As Chancellor Rachel Reeves battles to get the UK back to growth she could do worse than take a leaf out of the advertising and marketing industry’s book, with adspend set to continue to outperform the UK economy, rising 6.9% in 2025 to be worth £43.5bn.
That is according to the latest forecast from the Advertising Association and WARC’s Expenditure Report, which shows show UK adspend rose 9.7% to £10.6bn during the third quarter of 2024.
This marks the first time adspend has exceeded the £10bn barrier in Q3, largely attributed to an AI-driven improved performance for search and robust growth for other online formats, while even direct mail has returned to growth.
In fact, the advertising market is forecast to have grown by 11.2% overall in 2024, an upgrade of 0.6 percentage points (pp) from the October forecast, with full year spend expected to reach £40.7bn.
Channels expecting to see a strong 2024 include online display (+18.9%), search (+12.7%), broadcaster video on-demand (BVOD) (+12.4%) and out of home (+10.3%), with final figures for full year 2024 due to be published in late April.
Looking ahead, AA/WARC anticipates additional growth of 6.9% in 2025, by when the UK’s ad market will be worth £43.5bn and is expected to show real terms growth of 8.5% in 2024 and 4.5% in 2025. As of January 2025, the IMF projected that the UK’s GDP growth would be 1.6% in 2025.
Deep dive into the Q3 2024 results
In spite of stagnant economic conditions for UK growth, the Q3 period saw a 9.7% rise in UK adspend, performing 1.4pp ahead of expectations from the previous forecast in October. AA/WARC largely attributes this additional growth to an improved performance for search (including retail media) which was up 12.6% to £4.6bn.
Other online formats also recorded robust growth in Q3, including online display (+15.2%), online radio (+10.0%) and BVOD (+8.7%) – with live sport content a key feature of the July to September period, through the Olympics and Paralympics as well as the UEFA Men’s Euros, with England successfully reaching the final on July 14.
Direct mail had a particularly strong quarter (+12.9%), marking a return to growth for the channel for the first time in just over two years, and radio performed ahead of expectations (+3.8% against expected growth of 3.0%).
Overall in the Q3 period, advertisers within two categories spent more on media: financial (+6.9%) and consumables (+4.0%) which includes household FMCG, cosmetics, and food and drink. Of the latter, household FMCG (+21.0%) and food (+7.6%) were the key growth drivers.
Expectations for 2025
Looking to 2025, channels expecting to see a rise this year include BVOD (+12.9%) and online display (+9.4%), which encompasses social media. Furthermore, a return to growth is expected for cinema (+4.7%), online classified (+2.5%), and online magazine brands (+1.3%).
Advertising Association chief executive Stephen Woodford said: “While there is much work to do to kickstart growth in the UK economy, we know investment in advertising produces a fantastic return. It supports competition, innovation and jobs up and down the country, with fresh evidence for this to be previewed at the AA, IPA and ISBA’s LEAD conference next month. The new Ad Pays 2025 report will make a compelling case for how advertising is a vital engine of the UK economy.
“It is also important to reflect on how policy decisions can impact the planning of advertising campaigns, such as through the delayed resolution of the Less Healthy Foods regulation. This is a clear example of where businesses require certainty to have the best chance to deliver growth.”
WARC director of data, intelligence and forecasting James McDonald added: “Online ad formats, benefitting from the widespread adoption of new AI tools, have propelled the UK ad market to exceptionally strong growth so far in 2024 and will continue to drive expansion into 2025. However, economic uncertainty remains at both a local and global level.
“As a new US president comes into office, attention will be focused on implications for the world economy. In the UK, advertising businesses will look to the UK Government’s growth strategy and how it will affect the industry. A deterioration in overall business confidence could lead some marketers to depress spend in the short term.”
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