Advertising guru Sir Martin Sorrell today compared the energy crisis to the 2008 financial crash and warned that there may be no signs of economic recovery until 2024.
He was talking as he disclosed a loss of £82 million at his tech start-up S4 Capital for the first half of the year. It follows a spectacular profit alert in July that halved shares.
Today’s results have somewhat calmed nervous investors — the stock soared 12p to 156p.
On the economy, Soho’s sage told The Standard: “It’s going to be tough, whether it’s a hard landing or a soft landing, the energy stuff is going to have an impact for 2023 that will stretch to 2024 and the next US presidential election.”
On comparing it to the financial crisis, he said: “It’s different. You have Putin. Climate change, inflation, interest rates, US-China relations, or less of them. When you look at all those things, it’s probably equally difficult. The financial crisis you can see your way through is tough. ,
S4 Capital has grown rapidly since Sorel was ousted four years ago in a sharp departure from WPP.
He has been critical of his former employer as he built a digitally-focused rival, largely through acquisitions paid for by equity.
The summer warning was largely due to the cost of hiring employees. One sign of the S4’s growth is that today’s statement showed that the workforce has “stagnated” at 9100, up from 6000 a year ago.
Sorrell said the S4 is now being “more selective” in its hiring. Tech giants like Facebook have done just that, easing the pressure on pay.
The business is still recovering from an auditing issue, which saw PwC twice delayed results statements, deeply troubling the stock market.
Sorel called it “unacceptable and shameful”. His rivals in the WPP enjoyed his discomfort in private.
S4 sales increased 60% to £446 million over the past six months.
Sorel boasts eight key accounts that he thinks will see businesses through difficult times, of which Google is the largest. BMW and Facebook owner Meta are also part of that group.
The US Federal Reserve is going to raise interest rates again in the UK at 7 pm tonight. The Bank of England will do the same tomorrow.
Sorel warned that borrowing costs would have to rise above inflation to bring cost growth under control.
Credit: www.standard.co.uk /