Revival of the fittest: UK ad market 'set for record year'

Fresh evidence has emerged that UK ad budgets not only proved more Covid-proof than first thought but the market is set to bounce back faster and stronger, with spend this year projected to reach £26.69bn – breaking the previous record of £25.37bn set in 2019.

According to the latest Advertising Association/WARC Expenditure Report, the UK market will grow by 15.2% this year, an upgrade of 0.8 percentage points from the last forecast published in October 2020.

The preliminary estimate for 2020 now shows the market declined -7.9%, with adspend of £23.17bn. However, this a marked improvement (+6.6 percentage points) since the previous outlook, owing mostly to brighter prospects for online platforms from the surge in advertising for home shopping brands.

The new forecasts show the UK’s ad market will make up for 2020’s decline and accelerate further into growth this year, reaching a total of £26.69bn, with the decline seen during 2020 now estimated to be softer than the global rate (-10.2%) and that of the rest of Europe (-13.7%).

The UK’s projected ad market growth in 2021 is also expected to be ahead of key international markets, with the US expected to grow 3.8%, Germany 9.3%, Europe (excluding the UK) 8.8%, and China 10.3%.

The latest dataset includes actual figures for Q3 2020 and predictions for the coming eight quarters. The key findings show that UK adspend fell 3.3% to £5.9bn in Q3 2020. This was far better than the -17.9% forecast back in October 2020, owing mostly to better-than-expected Internet growth.

Online spend rose 10.1% to £4.2bn during the quarter, buoyed by a 14.5% rise in search spend (which in turn was driven by ecommerce advertising). Overall, UK adspend was down 11.1% over the first nine months of 2020, at £16.2bn.

Paid search – which accounts for over a third of all advertising spend in the UK – was the format that gained most from the surging ecommerce sector.

Ancillary research by WARC shows that online sales recorded a six-year leap in penetration in 2020, as ecommerce’s share of all UK retail value rose by 8.4 percentage points to 27.6%. This rate was ahead of China (24.9%) and double that of the US (13.4%) last year.

Double-digit growth is expected across most media sectors in 2021 – and even triple-figure growth of 228.4% for cinema, albeit from a total wipe-out last year. Other growth areas will be digital out of home at 53.6%, traditional out of home at 37.7%, and video on demand at 21.2%. Direct mail will also bounce back, growing 7.5% compared to a 35.7% decline last year.

Advertising Association chief executive Stephen Woodford said: “The latest figures from the AA/WARC Expenditure Report come as welcome news at the beginning of the year. Not only does the data show the overall decline expected in 2020 may be less than feared, but the recovery in 2021 will be stronger than we would have dared hope even a few months ago.

“With the vaccine rollout accelerating and a Brexit trade deal in place, the 2021 business outlook is brightening, reflected by these new forecasts showing a stronger and quicker recovery in adspend, with a stronger rebound than in other large economies.”

Merkle UK chief executive Anne Stagg added that while the report is a “mixed bag”, there is cautious optimism following last week’s IPA Bellwether Report.

She added: “We can expect 2021 will be stronger than we could have imagined mere months ago as brands are better prepared and willing to adapt to the change required to make a difference.

“No single year has brought about more change to consumer behaviour than the last, and with the shift in consumer engagement channels and media, and the notable lack of physical interactions – brands must be hyper-focused on delivering value to customers in an increasingly nimble way, meeting them with relevant content in a meaningful way wherever and however they decide to engage.”

Kinetic Worldwide UK CEO Ali MacCallum concluded: “It’s really welcome news to start the year that not only was last year’s decline gentler than feared, but that recovery is set to be stronger than we had imagined. The current lockdown has – inevitably – set us back, but we’re confident that brands and agencies now have robust enough plans in place to move quickly when the worst is over, the vaccine comes into play and we can return to our normal lives.”