Brand America has been damaged: WPP CEO
The head of the world's biggest advertising firm by revenue warns that the spying scandals and extreme politics are damaging the reputation of the United States and are weighing on business confidence.
"There has been some damage," Martin Sorrell, CEO of WPP told CNBC Thursday. "Firstly, there's the privacy issue, the Snowden situation and what we've had all those revelations which continue to flow out....the second level is this paralysis of government, these extremities in the Democratic Party, in the Republican Party, the Tea Party which I think have caused significant damage to Brand America abroad."
To have President Barack Obama to go to the Asia-Pacific Economic Cooperation summit because he has to stay at home in Washington to deal with the congressional and the deficit crisis has added to the reputational damage, Sorrell said.
"And of course Russia and President Putin have gained a considerable amount of political capital around the world because of the efforts to resolve Syria," he added.
Revelations of spying by the U.S. government began back in May with Edward Snowden, the fugitive U.S. spy agency contractor, leaking classified documents to the media. The repercussions are still evident with the White House declaring on Thursday that President Barack Obama had to assure German Chancellor Angela Merkel that the U.S. wasn't listening in on her phone calls.
Added to this, Sorrell sees the political wrangling as a major turn-off of businesses. Analysts have predicted that the loss of government services during the three-week shutdown will take a roughly $3.1 billion bite out of gross domestic product (GDP) in the U.S. The final agreement approved last week restores budget authority only until January 15 at current spending levels and extends the Treasury's borrowing authority until February 7.
Sorrell said the shutdown might have little affect on WPP's figures in the next quarter but is fearful that this issue could crop again at the start of next year.
"We could expect quite reasonably more political turbulence...that is the most serious issue," he said, adding that this is likely to make clients extremely cautious, with a hit on spending and hiring.
The U.K. advertising firm reported third-quarter organic revenue well ahead of expectations, with like-for-like growth rising by 5 percent against 2.4 percent in the first half of its financial year.
Improvements in trading in North America, Britain and Latin America were the underlying reasons for this growth, according to the report with Sorrel adding that Germany has been strong.
The WPP chief added that the company was looking to frontier markets such as Cuba, Myanmar and Iran to expand the company further.
"These are going to be very big opportunities," Sorrel said. The" political noises" coming out of these countries was very positive, he said, but added that didn't want to get too optimistic.
— CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81