The burgeoning market for AI and emerging technologies could trigger a near 40% boost in the value of the digital advertising sector to the UK economy by 2035 to over £242bn, while jobs could rise 45% to 3.8 million, but only if the Government creates the right environment to making the sector a key powerhouse of growth.
While the doom merchants are predicting a shrinking industry, a new report commissioned by IAB UK from research consultancy Public First reveals the scale of the economic prize from backing one of the country’s fastest-growing industries.
It finds that this growth could only be realised under a policy environment that supports innovation, investment and skills, which would create new opportunities for businesses across the country. Both the IAB and the DMA have already called for the Government to work with the industry to develop a strong framework for the responsible use of AI and emerging technology.
The potential comes on the back of rapid recent growth. Digital advertising already contributes £175bn to the UK economy and supports 2.6 million jobs. Between 2022 and 2026, its contribution to UK GVA increased by £46bn, or 35%, ten times the growth rate of the wider UK economy. That £46bn increase alone is equivalent in scale to adding an economy the size of the Liverpool City Region in just four years.
But the report warns that future growth is not guaranteed. The policy environment around AI, data, investment and skills will help determine whether the UK captures the next wave of growth and remains a leading global market for digital advertising.
AI is already transforming the sector. Some 95% of businesses engaged in digital advertising are using AI, compared with 16% of businesses across the wider UK economy.
More than eight in ten (82%) digital advertising businesses say AI has increased their productivity, while 68% report improved profitability. Almost two-thirds (65%) say AI is already saving at least three hours per employee.
The report estimates that a 10% AI-driven improvement in return on advertising spend could generate £80bn in additional sales for UK businesses over the next decade, as AI improves targeting, measurement and creative optimisation.
New technologies and channels could unlock further growth, the report states. Agentic advertising buying, for instance, could generate a £13bn sales uplift by 2035, while the UK creator economy could grow from £800m in 2025 to £12bn over the coming decade.
But the economic impact of digital advertising reaches far beyond the advertising industry itself.
The IAB maintains that digital advertising spending drives £118bn in sales growth for UK businesses every year, including £53bn for SMEs – more than double the £26bn recorded in 2022.
For Britain’s 5.68 million SMEs, digital advertising provides an accessible way to find customers, test demand and expand into new markets without needing the sales teams, national footprint or marketing budgets of larger competitors.
The total SME economic footprint of digital advertising now stands at £74bn, while the sector supports 1.3 million SME jobs.
The report also identifies a major opportunity to spread investment and highly skilled jobs further across Britain.
Manchester, Leeds, Birmingham, Bristol, Edinburgh and Glasgow are identified as particularly well placed to benefit from the next phase of digital advertising growth.
Under a high-growth scenario, innovations in digital advertising technology could generate an additional £1.8bn of economic value across UK cities and regions over the next decade.
Manchester is already demonstrating the potential. Between 2017 and 2024, the North West’s share of the UK advertising and marketing workforce increased from 8% to 12%, making it the largest hub outside London.
IAB UK head of policy and public affairs Sinead Coogan Jobes said: “Digital advertising is already one of Britain’s great growth stories, helping businesses of every size find customers and grow.
“Now AI and emerging technologies are opening up an even bigger opportunity. But that economic prize cannot be taken for granted. Britain needs a policy environment that protects consumers while giving businesses the confidence to innovate, invest and build here in the UK.”
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