in creating an integrated market in services. Furthermore, we agree with its assertion that many services sectors require such free movement for the performance of services across borders, and free trade in services in its international understanding extends to permanent commercial presence, and thus a right of investment and establishment, and to the movement of natural persons.

29. Given that the freedom of the movement of labour within the internal market is one of the fundamental freedoms, it is hard to reconcile with the idea that the EU would agree to some sort of bespoke arrangement whereby the UK could restrict EU migration but at the same time still be able to participate fully in the Single Market. This would likely be seen as a violation the spirit of equality among EU member States. Non-EU EEA Members currently accept freedom of movement.

EU Controls on Migration within the Single Market

30. In fact, contrary to popular belief, the Single Market does offer some flexibility for migration control. Directive 2004/38/EC set outs limits on EU citizens’ right of movement and residence. Specifically, it permits EU citizens to live in another EU country for longer than 3 months provided they are employed or self-employed. Students and other people not working for payment, such as those in retirement, need to prove that they have sufficient resources for themselves and their family, so as not to be a burden on the host country's social assistance system, and comprehensive sickness insurance cover[xiii]. It is our understanding that these rules have never been strictly enforced in the UK and EU citizens have never been asked to register after staying for more than three months. Moreover, as passports of EU/EEA citizens are not routinely stamped on entry and exit by UK Border Force it probably makes enforcement difficult in practice.

31. EU Member states were able to invoke immigration transitional safeguards against newly acceded EU Member States following the 2004 and 2007 enlargement of the EU. These were known as the 2+3+2 phased arrangement; however, the key point was that this was supposed to gradually introduce free movement of people over a period of seven years following accession rather than impose any permanent measures. Currently these measures only apply to Croatia[xiv] but must expire by July 2020.

4. MIGRATION CONTROLS IN AN EEA-TYPE FRAMEWORK

EEA Emergency Brake

32. The EEA presents an interesting prospect as it solves many of our industry issues which would arise as the result of Brexit, as the UK would not require membership of the EU but would still retain access to the Single Market. However, the EEA does require free movement of persons, which runs counter to the current desire to control immigration.

33. The EU trade relations study suggests that there may be some scope for using the general safeguard clause, for example in response to a surge in immigration. The example of Liechtenstein unilaterally invoking Article 112 safeguard measures since 1998 is often quoted but we think that it may be difficult to make a comparable case with the UK. Liechtenstein’s economy and population are many times smaller hence, some believe that it would be hard to argue, for example, that the UK could experience similar serious economic, societal or environmental difficulties of a sectorial or regional nature[xv].

5. MIGRATION CONTROLS WITHIN A FREE TRADE AGREEMENT (FTA)

Immigration Controls in an FTA

34. If the UK was to pursue an FTA with the EU, it would mean that the UK would not have to accept the EU’s freedom of movement. However, the main trade off would be accepting trade terms inferior to the Single Market.

35. FTAs by nature are supposed to encourage movement for natural persons to facilitate the trade in services and therefore such agreements typically have a chapter on the temporary movement of business persons, specifically intra company transfers, contractual service providers, independent professionals, short term business visitors as well as graduate trainees. This is known as Mode 4 under GATS (General Agreement on Trade in Services) but crucially it does not concern persons seeking access to the employment market in the host member, nor does it affect measures regarding citizenship, residence or employment on a permanent basis[xvi].

36. Countries can employ a variety of non-conforming measures or reservations in FTAs that reflect domestic legislation. These can exclude whole or partial sectors, insist on nationality requirements, wage parity or require economic needs tests. The EU-Canada (CETA) Agreement highlights the primacy of domestic legislation in Chapter 10 in dealing with longer term or permanent employment[xvii] creating flexibility to allow for subsequent migration policy changes. In 2017 we saw Australia amend its domestic 457 visa system even though this had a direct impact the movement of workers from China[xviii] facilitated by the China-Australia FTA (ChAFTA). The problem of this approach is that there is nothing to stop the other Party from implementing similar measures effectively creating a tit-for-tat scenario.

37. NAFTA contains an annex stating minimum education and alternative credentials for specific profession classes[xix]. We believe this to be impractical for our industry as there is no single qualification that equips someone for the skills to build a career in advertising. The Advertising Association supports a flexible system that keeps the UK as an attractive place for exceptional people to grow their careers.

Applying existing non-EEA rules to EEA citizens after Brexit

38. If a skill shortage can be addressed then nationality should not be a concern so in principle it would make no sense to differentiate between EEA and non-EEA citizens post-Brexit especially if there was no reciprocal preferential treatment accrued. However, the current Tier 2 visa system is burdensome, expensive (the immigration skills charge places financial strain on businesses) and time-consuming for creative businesses that often need to hire people on a tight schedule. If the Tier 2 system was replicated for the EU, then this would drastically reduce the attractiveness of the UK to young professionals wanting a career in advertising or the wider creative industries.
39. The Government’s Shortage Occupation List (SOL) is helpful for longer term projections but not for short term requirements. The SOL could be enhanced with the creation of a Skills Advisory Board with contribution from private sector to ensure the lists is more transparent and regularly reviewed.

July 2018