UK Adspend is rattling along at a fair old lick, up 28.3% year on year in Q1 2022, reaching £8.6bn and heading for a new record of £35.4bn (up 10.9% on 2021.) Rather dauntingly 74.3% of this is forecast to come from digital, from 73.5% in 2021.
Real growth, however, is estimated at just 1.8%, allowing for inflation currently running at around 10%. The ad market is forecast to grow just 4.4% in 2023, to a value of £37bn, a downgrade from previous forecasts from the Advertising Association/WARC Expenditure report, the most reliable estimate of such things. The 2023 number is a 0.9% contraction in real terms reflecting inflationary pressures and issues faced by all businesses and families including the rising cost of living coupled with geopolitical uncertainties.
AA CEO Stephen Woodford says: “It is encouraging to see growth in our industry over Q1, as the economy continues its recovery year-on-year following last year’s Covid-19 lockdown. However, the pressures of inflation on living standards and economic growth are at the top of everyone’s mind, and these rising costs may represent a real-term contraction of nearly 1% in 2023 for UK advertising investment.
“As the UK’s political leadership changes, it is important to recognise the value that advertising brings to the economy in supporting competition, innovation and growth at this critical time. A consistent, evidence-led policy-making approach, with due consideration of industry views and expertise, will help create the conditions which encourage, not hinder, economic growth and will be integral to the ability for businesses to weather the challenges of the coming year.”
Such forecasts are often revised further in such a volatile economic and political environment. The main take-out from the AA/WARC numbers may be that all-conquering digital may be plateauing at three quarters of all adspend (search, which some may define as direct marketing rather than advertising is still the main element), giving some hope to traditional main media. In Q1 cinema, regional newsbrands and Out of Home, all of which were hard hit by the Covid pandemic from 2020, showed the strongest growth.
The key for all these media (and ad and media agencies) is their ability or not to pass on inflation-induced price increases to clients.
