Adspend to reach £35.6bn as industry shows its mettle

Key online formats are continuing to shore up the UK advertising market, which outperformed the economy in Q2 – albeit witnessing growth of just 1% – to reach a total of £9bn and is now on course to reach £35.6bn for the full year, a total increase of 2.6%.

That is according to the latest Advertising Association/WARC Expenditure Report, which shows the best performing channels between April and June included search (+5.3%) and online display (+5.8%), alongside broadcast video on demand (BVOD) up 5.6% and out of home up 4.4%, as it continues its recovery from the pandemic downturn.

However, many traditional channels, including TV (-11.5%), regional newsbrands (-14.0%), magazine brands (-7.3%), and cinema (-7.1%), have not had such a buoyant time in Q2.

Direct mail, at -15.8%, was one of the hardest hit but, according to Jicmail, the effectiveness of the channel has reached an 18-month high, and 30.5% of mail is driving positive commercial outcomes for brands.

The ad industry is often seen as a barometer for the broader state of the UK economy, and AA/WARC’s latest results continue to demonstrate this trend. The industry-verified data for 1.0% adspend growth for Q2 – equivalent to £17.5bn in spend, compared to £17.3bn the previous year – is just ahead of ONS figures for the same period, which show GDP rose 0.6%.

Looking ahead to forecasts for the full year, AA/WARC expects adspend to grow 2.6% to reach £35.6bn in 2023.

Double digit growth is expected from BVOD at 16.1% year-on-year, with increases also projected for online display (7.4%), out of home (7.7%) and cinema (7.6%).

Sporting events such as the FIFA Women’s World Cup and the Rugby World Cup, as well as key content moments such as the return of Big Brother to ITV and the success of the Barbie and Oppenheimer films, are also expected to give adspend a fillip in the second half of 2023 in the face of ongoing macroeconomic headwinds.

The latest dataset shows that the UK’s ad market is set to grow by 3.9% to reach £37bn in 2024, a minor downgrade from July’s forecast of +4.0%. More channels are expected to return to growth next year, such as the online portions of national and regional newsbrands and magazines, though the economic backdrop is likely to remain challenging.

Advertising Association chief executive Stephen Woodford said: “Advertising continues to show itself as a weathervane for the UK economy, with the advertising market expected to grow slightly more than the economy, with both barely in positive figures.

“Looking ahead to 2024, we expect to see more channels experience growth again, as the ad market grows to £37bn for the year. As we anticipate the General Election next year, the Advertising Association will continue to demonstrate advertising’s contribution to a strong economy, not least that brands that continue to invest in advertising during a downturn are more likely to post better returns when emerging from tough conditions.”

WARC director of data, intelligence and forecasting James McDonald added: “The UK’s economy continues to skirt with recession as households make cutbacks in the face of stubbornly high inflation and unemployment slowly ticks upwards as activity in the private sector cools.

“It is therefore encouraging that, amid this backdrop, the UK’s advertising industry was able to grow during the first six months of 2023, and that the market is on course to be 2.6% larger this year overall. It should, however, be noted that this growth is concentrated in certain corners of the industry, with broadcasters and publishers bearing the brunt of an unfavourable trading climate while digitally native platforms largely prosper.”