Adspend hits £34.8bn despite tarnished golden quarter

The UK’s ad market defied a major slowdown in the second half of 2022 – including a disastrous golden quarter – to grow 8.8% to £34.8bn, although a hangover caused by the economic headwinds of high inflation, muted growth and talent shortages is still being felt across the industry.

According to the Advertising Association/WARC Expenditure Report for the full-year, the momentum from a strong start to 2022 was seen to wane in latter months.

Data shows that online advertising – 75.1% of total UK spend last year – grew 30.1% in the first half of 2022 before falling 5.4% in the second half. As a result, total UK ad spend growth in the first half of 2022 is upwardly revised to 26.0%, while the total ad market contracted by 5.7% in the second half of the year.

The strongest growth seen in 2022 was for cinema (123.0%) and out-of-home (31.1%), media which continued their year-on-year improvements after a disproportionate impact from Covid-19. So-called traditional media all suffered declines despite being shored up by their digital counterparts. However, direct mail continues to defy the doom-mongers, inching up 1.2% to just over £1bn in spend and radio also witnessed growth, up 2.8% to £740.1m.

Other areas of the industry posted strong figures in 2022: 15.4% year-on-year growth was seen in the broadcaster video on demand (BVOD) component of TV, while paid search grew by 12.7%.

When reviewed by category, advertising growth was led by services (such as entertainment, media and travel) and industrial (such as business, property and telecoms) products.

The report also confirms that UK advertising spend fell by 5.8% to a total of £8.6bn between October and December 2022, despite the FIFA World Cup and Christmas. It is the first time spend has decreased during a fourth quarter since 2009.

For the year ahead, revised forecasts suggest minimal growth (+0.5%) in 2023, with spend expected to reach £35bn, before a 3.9% rise in 2024 to a total of £36.3bn.

2023 projections have been downgraded from the previous forecast (published in January 2023) to +0.5% (compared to +3.8% in January) due to signs that the downturn recorded in the latter half of 2022 has continued into the first half of 2023.

Forecasts for the coming year show reduced growth expectations for nearly all sectors of advertising despite cinema, which is expected to continue its recovery in 2023 (+37.2%) while modest growth is expected in OOH (4.9%).

Even so, the UK remains the third-largest advertising market in the world, at a value of US$41.5bn, and saw the third-fastest growth rate of the top ten markets in 2022, behind only Brazil (+9.7%) and Australia (+9.4%). Projections from WARC Media, however, show the UK is forecast to post the slowest growth among the top 10 ad markets this year.

Advertising Association chief executive Stephen Woodford said: “These figures reflect the broader macro-economic environment, with a cautious outlook as the UK economy narrowly avoids recession, but shows very little signs of real growth. Advertising investment is an important barometer of business performance and confidence in the economic outlook. It drives competition and innovation, supporting job creation and livelihoods.”

Advertising Association chair Annette King is slightly less bullish. She said: “It’s clear from these figures that the UK needs a strong plan for growth, one that capitalises on the advertising industry’s talent to help businesses innovate and compete, and support jobs and livelihoods up and down the country.

“At the same time, we need to address the talent shortages faced by our industry – for example, working with Government to increase flexibility in apprenticeships, and answering the demand for digital skills and expertise which will equip our workforce for the future.”

WARC director of data, intelligence and forecasting James McDonald concluded: “The UK’s ad market entered recession in the second half of 2022, with clear signs that the downturn has continued into the opening months of this year.

“Sharp and sustained falls in social media spend – the first time this has been recorded in the UK – are likely to have been instigated by reduced advertising activity among the SMEs who comprise a ‘long tail’ of ad volume on social platforms and whose margins are under incredible stress as inflation bites.

“One in every 202 UK companies entered liquidation in 2022 – the highest rate in seven years – and it is unsurprising to see these pressures reflected to some degree within advertising trade.

“Trading conditions are not expected to improve until the second half this year, with economic activity and advertising investment both largely flat during 2023 as a whole. The outlook is set to improve next year, however, as the economy returns to growth, inflation falls nearer to the Government’s 2% target and consumer confidence lifts, though advertising spend is still predicted to rise below its long-term average in 2024.”