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British Brands Could Lose up to £50 Billion from COVID-19

  • Most valuable British brands in Brand Finance UK 150 2020 ranking could lose up to £47 billion of brand value following devasting COVID-19 pandemic
  • Shell retains title of UK’s most valuable corporate brand, valued at £36.9 billion, but oil & gas sector’s future uncertain as oil price tanks
  • 20 retail brands dominate ranking, with Tesco as nation’s most valuable at £8.5 billion. All supermarket brands expected to grow despite crisis
  • British brands to watch: INEOS, Just Eat, Wetherspoons, and Greggs
  • EY remains UK’s strongest brand, Brand Strength Index (BSI) score 89.3 out of 100
  • NHS – the Jewel in the British Crown, brand value £53 billion

View the full Brand Finance UK 150 2020 report here

As the COVID-19 pandemic wreaks havoc on the global and British economy, Britain’s top 150 most valuable brands could lose up to 14% of brand value cumulatively, a drop of £47.5 billion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance UK 150 2020 report.

Richard Haigh, Managing Director, Brand Finance, commented:

“British brands have continued to grow despite the shocks of Brexit. Many are world leaders that look set to defy also the downturn currently in progress, with innovative brands like INEOS, GSK, and McLaren at the forefront of solving the COVID-19 crisis. But there is no denying the catastrophic damage that COVID-19 is causing to the global economy is going to be felt for the foreseeable future. Only time will tell how Britain's top brands will fare in the coming year."

Looking beyond the UK, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated £706 billion as a result of the Coronavirus outbreak.

Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of brand value loss observed for each sector in the period between January and March 2020.

Shell is UK’s most valuable but oil sector’s future uncertain

Maintaining its considerable lead in the ranking and retaining the title of Britain’s most valuable corporate brand for the 4th consecutive year, Shell has seen a 12% brand value growth over the course of 2019, to £36.9 billion. Fellow oil & gas brand, BP, ranked in 3rd position, recorded a modest 3% brand value growth to £18.1 billion.

Richard Haigh, Managing Director, Brand Finance, commented:

“Despite Shell posting a solid year, through achieving a significant price and volume premium, the brand, along with the whole sector, is now dealing with unparalleled territory. This week, for the first time in history, the price of US oil turned negative. With the oil & gas sector in the heavily impacted bracket, brands could lose up to 20% of their value as demand tumbles.”

Supermarket demand skyrockets

With 20 brands in the Brand Finance UK 150 2020 ranking, the retail sector dominates. The major supermarket chains, however, have recorded mixed results over the past year. Asda, in 13th position, saw the greatest brand value growth (up 14% to £4.9 billion). In contrast, Sainsbury’s (down 27% to £3.3 billion), The Co-operative (down 20% to £1.1 billion) and Waitrose (down 43% to £875 million) all recorded less than favourable results. The highest ranked supermarket, Tesco, in 6th, saw a slight decrease in brand value, down 3% to £8.5 billion.

Richard Haigh, Managing Director, Brand Finance, commented:

“Supermarkets are one of the few winners to come out of the COVID-19 pandemic, with brands seeing Christmas levels of demand, resulting in hiring sprees for thousands of temporary workers – Tesco alone has hired 20,000 new workers. It is likely that many of them will rebound and post positive brand value growth over the course of 2020, while brands in many other retail segments are struggling.”

Aviva breaks into top 10

Seven insurance brands feature in the ranking, recording an average 16% brand value growth. Aviva has broken into the top 10 following a 9% increase in brand value to £5.7 billion. However, like the oil & gas sector, insurance brands, are facing a potential 20% brand value loss as the sector is predicted to face worsening low interest rates and depressed asset values.

Shining stars

As one of the world’s leading chemical brands, INEOS, has celebrated outstanding brand value growth (up 50% to £1.2 billion) over the previous year. A perhaps unlikely pairing, the chemicals giant has continued to propel itself into the sporting sphere – from buying OGC Nice and being lead sponsor of the Mercedes Formula One team, to acquiring the world-leading Tour de France cycling group, previously known as Team Sky. It was the INEOS 1:59 Challenge, however, which saw Kenyan long-distance champion, Eliud Kipchoge, smash the elusive sub 2-hour marathon barrier, that earned INEOS a truly global recognition.

Despite chemicals being classed as a heavily impacted sector, equating to a potential 20% loss of brand value as a result of COVID-19, INEOS has cited very little impact on the supply side. Although there has been an inevitable downturn in the demand from the automotive and construction sectors, the brand’s increased demand in the medical, food and cleaning applications sectors has so far offset this loss. In March 2020, in staggering speed – just under 10 days, INEOS completed building a plant in Middlesbrough to produce up to 1 million bottles of hand sanitiser a month.

