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AA/WARC: UK adspend still growing but lags inflation

The latest quarterly data from the Advertising Association/WARC Expenditure Report show UK advertising spend rose by 4.3% to £8.5bn between July and September 2022, the ninth consecutive quarter of post-covid growth.

The UK ad market is forecast to grow by a further 3.8% to £36.1bn in 2023 following on from an expected 8.8% rise in 2022 based on the latest advertising revenue data collected directly from media owners. The projection for 2023 is on par with the previous forecast (published in October 2022) but equates to a 3.0% real terms decline once inflation is taken into account.

Forecasts for the coming year show reduced growth expectations for almost all sectors of advertising in line with pressures felt by all parts of the economy.

Actual figures released by the Advertising Association/WARC for the first nine months of 2022 confirm that growth was up by 10.8%, with the total figure standing at £25.3bn. Out of Home (OOH) and cinema, specifically, continued their strong recovery during Q3, while search rose 7.7% – equating to almost 40% of total adspend during the quarter. Social media, included within online display, continued growing (+4.4%), while broadcast video on-demand (BVOD) spend rose by 4.3%.

Full year 2022 revisions

The UK ad market is now thought to have reached a total of £34.7bn in 2022. After accounting for double digit inflation, real growth was thought to have been flat in 2022, at -0.1%. Crucially, a recovery is projected for the ‘golden quarter’ (Q4 2022). Spend during this time was estimated to have grown by 4.0%, to a total of £9.5bn, as the winter period hosted the two biggest events for adspend: Christmas and the FIFA Men’s World Cup. This growth was half a point behind previous forecasts.

AA CEO Stephen Woodford says: “The UK advertising industry has held firm in its continued recovery from the COVID pandemic, with ad investment holding up in the face of significant headwinds. However, the economic pressures of 2022 including high inflation’s impacts on the wider economy and on media costs means in real terms spend is likely to be flat. These pressures all contribute to slower growth projections for the year ahead.

“Advertising plays a vital role in helping brands communicate with their customers and navigate the cost-of-living pressures that everyone faces. As we publish our new 3-year strategy which puts trusted, inclusive and sustainable advertising at the heart of our mission, we are determined to show the economic and social value of responsible advertising to the UK.”

WARC’s James McDonald says: “With the economy enjoying modest growth in November, and inflation appearing to have reached its peak, it is likely that the UK narrowly avoided slipping into the recession at the end of last year that many had feared – but a downturn now seems unavoidable in 2023.

“Despite an air of resilience in recent market results, a looming recession will put pressure on ad trade this year. We foresee ad market growth easing to 3.8%, equating to a real terms decline and the weakest rise in a decade if the pandemic-hit 2020 were excluded. The silver lining here is that our current modelling suggests that the slump will be short lived, with advertising investment set to lift by 5% over the first nine months of 2024.“

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