Industry calls for tax credit plan as spend faces £4bn hit

The marketing industry is calling on the Government to launch a tax credit scheme to stimulate investment and encourage brands to return to the market on the back of a new study which predicts the sector will decline by £4.23bn (16.7%) to £21.13bn this year due to the Covid-19 pandemic.

The scheme is just one of the Advertising Association’s initiatives to boost adspend and reactivate growth in the market. The industry body believes it would also encourage companies that do not currently advertise, typically SMEs, to invest in advertising.

The proposal would also act as a stimulus for the wider economy and provide a welcome boost in investment for British commercial media.

In 2019, consumer spending accounted for two thirds of UK GDP and so encouraging consumer confidence through advertising would be boost to the national recovery, the AA insists.

The call comes as the latest AA/Warc Expenditure Report lays bare the devastating effect of the lockdown, with the spend in the second quarter forecast to crash 39.1%. Every medium – even the previously Teflon-coated digital channels – are facing double-digit declines in April, May and June.

The figures make grim reading for every channel, with Internet search down 29.6%, and online display (-31.8%), TV (-46.6%), radio (-44.1%), national news brands (-45.3%), out-of-home (-52.6%), direct mail (-45%) all suffering. However, the worst hit is cinema advertising, which, due to lockdown, has seen a 100% fall.

The report estimates the Q3 will be down 24.3%, with Q4 seeing a decline of 8.9%. Adspend is expected to return to growth in 2021 with a rise of 13.6%, but absolute levels of investment are not expected to surpass the 2019 total.

AA chief excutive Stephen Woodford commented: “Despite a good 2019 and promising start to 2020, Covid-19 has affected UK advertising as it has all parts of the economy and the falls we are seeing in adspend come as little surprise. The current quarter will be a tremendously tough time for many businesses across our industry. We are acutely conscious of their predicament and working fast with Government and officials, so that they get the best support possible.

“Instinct might tell businesses to be cautious in their advertising at this time and we all need to be mindful of the unusual times we’re living in. But at the same time, the importance of advertising during a downturn cannot be overstated.

“The vast majority of adspend, nearly 85%, will still be invested this year and businesses should ensure they are in the best possible place – and best possible shape – to take advantage of a return to growth when it comes. History shows the brands that emerge fastest and strongest are those that invest in advertising during a downturn.”

Even so, while adspend may be suffering, investment in other areas of the data-driven marketing industry – including data, analytics and artificial intelligence – are predicted to escape the worst excesses of the downturn.

Last week, a report by Search & Market claimed that Covid-19 has positively impacted the martech sector, owing to the increasing social media marketing activities among industries such as automotive, financial services, education, and healthcare. The use of AI is also booming, with organisations adopting the technology to improve customer experience.

Overall, Search & Market forecast the martech software market is set to record compound annual growth of 17.4% and be worth $152bn (£123bn) by 2027.