Online food order and delivery brand, Just Eat, is this year’s third fastest growing brand, its brand value increasing by 46% to £734 million. Having recently announced a merger with Dutch giant, Takeaway.com, in a £5.9 billion deal, the newly formed company will create one of the world’s largest meal delivery brands. With restaurants closed across the nation, and no clarity on when they can reopen, Just Eat is one of the few brands that can find benefits in the current situation, through its contact-free delivery options.

Falling from grace

In contrast, SSE is the fastest falling brand in the ranking, its brand value decreasing 77% to £793 million, simultaneously dropping 78 positions. Other utilities brands: Centrica (down 42% to £464 million), British Gas (down 39% to £689 million), and npower (down 14% to £474 million), have all suffered similar fates, with their brand values dropping significantly. National Grid is the only brand in the sector to buck the trend, recording a 6% brand value growth to £990 million.

Brand Finance has calculated, however, that the utilities sector is likely to suffer limited impact as a result of the COVID-19 pandemic, with a 0% expected brand value change. The sector is largely sheltered due to the very nature of its operations with these brands providing an essential service to the global population, thus demand should not falter considerably. This, paired with the regulated structure of the sector and longer-term contracts, should ensure these brands have access to adequate supplies and equipment to continue operations.

Best of British

There are 15 new entries in this year’s Brand Finance UK 150 2020 ranking, with Openreach claiming the highest spot in 66th, with a brand value of £1.3 billion. Two typically British brands, Wetherspoons (brand value £780 million) and Greggs (brand value £508 million) have also entered the ranking for the first time in 105th and 133rd position respectively.

Celebrating its 40th birthday in 2019, Wetherspoons now boasts a vast portfolio of over 900 pubs and hotels spanning the nation - an impressive feat as pubs continue to diminish, with one pub shutting its doors permanently every 12 hours in the UK. Renowned for its bargain booze and often spectacular buildings, Spoons has thus far been able to buck the trend across the sector.

Unsurprisingly, however, Wetherspoons has a rough journey ahead as it deals with nationwide pub closures amid the COVID-19 pandemic. With little clarity on when the British public could expect to return to pubs and restaurants, the future of the chain remains unknown. CEO, Tim Martin’s, response to the crisis garnered less than favourable media attention following his announcement that his staff should take a job at Tesco, in spite of the government’s furlough scheme.

Greggs’ advertising and marketing prowess has gone from strength to strength, the results of which are reflected in the brand’s record financial performance in 2019 after exceptionally high sales and the success of the vegan sausage roll. However, the Geordie bakery chain has been forced to shut its stores as of March 2020 due to the COVID-19 pandemic.

EY – Britain’s strongest brand

In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria, EY (up 2% to £18.4 billion) has retained its position as the UK’s strongest brand with a Brand Strength Index (BSI) score of 89.3 out of 100 and a corresponding AAA brand strength rating.

The commercial services giant, and Britain’s second most valuable brand behind Shell, has celebrated record global revenues, a result of the brand’s investment in new and innovative technology solutions and capabilities. Focusing on future growth, EY has completed 20 acquisitions and eight new alliances in 2019.

The NHS: the jewel in the British crown

This year for the first time, given the extraordinary attention it is receiving, Brand Finance has looked at the brand value of the NHS, and has estimated it to be a staggering £53 billion, making it the most valuable British brand. The NHS is also the only brand in the UK to be awarded the elite AAA+ brand strength rating.

As one of the few fully publicly funded healthcare services in the world, the NHS has remained one the leading and most efficient healthcare systems globally. Hiring 1.5 million people, the NHS is Europe’s biggest employer. 

The outspread of appreciation for the NHS has been indescribable as COVID-19 engulfs the nation, from families clapping for our carers every Thursday, to war veteran - Captain Tom Moore - raising over £28 million for completing 100 laps of his garden before his 100th birthday.

Richard Haigh, Managing Director, Brand Finance, commented:

“Three of the most significant British brands – the Monarchy, the BBC, and the NHS – are all shining in the current COVID-19 crisis. The NHS is a unique and highly valuable British brand for all of us to cherish.”

View the full Brand Finance UK 150 2020 report here

Note to Editors

Every year, Brand Finance values 5,000 of the world’s biggest brands. The 150 most valuable British brands are included in the Brand Finance UK 150 2020 report.

Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.

Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance UK 150 2020 report.

Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.

Media Contacts

Florina Cormack-Loyd
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About Brand Finance          

Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.

Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.

Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).

Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.

Methodology

Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020

Definition of Brand

Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Brand revenues are discounted post-tax to a net present value which equals the brand value.

 

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