Pandemic recovery boosts UK adspend to record £31.9 billion

The UK ad market reached a record £31.9bn in 2021, equating to growth of 34.3% year-on-year. The latest AA/WARC full year figures reveal the 2021 ad market emerged £8bn larger than April 2020’s original forecast of £24bn, set at the beginning of the Covid-19 pandemic. This is in partly due to inflationary pressures on the cost of advertising but also a higher than expected growth in online advertising during the year.

Three in every four pounds spent on UK advertising is now in one of a wide range of online formats – only China has an equivalent online share as big. Data shows internet adspend totalled £23.5bn in 2021, equivalent to 73.5% of all UK adspend and up 11.7% from pre-pandemic levels in 2019.

The ‘UK Advertising Adspend Review: The Pandemic Effect’ is published by the UK Advertising Association and includes contributions from WARC; think tank Credos and AA members including Google, Tesco, News UK, UM, ISBA and TV marketing body Thinkbox.

2022/23 Forecast

The latest AA/WARC data presents an upgrade to previous forecasts for 2022. The UK’s ad market is forecast to grow by 10.7% this year to £35.3bn, driven by a strong start to the year, higher CPMs and higher demand ahead of the FIFA World Cup. In 2023 there will be further 5.4% year-on-year growth to reach £37.2bn. Economic headwinds, including cost of living pressures and supply chain disruption, mean this is liable to review.

Online threshold marks a new era of advertising

The latest figures show search, inclusive of ecommerce, was the strongest performer in 2021 – at £11.7bn it beats April 2020’s projection (made during the onset of the Covid-19 pandemic) by over £3.7bn. TV surpassed early expectations by almost £1bn, while online video over-performed by approximately £2bn and social media by £2.3bn.

With online retail spend of $2,648 per capita, the UK now has the world’s most avid online shoppers. The UK government became the country’s biggest advertiser in the pandemic.

AA CEO Stephen Woodford says: “The UK has held its position in 2021 as the largest advertising market in Europe through the pandemic and is now the third largest in the world, behind the USA and China. While further growth is forecast, inflationary pressures on the cost of advertising, and more generally, due to the ongoing geo-political uncertainties, mean we should be cautious.

“While lockdowns saw sharp declines in spend across some sectors, the pandemic presented our industry with opportunities to innovate and meet the public health challenges. The UK Government remained in pole position as the largest advertiser. Cover wraps in our print media informed the nation with ‘Stay Home’ public health messages; direct mail brought testing kits and essential deliveries to households up and down the country; and billboards showed the everyday heroes in our NHS.

James McDonald, director of data, intelligence & Forecasting at WARC says: “The Covid-19 recovery last year was buoyed in part by the release of pent-up investment on established online platforms – as well as maturing ones such as TikTok – and in part by the emergence of retail media as a major contender for marketing budgets. The latter trend bears the hallmark of a new era in advertising, one which is set to fuel growth over the forecast period and beyond.

“Be that as it may, economic headwinds create uncertainty ahead; the consumer is being stretched further than at any other time since the Second World War, conflict in Europe has stoked market volatility and has exacerbated supply chain pressures, and the prospect of a UK recession cannot be ignored. Given the market’s current momentum, however, we do not yet see this translating into an advertising recession over the coming quarters.”

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