Branding adds a lot to the UK economy, claims report

What have inward investment, gross domestic product and tax returns got to do with the value of branding?

These are the factors influenced by branding that will need to be explored in any potential methodology attempting to measure the value of branding to the UK economy, according to Interbrand head of brand valuation Julian Dailly.

While brand valuation has traditionally focused on the value of a brand as a single entity and to its owner, a study published last week – The Value of Brands to the UK Economy – by Westminster Business School and the British Brands Group, could pave the way for a more macro understanding of the subject.

While the report, which argues that the total contribution of the branding industry and its services to the UK economy is not being fully accounted for, endorses the importance of branding as an industry, it does not propose any methodology for measuring the true value of this industry to the economy.

‘The value of brands to the economy could be measured in terms of GDP through innovation, which drives growth. Countries like Korea and Japan have become strong economies through innovation,’ says Dailly. ‘It could also be measured in terms of tax returns on a company’s profitability, which comes through branding, among other things,’ he adds.

The main driver of the study, according to its author Peter Urwin, of Westminster Business School, is to influence policy-making, arguing the case for inclusion of ‘intangibles’ like branding in the national accounts. ‘Brand creation is not being captured as an indicator of the economy,’ Urwin says.

Urwin used official statistics, taking into consideration employment in the branding sector, as well as the value of its output – measured by the amount of money invested in ‘brand creation’, classified as ‘intangible investment’ in official statistics.

One of the most serious official statistics oversights, Urwin argues, is that marketing, branding and advertising activities are subtracted from any measures of value added in the economy because they are viewed as ‘production costs’ as opposed to an ongoing investment that will reap dividends. This, he says, places this expenditure in the same category as electricity, thereby reducing firms such as Apple to importers of consumer electronics.

Despite such constraints, Urwin was able to unearth figures suggesting that about one million people are employed within the marketing, advertising and design sector, and that expenditure by companies on its services generates at least £15.85bn, around 12 per cent of intangible investment in the UK economy, such as spend on research and development.

Other ways that brand management and creation contributes to GDP, the report suggests, are in the consumer assurances that come with a brand, which can facilitate a quicker uptake of new technologies and product extensions, or of the introduction of existing products and services into new markets. This especially comes into play in innovation.

While those within design and branding know that brand is implicit in maintaining levels of consumer accountability, corporate social responsibility and quality assurance, what can be extrapolated from this is, ‘If you’ve got to a point [in an economy] where you’ve got lots of strong brands and trust relationships between the brand and the consumer, it has a value, and there are people that have spent many years and invested a lot of money in building up that trust,’ according to Urwin.

Urwin says while this report goes some way to making the case for the inclusion of the branding industry’s output in the national accounts, his next area of focus, once funding is secured, will be to examine and quantify branding’s contribution to innovation.

A Big-Budget Enterprise:

• Almost £16bn is invested annually in creating and building brands

• This amounts to 12% of intangible investment/spend in the UK economy (such as research and development), and 6% of tangible investment/spend (such as the construction of factories or roads)

• Brand development, design, marketing and advertising supports one million jobs in the UK, the same number as those employed in financial management and accounting

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